Real assets were in the sights of public pension funds this week with a clear preference for developing partnerships and backing co-investment platforms.
This week, Dutch public pension PGGM committed A$350 million (US$268 million) to the EG Australian Core Enhanced Fund, now valued at A$1.25 billion, following up on its A$800 million industrial and logistics real estate partnership with Charter Hall. EG ACE targets light industrial and logistics assets in Sydney and Brisbane and offices in Perth.
Canada’s PPFs were also active in investing in real estate and infrastructure in recent days, with investment spanning logistics and renewables – two segments that were bolstered by the disruption created by the pandemic. CDPQ’s real estate subsidiary Ivanhoé Cambridge established an industrial platform with GID, named GID Industrial. It comprises US$2 billion of assets, including 173 buildings, with plans for additional capital for new investments in the US. Ivanhoé sees the venture as aligned with its strategy to increase exposure to urban infill light-industrial strategy in the US. With its eye on the stellar growth in online spending, GID Industrial will look to capitalize on the speeding up of delivery times in supply chains by developing warehouse space closer to the consumer.
Having launched its US$14 billion Sustainable Energy Group this week, Canada’s biggest public pension fund CPP Investments is planning to acquire a controlling stake in SB Energy, an Indian solar power generator with 7.7GW of solar power generation, from SoftBank for an estimated US$525 million. According to The Mint’s sources, CPP is exploring the possibility of bringing the assets under an infrastructure investment trust, which is an increasingly popular mode of green energy asset ownership in India. InvITS have the advantage of enabling asset owners to publicly list their portfolio or sell stakes on private markets. CPP already has a partnership with Piramal Enterprises to create a green energy InvIT in India.
However, as Global SWF’s reported last month, there are risks in Indian green energy infrastructure, which has attracted around US$4 billion of funding from ADIA, GIC, CPP and CDPQ. Generators are faced with outstanding payments by cash-strapped distribution companies, threatening to erode foreign investor confidence in the sector – and potentially hitting the earnings of foreign state-owned investors.
The infrastructure division of another Canadian PPF, OMERS, announced today that it is selling its minority interest in Vento II, a 596MW portfolio of four wind assets located in Illinois, Texas, Oregon and Minnesota, for approximately US$196.5 million to Atlantica Sustainable Infrastructure. It began investing in the wind generator portfolio in 2012. The exit does not mark the end of OMERS’s investment in US-based wind and solar assets, with plans for further growth in the sector.
This week is typical of a growing trend in real assets strategies. Global SWF forecasts billions more in SWF and PPF capital deployed in renewables infrastructure and logistics and light industrial real estate over coming years, matching broader structural trends that were boosted by the pandemic. NBIM's acquisition of a 50% stake in the Borssele 1 and 2 wind farm off the Netherlands for US$1.63 billion this week marks the start of the Norwegian behemoth's US$14 billion program of renewables acquisitions. OMERS, CDPQ, APG and PGGM will remain among the leaders in the massive deployment of capital in the sector, which is supporting asset values and enabling growth - 2020 was a record record year for offshore wind financing in Europe, climbing to EUR26.3 billion, according to industry body WindEurope.
