Sun Life Deal for Bentall Kennedy gives CalPERS exit route

Sun Life Financial will acquire Canadian real estate investment manager Bentall Kennedy Group in a CAD560m (€404m) transaction that will create a CAD47bn global property investment firm.

It will also provide Bentall Kennedy’s institutional shareholders – the British Columbia Investment Management Corporation (bcIMC) and the California Public Employees’ Retirement System (CalPERS) – with an exit from their respective one-third ownership stakes in the Toronto-based property company.

With $813bn (€724bn) in assets under management, Sun Life operates in 26 countries worldwide, including a large group insurance business in the US and Boston-based MFS Investment Management, with more than $440bn in AUM. 

The acquisition adds property capability to Sun Life’s expertise in asset-liability management, commercial mortgage investment, fixed income and alternative asset classes.

CalPERS said the transaction would “likely result in a compelling return for the System” but provided no details.

CalPERS, with a total fund market value of approximately $300m, acquired its stake in Bentall Kennedy in 2012 for approximately $100m, according to CalPERS’s statement about the transaction.

The fund has been undergoing a series of strategic adjustments recently, including an outside consultant’s assessment of the system’s progress implementing a set of core “investment beliefs” adopted in 2013 to guide the board and staff in decision-making, and a plan formally announced this week to reduce the number of external investment managers to 100 from more than 200 currently.

The manager cull is, in part, driven by CalPERS’s desire to use its size as leverage in negotiating lower fees from external managers, as called for in one of its investment beliefs.

The system has approximately $900m invested with the firm, CalPERS said.

In March 2013, CalPERS formed Institutional Logistics Partners (ILP), a joint venture specifically to facilitate implementation of CalPERS’s industrial property mandate to Bentall Kennedy, which was funded with an initial allocation of $250m and topped up with a further $600m in 2004.

The ILP strategy invests in core industrial assets, in markets including Los Angeles, the Inland Empire, Northern New Jersey and Dallas.

Bentall Kennedy will retain its brand name and operate as Sun Life’s exclusive real estate investment management platform.

The acquisition is part of Sun Life’s strategy to expand its capabilities in commercial property.

Sun Life has been a client of Bentall Kennedy since 2004.

In 2013, the companies launched a Canadian property fund for distribution through Sun Life’s defined contribution platform. The largest in Canada, it reaches nearly 8,000 plans.

Sun Life and Bentall Kennedy are both leaders in sustainable investing and adherence to ESG principles.

Sun Life is the top-ranked North American financial services institution in Corporate Knights’ Global 100 Most Sustainable Companies.

In 2014 – for the fourth consecutive year – Bentall Kennedy took top honours in three major categories in the Global Real Estate Sustainability Benchmark (GRESB), an annual survey compiled by the Netherlands-based GRESB Foundation that tracks property portfolios on a number of measures such as measurement of energy consumption, water consumption, waste collection, recycling, CO2 emissions and employee training programmes and remuneration policies.

A Bentall Kennedy spokesman told IPRE the transaction was the result of the Bentall Kennedy board and owners “recognising that different and more conventional ownership, by a leading financial services firm, would be beneficial now that we have grown and evolved into a fully diversified, multi-client manager”. 

Both CalPERS and bcIMC were “highly supportive of the transaction and both will continue as key clients of Bentall Kennedy”, he added.