CANADA - The Canada Pension Plan Investment Board (CPPIB) has partnered with a North American real estate company to acquire all of the shares of commercial real estate company O&Y Properties and the assets and liabilities of its Real Estate Investment Trust (REIT) for a total of CAN$2bn.
Brookfield Properties Corporation announced its bidding consortium, which includes its Canadian-based subsidiary BPO Properties and institutional investors, the largest of which is CPPIB, had entered into a definitive agreement to acquire 100% of the shares O&Y Properties along with the assets and liabilities of O&Y REIT.
O&Y Properties’ two principal assets are First Canadian Place in Toronto and a 42% ownership interest in O&Y REIT. The combined portfolio of the two companies consists of 25 office properties in six Canadian markets, principally Toronto, Calgary and Ottawa.
The CPPIB will provide 50% of the equity for the portfolio while BPO Properties will provide 25% and serve as property and asset manager for the portfolio. It is expected that BPO Properties’ equity investment will total about CAN$200m.
“This investment is an important step in the continued diversification of the CPP reserve fund,” said David Denison, president and CEO of the CPP Investment Board. “Real estate investments traditionally have delivered attractive long-term returns that tend to rise with inflation. This is an outstanding portfolio with landmark properties across Canada.”
Commenting on the joint venture, Ric Clark, president and CEO of Brookfield Properties, said: “We are pleased that our consortium was selected as the successful bidder for the acquisition of this major Canadian portfolio of properties. It provides Brookfield with a unique opportunity to expand our asset management activities with leading institutional partners.”
Brascan Financial Real Estate Group advised the consortium on the purchase. Morgan Stanley provided financial advice to the CPP Investment Board.
The agreement follows a bid process initiated in February this year. It still requires shareholder and regulatory approval.
Pending the approvals, the transactions are expected to close in mid-July.
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