CPPIB Selling China Mall Holdings to Dajia Insurance to Net $163M in Proceeds

A decade after forming its first joint venture with Longfor Properties, the Canada Pension Plan Investment Board (CPPIB) is selling its near-half stake in four projects with the mainland developer as it trims its exposure to commercial real estate in favour of alternative sectors.

The Toronto-based manager of Canada’s public retirement fund announced late Friday that it has agreed to sell its 49 percent stake in a quartet of shopping centres, along with connected office and rental housing properties, in Shanghai, Suzhou, Chengdu and Chongqing to an affiliate of China’s state-owned Dajia Insurance.

CPPIB, which manages Canada’s $467.3 billion public pension fund, said it expects to net approximately C$235 million ($163 million) in proceeds from the sale of the properties. The fund had invested in the assets through a series of transactions from 2014 through 2018, according to Mingtiandi research.

In its most recent annual report, CPPIB indicated that it would be allocating a smaller portion of the pension fund both to real assets and to emerging markets, with the organisation also announcing on Friday that it had agreed to sell its 45 percent stake in a North American warehouse partnership with Australia’s Goodman Group.

Four-Piece Partnership

CPPIB did not identify the target assets in the China transaction or specify the pricing for the deal, however, records show the company having invested in a portfolio of Longfor’s Paradise Walk commercial projects.

In December 2014, CPPIB formed a joint venture with Longfor to jointly develop the Times Paradise Walk project in Suzhou’s Gaoxin District, the home of Suzhou Industrial Park. The institution committed RMB 1.25 billion (then $202 million) to developing the 735,000 square metre (7.9 million square foot) complex, which includes residential, office, retail and hotel space.

The partnership expanded in 2016 when CPPIB committed the equivalent of $147 million for a 49 percent stake in Longfor’s six-storey West Paradise Walk project in Chongqing.

Then in January 2018, the Canadian institution said it was investing RMB 4.2 billion (then $662 million) into a 740,000 square metre Paradise Walk project in Chengdu, the capital of southwestern China’s Sichuan province, and in a 340,000 square metre retail and commercial project in Shanghai’s Minhang district which would incorporate a Paradise Walk mall.

CPPIB did not provide further financial details on the disposal and noted that it will continue to have number of China joint ventures with Longfor following the close of the transaction. Based on its earlier statements, CPPIB would have invested just over $1 billion into the joint venture.

Market sources indicated to Mingtiandi that Dajia Insurance is acquiring the stake at approximately a 7-8 percent cap rate, with Longfor retaining the remaining ownership of the assets. In its interim report for the first half of 2024 Longfor said that occupancy at its 8.29 million square metres of Paradise Walk shopping centres averaged 96 percent.

In July 2018, CPPIB announced that it was forming a new venture with Longfor to develop, acquire and master-lease rental housing assets in China’s first tier, and core second tier cities, with an initial investment target for $817 million.

Property, APAC Strategies Underperform

In its western hemisphere disposal, CPPIB said it expects to realise $2.2 in net proceeds by selling its stake in the Goodman North American Partnership (GNAP). In a statement, the company credited the venture with having provided it with the opportunity to collect cash for the fund.

“The success of GNAP has provided us with an opportunity to lock in strong returns for the CPP Fund and is emblematic of our ongoing partnership with Goodman,” said Max Biagosch, global head of real assets and head of Europe for CPP Investments. “The proceeds from this transaction also give us the ability to redeploy capital towards new investment opportunities as our portfolio continues to grow and evolve alongside the global market.”

GNAP was established as a 45-55 partnership between CPPIB and Australia’s Goodman Group in 2012, with a mandate to invest in high-quality logistics and industrial property in key North American markets.

In its annual report for the 12 months ending March of last year CPPIB said its real estate investments had generated an annualised net return of 0.7 percent — outperformed by credit (3.8 percent), infrastructure (5.9 percent), public equities (8.4 percent) and private equity (13.9 percent).

The same period saw CPPIB’s Asia Pacific investments post an annualised net return of 4.6 percent, as US investments led with 8.9 percent and European strategies trailed at 4 percent.

Data Centre Devotee

In its recent real asset investments CPPIB has favoured alternative sectors such as digital infrastructure over commercial property or other more traditional strategies.

The fund joined with Blackstone in September in a deal to acquire Australia’s AirTrunk in a deal valuing the data centre operator at A$24 billion ($16.1 billion), in one of the largest corporate takeovers ever in that country.

Just one month later, CPPIB teamed up with Singapore sovereign giant GIC and US data centre provider Equinix to form a US data centre development joint venture, with the partners targeting to raise over $15 billion to develop more than 1.5 gigawatts of capacity.

In November, the fund manager committed to a $714 million joint venture to develop its second data centre in Korea with local player Pacific Asset Management.