The Asia Pacific region currently accounts for about a quarter of Canadian investor outbound allocations, up from 10% between 2015 and 2019. according to Real Capital Analytics (RCA) report dated June 21 – and most of this outflow comes from regional real estate.
This is part of a broader trend with Canadian investors diverting their attention outside North America, with about half of outbound spending leaving the continent from 2020.
“Five of the eight largest Canadian investors in [Asia Pacific] region since 2016 [have been] pension funds. In contrast, the U.S. and European real estate presence in the Asia Pacific region tends to come from a wider range of sources, including banks, investment managers and insurance companies, ” said Benjamin Chow, Head of Research Asia Pacific. to RCA.
According to Chow, established players following the global financial crisis, such as the CPP Investments Board (CPPIB) and Brookfield, have steadily grown their local teams in the mid-2010s.
Canadian investors have generally increased their presence in the Asia Pacific real estate sectors over the past few years, especially with a focus on India, China and South Korea.
As of March 31, 2021, CPPIB’s net assets in the Asia-Pacific region (including Japan and Australia) were C $ 134 billion (US $ 109 billion), accounting for 27% of its total assets under management (AUM).
According to the annual report for 2021net pension assets are about C $ 497 billion ($ 403 billion) as of March, and the five-year annual return is 11%.
In Greater China, C $ 72.7 billion (US $ 59 billion) has been invested in CPPIB, according to data recent financial results. Of the total portfolio, 12.7% fell on real estate, 55.9% on shares and 13.5% on credit assets.
“Five of the eight largest Canadian investors in the region since 2016 are pension funds. In contrast, the US and European real estate presence in the Asia Pacific region tends to come from a wider range of sources, with banks, investment managers and insurance companies among the main players, ”he added.
CHANGE OF PRIORITIES
While CPPIB has a strong focus on Asian real estate, the recent deal has allowed the company exit several commercial projects in China from the Singapore real estate group CapitaLand.
Following the exit of the Canadian pension fund, the Chinese insurer Ping An Insurance (Group) plans to acquire shares in six retail and office projects in China from CapitaLand for up to 32.7 billion yuan ($ 5.06 billion).
Ping An Life Insurance, a division of Ping An, announced on June 28 that it will acquire stakes in six Raffles City commercial projects. Following the transaction, CapitaLand will retain an effective stake in each project ranging from 12.6% to 30%. The deal is scheduled to be completed by September.
CPPIB will have net sales of approximately CAD 800 million ($ 649 million) before the close of trading; the pension does not disclose the exact stake in these projects.
CPPIB spokesperson informed AsianInvestor that after the exit, the company still has significant investments in real estate in China, although there is no data on investments nationwide.
“CPPIB first invested in Raffles City China shortly after we opened our Hong Kong office in 2008. As China’s economy and real estate market expands and develops, this is the perfect time to monetize investments for other opportunities in the country. “ said Guy Fulton, Managing Director, Head of Greater China Real Estate at CPPIB, in the announcement. A spokeswoman declined to name specific targets for these “other opportunities.”
“The six properties are CapitaLand’s premier core assets with high-quality tenants and a stable rental income. The proposed investment will optimize the distribution of insurance funds and provide stable and good returns, ”said Ping An. AsianInvestor.
Chow noted that the Ping An acquisition was one of the top five Real estate transactions in the Asia-Pacific region in recent years.
“Roughly half of the portfolio was in retail and hospitality assets, which is a remarkable statistic considering how retail and hospitality are shunned globally. In particular, large shopping malls have lost their popularity around the world since the start of the pandemic, but they remain in vogue for investors targeting China, ”he said.
The deal may continue to draw attention to office and retail properties in China. Office and retail assets were among the top picks for Canadian capital in the Apac region from 2016 to 2021 YTD, according to RCA’s report.