CPPIB to Buy 50% of German Retailer, Highlighting Popularity of German Property Investments

(February 18, 2011) — The Canada Pension Plan Investment Board has agreed to purchase a 50% stake in Europe’s biggest retail center.

The $949 million purchase of CentrO near Dusseldorf, Germany, growing interest in German retail properties.

Following the financial crisis when the value of real estate investment plummeted, he CPPIB, similar to other funds around the world, had been pursuing real estate investments, signaling renewed confidence in real estate investments and a heightened faith in a rebound. David Denison, chief executive of the CPPIB, which oversees $140 billion in assets for Canada’s national pension plan, told the Wall Street Journal that he has witnessed a spike in the availability of commercial real estate in the US, and that he is expecting that trend to continue.

Largely due to a number of major purchases in recent months, the fund reported its infrastructure holdings have ballooned over the past nine months, and now total 6.8% of the fund’s total assets with a total value of $9.5 billion, up from 4.6% of assets worth $5.8 billion as of March 31 a year ago. Meanwhile, real estate assets have grown to $9.2-billion in value representing 6.6% of the fund’s holdings, an increase from $7 billion or 5.5% of total assets last year. In November, the fund acquired a 25% stake in a mall next to the site of the 2012 Olympics in London for about $700 million. Also in November, the fund acquired a mall in Huerth, Germany, for $215 million.

A survey last month by the European Association for Investors in Non-Listed Real Estate Vehicles (INREV) discovered that compared with last year when the UK ranked as a top property investment location, the UK fell to fourth place with Germany now the region of choice. More than a third (36%) of investors now rank German retail as their preferred intended location and sector for 2011.

“This is a dramatic change in sentiment,” Director Research and Market Information Lonneke Löwik said in a statement. Over the last two years the UK dominated the rankings with UK retail, UK office and UK industrial/logistics included in the top four most preferred country/sector combinations. While the UK remains well represented in the top ten, investors seem wary of higher property prices and a slower economic recovery in the UK but attracted by growing confidence in the German and other European markets.”

The boost in confidence in Germany as a top property investment location comes after the country’s economy grew at a record 3.6% pace last year. The survey showed retail real estate in Germany was the most favored type of property among investors, while office buildings were the third most popular.