CPPIB Commits $202M to JV with Longfor Properties

The people of Canada are now joining with a Chinese real estate developer to build a 735,000 square metre real estate project – or at least their pensions are.

According to a joint statement this week from the Canada Pension Plan Investment Board (CPPIB) and Longfor Properties, the manager of the $195 billion pension fund and the Beijing-based developer have formed a new joint venture for a major mixed-use development project in Suzhou. Under the terms of the deal, CPPIB will contribute RMB 1.25 billion ($202 million) to Longfor’s existing Times Paradise Walk project in the city just west of Shanghai in China’s Jiangsu Province.

The joint venture is the third such arrangement for CPPIB in China, after it had earlier formed new companies with China Vanke for residential development, and with Australia’s Goodman Group for building new logistics facilities.

Building a New Complex in Suzhou Industrial Park

CPPIB formed the new joint venture with Longfor on 23 December last year to jointly develop the Times Paradise Walk project in Suzhou’s Gaoxin District, the home of one of China’s most successful development projects – Suzhou Industrial Park.

Suzhou, which is less than 30 minutes from Shanghai by train, is the fifth most affluent city in China with a population of 10 million.

The mixed-use development is an integrated project includes residential, office, retail and hotel space covering a gross floor area of 735,000 square metres. The project is scheduled to be completed in a series of phases beginning in 2016 and ending in 2019.

More Cooperation with Longfor Could Be on the Way

“We look forward to building a long-term strategic partnership with Longfor that will allow CPPIB to continue to invest in large scale mixed-use and retail projects in China, a market in which we see long-term growth potential,” said Jimmy Phua, Managing Director, Head of Real Estate Investments Asia for CPPIB. The pension fund manager has already stepped up its joint venture with Goodman several times after achieving solid returns from the logistics JV.

Located in the heart of Suzhou’s Gaoxin district, Times Paradise Walk Suzhou has already achieved sales from two prior residential launches of RMB 1.9 billion, according to the statement this week.

“One of Longfor’s key operating strategies is to expand joint venture initiatives with aligned partners. We look forward to forming a sustainable partnership with CPPIB to explore real estate opportunities in China over the medium to long term, leveraging each other’s strengths and resources,” said Zhao Yi, Finance General Manager, Longfor.

Pinnacle Real Estate Capital Partners acted as the independent advisor for the investment and will have an ongoing role with CPPIB and Longfor. “This joint venture sets the stage for the beginning of a significant partnership between CPPIB and Longfor and they are ideal partners to capture the long term growth prospects for such large scale development projects in China,” said Kenny Tse, Managing Director for Pinnacle.