Canada Pension Plan Investment Board expands into U.S. multifamily sector with new acquisitions

By bdeditor On Aug 12, 2011

The CPP Investment Board (CPPIB) announced the completion of eight new real estate investments in the United States as part of the continued execution of its U.S. real estate investment strategy to acquire high quality assets in key markets, alongside best-in-class partners.

CPPIB made its first direct entry in the U.S. multifamily sector with the completion of the following investments:

40 per cent interest in two prime multifamily properties for an equity investment of US$108 million in a joint venture with Allianz and Archstone, a leader in apartment investment and operations. The joint venture includes Archstone North Point, a 426-unit property in Cambridge, Massachusetts and Archstone Woodland Park, a 392-unit property in Herndon, Virginia located in the Washington, DC metropolitan area. In addition, Archstone and CPPIB have formed a three-year development joint venture program.
49 per cent interest in Palazzo Westwood Village, a Class A, 350-unit property located in Los Angeles in a joint venture with Casden Property Company LLC, a privately held real estate company that is widely regarded as one of the premier developers of multifamily residential properties in the western United States.
45 per cent interest in the Cadence multifamily development project in San Jose, California for an equity investment of US$92 million in a joint venture with Essex Property Trust, a leading Real Estate Investment Trust (REIT). Construction on the 569-unit Class A development is scheduled to begin in September 2011.
44 per cent interest in a 654 unit multifamily development in downtown Seattle, Washington for an equity investment of US$84 million. This investment is through a joint venture with an entity affiliated with Multi-Employer Property Trust (MEPT), an open-ended fund managed by Bentall Kennedy. Called Sixth and Lenora, the development is a Class A, 24-storey high rise that includes 654 units in the city’s popular Belltown neighbourhood.

“We see U.S. multifamily real estate investments as an attractive opportunity to build our portfolio in this sector over the coming years. Our multifamily strategy is to acquire or develop high quality, long-term assets in core, high barrier to entry markets alongside experienced and best-in-class partners with aligned interests,” said Peter Ballon, CPPIB’s vice president and Head of Real Estate Investments – Americas. “We believe that the limited supply of high quality rental properties and other broad demographic trends such as forecast population growth, declining home ownership and the echo-boom generation reaching peak rental propensity all support continued growth in the U.S. multifamily sector.”

In addition to the multifamily investments, CPPIB recently completed acquisitions of three prime office properties in Manhattan and Washington, DC:

In Washington, DC, CPPIB acquired a 45 per cent interest in 1255 23^rd Street, a 340,000 square foot Class A office property in a joint venture with locally-based Carr Properties and MetLife Real Estate Investments. The total purchase price was US$138 million resulting in a US$30 million equity investment, net of debt, for CPPIB.
In Manhattan, CPPIB acquired a 32 per cent interest in a joint venture owning two properties – 655 Fifth Avenue and 100 Broadway Avenue. 655 Fifth Avenue is a 49,300 square foot retail/office property located in Manhattan’s premier retail corridor. The property is 100 per cent leased to Salvatore Ferragamo and houses their flagship New York City store. 100 Broadway Avenue is a 394,600 square foot office building located in Lower Manhattan. The joint venture was made alongside Meadow Partners and Madison Capital, privately owned real estate firms based in New York. Financial terms of the transaction are not being disclosed.

“In all, these are excellent investments that fully align with our U.S. real estate investment strategy and introduce CPPIB to a number of new, best-in class partners. All of the properties involved in these transactions are well positioned to deliver stable cash flows and retain their relative value across multiple business cycles. We will continue to pursue attractive real estate investment opportunities in key markets in order to expand our U.S. real estate portfolio,” said Ballon.