CPP Investment Board has agreed to pay more than $700 million for stakes in companies that own malls in Germany and the United States.
In one deal, Canada's national pension plan has agreed to pay $336 million for a 36.9-per cent stake in the Mayflower partnership, owner of 13 regional malls focused particularly in the northeastern United States.
The deal partners CPP with Simon Property Group Inc., the largest retail REIT in the United States. Simon will continue to manage the property on behalf of CPP and other minority owners.
The group holds more than 10 million square feet of retail space in the Boston, Mass. area. "This investment represents CPPIB’s first major regional mall acquisition in the United States and we view this as an attractive entry point into the sector," CPPIB vice-president Peter Ballon said in a statement.
In a separate deal, the board acquired a 50 per cent joint venture interest in CentrO Oberhausen, a leisure and retail centre in Germany, from Stadium Group, for the equivalent of $370 million.
Stadium will continue to hold its own 50 per cent stake and manage the property on CPP's behalf. CentrO is a 1.6 million-square-foot facility roughly 40 kilometres north of Dusseldorf.
"We are very pleased to be acquiring a significant interest in what is widely regarded as one of the top large-scale regional shopping centres in Europe," CPPIB's senior vice-president Graeme Eadie said.
The CPPIB manages the funds of Canada's national pension plan not needed to pay the benefits of more than 17 million beneficiaries. At the end of December 2010, the fund had more than $140 billion in assets.
The high Canadian dollar has helped the fund make significant purchases abroad in recent months, and a number of them have been in the retail space.
Generally speaking, the fund seeks stable assets that spin out cash to help pay benefits in addition to long-term capital appreciation. The moves are not the fund's first foray into retail, but they are one of the largest recent splashes.
In April 2010, the fund spent $370 million in a joint venture with Kimco Realty Corp. for stakes in multiple retail and shopping centres across the United States. A few months later, in August, CPP invested $350 million for a stake in a company that owns Australian shopping centres.
But the pension plan has also looked domestically for retail bargains. In September, CPP struck separate deals totaling $335.5 million for stakes in eight shopping centres across Canada.
"Real estate is an attractive investment for the CPPIB," Ballon said. "Our overall objective is to build a portfolio that will deliver stable returns and retain its relative value across multiple business cycles."