CPPIB Spends More Than $680M On Chinese Retail In Two Weeks

The Canada Pension Plan Investment Board is creating its own version of the holiday shopping rush — and it’s buying out the whole mall. The fund manager reached its third deal to invest in mainland retail real estate in two weeks by signing up to invest $162 million to acquire a 40 percent interest in the Pavilion Dalian shopping mall in northeast China.

With this deal, Canada’s largest pension fund has now shelled out $684 million on mainland retail real estate investments in a two week period, despite talk of a mall glut weighing heavily upon the sector. Some investors have been turned off by mainland retail with more than 40 million square metres of new malls reportedly in the pipeline.

However, CPPIB is aiming to take advantage of the lack of interest from other buyers by securing what it deems to be high-quality retail assets. The latest acquisition, Pavilion Dalian, is currently fully leased and boasts the usual mix of local and international brands as well as international eateries.

“Acquiring a stake in Pavilion Dalian is consistent with our real estate strategy of investing in high-quality, well-located retail assets with leading partners in the region,” Jimmy Phua, Managing Director, Head of Real Estate Investments – Asia, CPPIB, said.

The investment management organization acquired its stake in the retail complex from Malaysia-based Pavilion Group who opened the mall in 2015.

Two Week Retail Rush For CPPIB

CPPIB’s Dalian deal follows just 14 days after CPPIB put up $147 million for a 49 percent stake in Longfor Properties’ West Paradise Walk. The six-level shopping mall in the western Chinese city of Chonqing was attractive in part due to its high occupancy rate, which stood at 99 percent during the past two years.

Also within the last fortnight, CPPIB invested over $375 million for a 25 percent stake in CapitaLand’s Raffles City China Investment Partners III fund. The $1.5 billion investment vehicle will target mixed-use developments in China’s gateway cities.

Latest Deal Follows Familiar Pattern

CPPIB’s deal for Pavilion Dalian follows a similar pattern to the firm’s other recent transactions in China, buying from a partner they have already worked with. While the Toronto-based firm hadn’t teamed with Pavilion in China, the two had formed a joint venture to invest in Pavilion Damansara Heights, a mixed-use development in Kuala Lumpur.

The Canadian outfit also had experience working with Longfor prior to the Chonqing acquisition having invested RMB 1.25 billion ($202 million) for a stake in Times Paradise Walk in Suzhou a few years earlier.