Canadian funds hunt Australian real estate

Canadian funds hunt Australian real estate

3 August 2018

Two big Canadian investments funds are hunting commercial real estate opportunities in Australia, and other international funds are lining up behind them.

The first contender, Canada’s Pension Plan Investment Board (CPPIB), one of the world’s largest pension funds, is taking its first tilt at the rapidly growing Australian commercial real estate debt market, putting up $500 million to seed a new Challenger Investment Partner fund, notes The Australian.

The fund will lend on well-located properties in key gateway cities across Australia and New Zealand, according to CPPIB.

“This partnership marks our first real estate debt investment in Australia and New Zealand,” said CPPIB’s head of private real estate debt Geoffrey Souter.

“We believe these markets offer compelling investment opportunities and we look forward to exploring these together with CIP.”

CPPIB’s Asia-Pacific head, Suyi Kim, added the new partnership with Challenger was a further expansion for CPPIB’s new asset classes across the Asia-Pacific.

“This region offers CPPIB attractive investment opportunities supported by strong fundamentals, and it remains a high priority for our growth.”

The Canadian pension fund has $C356.1 billion ($368 billion) under management, while CIP’s parent the ASX-listed Challenger Limited has $78.6 billion in assets under management, notes the AFR.

The fund focuses on debt durations of three to 15 years, mostly in the office, industrial and retail sectors and multifamily housing sectors in North America, Western Europe and Japan.

According to industry sources, the CPPIB has been looking for opportunities to enter the Australian market for at least the past three years.

Meanwhile, Canada’s NorthWest Healthcare Properties Real Estate Investment Trust has teamed with a sovereign wealth fund to launch a $2 billion healthcare property venture in Australia, creating the largest such pure-play vehicle of its kind globally, reports the AFR.

The joint venture is already being seeded with $412 million in assets sold out from the former Generation Healthcare REIT, a locally listed trust that the Canadian giant took in-house last year.

The new partnership is the most emphatic support yet for the rapidly growing asset class of healthcare property.

Once regarded as a niche area, the asset class is now the target of institutional investors while its growth potential is spurred on by an ageing demographic.

“The joint venture commitment, focused on Australian healthcare real estate represents one of the largest in the healthcare real estate sector globally, and leverages our track record in a growth asset class,” NorthWest chairman Paul Dalla Lana said.

“With a significant pipeline of near-term opportunities, we are confident in our ability to more than double our investments in the region over the coming years,” he added.

The surge into healthcare is also part of a broader trend to invest in the real estate that underpins demographic and social growth trends, as capital diversifies from the traditional commercial property types of office towers, shopping malls and logistics facilities.

Other global investors moving into the Australian market include the likes of the US-based Invesco, which have already lent directly on Australian property projects, says The Australian.

Others like TH Real Estate have set up an Australian platform and are poised to start lending to Australian property developers.

Meanwhile, the likes of German insurer Allianz continue to look for ways to enter the Australian market.