Canada fund shrugs off past experience, renews interest in Indian realty

Canada Pension Plan Investment Board (CPPIB), Canada’s largest pension fund manager, is signing a joint venture (JV) with Indian developer RMZ, despite facing roadblocks in previous JVs in the real estate space.
 
CPPIB had over $475 billion of assets under management globally as of December 31, 2020, and invested in the real estate sector in 20 countries.
 
Three of its Indian partners went ahead and formed similar JVs with other investors in the past.
 
While two of its previous JVs — with Shapoorji Pallonji Group and Ajay Piramal-led Piramal Enterprises — did not take off, another one with mall developer Phoenix Mills saw the Indian partner forming a similar JV with Singaporean fund GIC to build malls.
 
In 2013, CPPIB and Shapoorji Pallonji Group formed a JV to acquire FDI-compliant office buildings in major metros in the country. CPPIB owned 80 per cent of the venture with an initial equity commitment of $200 million. The JV bought one asset in Chennai and later sold it to Singaporean investor Mapletree. After that, the JV did not acquire any property. Later, Shapoorji formed tie ups with Germany’s Allianz group and Abu Dhabi sovereign fund Abu Dhabi Investment Authority (ADIA) to buy commercial properties.

 
“They had high yield expectations but yields have fallen as many investors entered commercial properties, pushing up valuations,” said a person, who dealt with CPPIB earlier.
 
Another executive said CPPIB took a lot of time to make decisions due to its stringent processes.
 
Many investors such as US-based Blackstone, Canada’s Brookfield Asset Management, Xander group, and other investors put in billions of dollars into Indian commercial properties in the last decade. They even tapped public markets via REITs.
 
In 2014, CPPIB tied up with Ajay Piramal-led Piramal Enterprises to float a venture to give rupee debt to residential projects across major cities. Both committed $250 million for the venture.
 
But the venture did very little in terms of disbursements, sources said. Piramal later floated a JV with Canada’s CDPQ to give equity money to property developers besides giving debt to developers on its own.
 
However, the two announced a JV for an infrastructure investment trust focused on renewable energy. CPPIB also invested $225 million in the distressed assets fund. Recently, Piramal grouped all its JVs with global investors such as CPPIB, CDPQ and others under Piramal Alternatives, its new asset management company.
 
In 2017, it formed a JV with mall developer Phoenix Mills to develop, own and operate malls and CPPIB invested over Rs 1,600 crore in the venture in two tranches. Also, Phoenix Mills, in December last year, floated a similar joint venture with Singapore’s GIC to invest in its malls and offices.
 
To Business Standard’s queries on previous JVs, a CPPIB spokesperson said, “We are a significant investor in India, with Canadian $12 billion invested in real estate, infrastructure, public and private equities, funds, co-investments and credit as on December 31, 2020. We have been investing in India before we opened our Mumbai office in 2015. We don’t gauge investment returns based on short-term performance. We operate with an investment horizon that spans decades.”
 
In 2017, CPPIB formed a JV with logistics company Indospace and committed $500 million to the venture. In 2018, CPPIB took 30 per cent of IndInfravit Trust, the country’s first private infrastructure investment trust.
 
Arun Natarajan, founder of Venture Intelligence, a research and analysis firm on private equity, venture capital and M&As, said, “Real estate in India is not an easy market to figure out. Investors such as CPPIB have deep pockets and stay invested for the long term. In their scheme of things, these setbacks do not matter.”