Source: The Canadian Press

“Australia is somewhat similar to Canada in that it’s relatively small in size and these opportunities don’t come along very often, so we think it’s a very good one for us,” said Graeme Eadie, CPPIB’s senior vice-president of real estate investments.

“Retail properties around the world are very highly valued and don’t trade very often, so any time we get an opportunity, we certainly take a very serious look at it,” he said Wednesday after the CPPIB announced the A$375-million investment.

The Canadian fund manager — which invests money not required to pay benefits under the Canada Pension Plan — has teamed up with Australia’s Future Fund to contribute A$750 million (C$702 million) in financing to the restructured retail property fund managed by Colonial First State Global Asset Management.

The retail-focused fund has a $1.1-billion portfolio consisting of nine shopping centres across Australia.

The existing investors will contribute A$150 million.

“In Australia the funds tend to have a finite life and it had come to the end of that life and some of the existing institutional owners wanted to sell out,” Eadie said.

“These aren’t distressed assets or anything like that. These are very good assets and really the key is because they are so good and so hard to get hold of, people don’t want to sell them.”

The CPPIB and Future Fund were approached as potential investors after the retail property fund reached the end of its life with its existing institutional investors. Their financing will extend the life of the fund for another eight years, Eadie said.

“The fund could have done one of two things,” he explained.

“One was to sell the underlying assets, but these regional centres are very hard to get hold of, so people didn’t want to do that. The other alternative is to bring in new capital to replace the existing capital and that’s what happened here.”

Darren Steinberg, Colonial First’s head of property, said the recapitalization of the retail fund was undertaken to “meet the changing needs of investors” and provided existing unitholders an option to leave or stay with the fund.

“An exit strategy for those wishing to reallocate their capital was achieved by securing equity from new investors,” he said in a statement.

The retail fund, which will be renamed the CFSGAM Property Retail Partnership, will be operated by Colonial, but CPPIB and Future Fund will control any major decisions.

The investment is the latest for CPPIB in a string of bids to acquire new real estate and infrastructure assets Down Under.

Last month, the pension fund said it was making a $3.2-billion proposal to acquire Australia’s Intoll Group (ASX:ITO), which owns a number of toll highways, including a 30 per cent stake in Ontario’s Highway 407 Express Toll Route.

In May, CPPIB announced it would take an 80 per cent interest in a real estate joint venture called the Goodman Australia Development Fund.

And earlier that month, the fund and its partners made a C$3.8-billion bid to take over another Australian toll operator, Transurban Group (ASX:TCL), that was later rejected.

Eadie said CPPIB is interested in Australia because its economy is comparatively strong and its retail sector continues to perform well.

“Australia continues to grow, largely based off their resources which are feeding into Asia,” Eadie said.

“It’s one of the few developed countries that has some pretty strong economic growth which is obviously good for business and will be good for consumers.”

The CPPIB is a professional investment management organization that invests the funds not needed by the Canada Pension Plan to pay current benefits on behalf of 17 million Canadian contributors and beneficiaries.

It’s designed to build up a pool of investments that can generate enough money to pick up the slack as the population ages and contributions from employers and employees fall.

In order to build a diversified portfolio, the CPPIB invests in public equities, private equities, real estate, inflation-linked bonds, infrastructure and fixed-income instruments.