CPPIB to invest $800M in Chinese real estate developments
The CPPIB investment in real estate developments by Longfor is the third of its kind
The Canada Pension Plan Investment Board (CPPIB) will invest $800 million in two new property developments in China by developer Longfor Properties, it announced on Monday.
The projects include a 740,000 square metre residential and commercial development in Western Chinese city Chengdu. The city has a population of 16 million.
The other is a 340,000 square metre development in South Minhang, which is a suburb of financial capital Shanghai.
The developments will both include a shopping mall.
"Both cities are well positioned to capitalize on the future economic growth and harness the returns of growing consumption in China," said Jimmy Phua, head of real estate investments Asia, CPPIB.
He added the move was part of the pension board's strategy to grow real estate investments in China, particularly in the fast-growing retail sector.
"The investments will help CPPIB diversify its real estate interests in China, providing attractive risk-adjusted returns over the long term," he said.
The announcement comes as policymakers in the world's second largest economy embark on curtailing real estate speculation as home prices continue to surge.
More than 100 cities have imposed measures to crack down on speculative buying with Chinese President Xi Jinping emphasizing that "houses are built to be lived in, not for speculation."
Housing data released last week showed that the measures were starting to take affect with new home prices rising just 5.3 per cent in December from year ago, compared to 12.4 per cent in 2016.
On Monday, the Shanghai government also announced that it would continue to strengthen regulation of the city's property market.
Investments in China
Meanwhile, the deal between CPPIB and Longfor is the third of its kind after a 2014 $234 million deal for a similar project in eastern city Suzhou, followed by a $193 million investment in 2016 for a mall in southwestern city Chongqing.
Zhao Yi, chief financial officer, Longfor Properties said the new projects are ideally located high-quality assets that are expected to offer strong returns.
"Our expertise in real estate development as well as in mall operations and management will help us deliver value to our shareholders and partners," he said.
The services sector in China was one of the big drivers of better-than-expected economic growth last year, according to gross domestic product (GDP) data released last week.
The services industry grew 8.3 per cent in the fourth quarter from a year ago and accounted for almost half of the GDP by value.
Real estate, meanwhile, contributed 6.3 per cent to the economy in the same time frame.