Starting in the summer of 2011, the Toronto-based Canada Pension Plan Investment Board (CPPIB) began making its presence known in the U.S. multifamily market with a series of high-priced multiproperty investments. And just like its aggressive burst onto the scene last summer, it’s making another statement this year.
At the end of July, the CPPIB announced several partnerships with big-name U.S. companies to the tune of $355 million. The new deals bring the board's total equity investments in U.S. real estate to $912 million, with more than 6,000 units exclusively in Class A properties in major metro regions.
This latest activity comes in the form of a 45 percent interest in two San Francisco–area developments alongside partner Palo Alto, Calif.–based Essex Property Trust that include 772 units. Another deal partners the CPPIB with Chicago-based AMLI Residential, giving the Canadian organization a 45 percent interest in four properties in the Chicago and Dallas areas. Finally, the board partnered with Washington, D.C.–based Multi-Employer Property Trust and Chicago-based Habitat Co. for a 44 percent interest in a 450-unit property in Chicago.
Peter Ballon, the CPPIB’s vice president and head of real estate investments–Americas, says these moves won't be the last the organization plans to make in U.S. rental properties. “As a long-term investor, our strategy is to focus on properties which will hold or increase their value over the next decade or two. Or longer,” he says.
The announcement comes at a time when foreign investors are becoming more bullish on U.S. real estate prospects, most commonly in commercial investments but increasingly in multifamily residential properties. According to data from Chicago-based Jones Lang LaSalle, global-investor purchasing activity increased 24 percent from the first quarter of 2012 to the second, landing at $108 billion all told.
Ballon says that factors such as forecasted population growth, declining homeownership, and the Echo Boom generation coming into peak rental propensity have all contributed to the CPPIB's and other foreign companies’ decisions to expand their presence in the U.S. market.
“These transactions fully align with our U.S. multifamily strategy to acquire and develop core properties in supply-constrained markets,” Ballon says. “We’re working with best-in-class partners to build a portfolio of high-quality assets that can deliver stable cash flows over the long term,” he adds.
Among the markets the organization is eying for future expansion are Boston; New York City; Washington, D.C.; Dallas; and Chicago. But don’t expect the CPPIB to be the only foreign investor entering supply-crunched U.S. markets. The LaSalle report points to an increasing number of foreign investors looking to tangible assets in America as the eurozone crisis continues to cause violent market swings in other global economies.