UPDATE 1-Canada pension board to invest in Chinese real estate venture

Tue Mar 25, 2014 9:25am EDT

(Adds details, background, executive comment)

By Euan Rocha

TORONTO, March 25 (Reuters) - The Canada Pension Plan Investment Board said on Tuesday it will invest $250 million in the Chinese real estate market through a new venture with China Vanke Co Ltd, the nation's largest residential developer.

The pension fund manager said the venture, which marks its first substantial real estate investment in the country since a small foray back in 2008, will focus on residential development projects in large cities across China, starting in the city of Qingdao in the Shandong Province.

CPPIB said it intended to capitalize on China's rising incomes and strong economic fundamentals, factors that will provide significant demand for middle-income housing.

Vanke's revenue exceeded $22 billion in 2013. The company has developments in 65 large and medium-sized cities across the country and four overseas cities.

CPPIB, which manages a fund pool of over C$201.5 billion ($179.63 billion), is hoping to grow the venture over time. It is initially committing $250 million with an investment period of 18 months into the venture, and it has retained the option to increase its capital commitment down the road.

CPPIB's venture with Vanke plans to target the mid-market housing segment in first and second tier cities in China where good demographics and a rising middle class provide favorable supply and demand conditions.

"Asia continues to be an important real estate market for CPPIB and one where we already have significant investments in the commercial property and logistics sectors," CPPIB's head of real estate investments Graeme Eadie, said in a statement.

As of Dec. 31, CPPIB's investments in Asia totaled C$23.4 billion representing 11.6 percent of its overall portfolio.

Last year, the fund manager invested a further $400 million and boosted its equity commitment toward owning and developing logistics assets in China with the Goodman Group. ($1 = 1.1217 Canadian dollars) (Editing by Lisa Von Ahn and Sofina Mirza-Reid)

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