CANADA - A New York-based property firm, which is part-owned by Caisse de depot et placement du Quebec, has sold a prime Orlando office block to Eola Capital for a reported CA$90.6m (€60.3m) – a record price for the city.
Seller Praedium Group, in which the Quebec pension fund is a major shareholder, focuses on underperforming assets.
News of the acquisition came at the same time as Caisse posted figures showing the return on its real estate investments dropped to 20.2% in 2006 from 26.4% in 2005. The fund’s allocation over the same period rose a percentage point to 9.9%.
Officials said the fund had achieved above 20% for the third consecutive year to its geographic allocation strategy and opportunistic acquisitions.
Its real estate investments in 2006 totalled CA$83.6m, including the acquisition of a portfolio in Washington and interests in three shopping centres in the UK, Spain and Canada. It also acquired retail in Germany and office in Paris.
Faced with excess liquidity (and with it competition for assets) and converging returns, the fund said its return would likely "revert to a level closer to the historical [18%] average" in the next few years.
The Praedium fund, which has a property portfolio worth CA$4bn, is among the 10 largest Canadian property investors. More than 80% of its acquisitions are made via three specialist subsidiaries and joint ventures: Cadim (40.6%), Ivanhoe Cambridge (24.2%) and SITQ (18.5%).
Fernand Perreault, executive vice-president of real estate, last week indicated the fund’s growing interest in Asia as a means of diversification. In a question-and-answer session published with its annual report, he pointed out emerging markets are less affected than developed markets by fluctuations in interest rates and inflation. Due diligence and a strategy aimed at joint ventures with local partners should mitigate the increased political risk.
In some emerging markets, an opportunistic strategy will exploit real estate cycles while in certain markets, notably in China, the fund plans to establish a long-term presence.
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