UPDATE 1-CPPIB delves deeper into Vancouver office market

Tue Mar 20, 2012 12:37pm EDT

* Announces acquisition of 50 pct stake in two buildings

* Total equity investment of C$115 million before closing costs

* Brings Vancouver office portfolio to six buildings

By Pav Jordan

TORONTO, March 20 (Reuters) - The Canada Pension Plan Investment Board (CPPIB), which has been aggressively building its real estate portfolio, announced a further investment on Tuesday in the prime office market in Vancouver, Canada's most expensive property market.

The CPPIB, which invests on behalf of 18 million Canadians, said it has bought a 50 percent stake in two downtown Vancouver office properties that are worth C$230 million ($232.83 million). The CPPIB's equity investment, before closing costs, adjustments and working capital, is C$115 million.

The other half is owned by Oxford Properties, the real estate investing arm of OMERS, the Ontario Municipal Employees Retirement System, another major Canadian pension fund and the CPPIB's largest real estate partner.

"The downtown Vancouver office market is very attractive for long-term investors such as CPPIB," Peter Ballon, the fund's vice-president and head of real estate investments, said in a statement.

Vancouver has been identified by the CPPIB as one of three target Canadian markets for office properties and the acquisitions on Tuesday mean it will own stakes six buildings in a market where quality assets rarely exchange hands. Its other target cities in Canada are Toronto and Calgary.

"Calgary happens to be a very attractive market but it also a very hot market right now and we haven't been as active in that market as we have been in Toronto," Ballon told Reuters in an interview.

CPPIB is still on the hunt for real estate acquisitions. It is mostly interested in emerging powerhouses such as Brazil and China, but it also has its eye on more established centers.

Ballon, who is in charge of real estate investments for North and South America, said the CPPIB preferred different sectors in different geographies, almost always favoring large-scale assets.

The CPPIB has been especially aggressive in real estate since the global economic crisis of 2008-09, first in the hard-hit office sector and then the retail sector.

"Now we're working sort of on the next evolution in terms of where the opportunities are," Ballon said. "We are very bullish on the U.S. recovery."

The CPPIB, which has investing horizons going out as far as 75 years, had a C$14.4 billion real estate portfolio as of Dec. 31, equal to 9.5 percent of its assets.

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