Canadian pension fund arm Ivanhoe Cambridge doubling investment in China

Ivanhoe Cambridge, the real estate investment arm of Canada’s second-largest pension fund, is doubling its investment in mainland China and looking for opportunities in other Asian economies, including Hong Kong, Singapore, India and Japan.

The company, holding C$48 billion of assets as of the end of June, aims to build up its exposure in mainland China to between US$1.5 billion and US$2 billion in the next three to four years, mainly through two partnership deals it signed in June.

That is part of its strategy to double the weighting of growth markets, including Asia-Pacific and Latin America, in its global portfolio.

“China is a major pillar of our growth market strategy,” said Rita-Rose Gagne, executive vice-president of growth markets at the Montreal-based Ivanhoe, part of pension fund Caisse de Depot et Placement du Quebec.

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After two years in the making, Ivanhoe, together with Dutch pension fund APG Asset Management, entered a deal with Chongbang, which builds retail-anchored mixed-use real estate projects in Shanghai and neighbouring cities.

It also invested, together with CBRE Global Investment Partners, in LOGOS China Logistics Club, which currently has over US$1 billion of integrated logistics real estate assets and capital under management in China and Australia.

In the two deals, announced in June, Ivanhoe will respectively commit US$500 million and US$200 million. The company has been active in China since 2005 and has invested in several projects through various vehicles, including a shopping mall called La Nova in Changsha, opened in 2011, and a residential development called Wuxi Parktown, through a partnership with mainland developer Shanghai Forte Land. It also invested in 2013 through a fund operated by US private equity giant Blackstone.

“We are focusing currently on tier-1 cities,” Gagne said. “We belive in the long-term prospect of this country.”

Her comments come amid a slowdown in China’s real estate and broader economy. “We don’t ignore the headwinds and risks,” the executive vice-president said. “(But) China is underserved in good real estate, although there is overcapacity in some places.”

The industry backdrop makes local partners matter even more. Ivanhoe sees in both Chongbang and LOGOS entrepreneural teams with the capacity to grow.

Ivanhoe’s strategy has already brought it success in Brazil, where it started in 2006 with the country’s Carvalho family, which had three shopping centres that have now grown to 18.

Although Brazil is now in recession, Ivanhoe takes it as an opportunity to grow as it believes in that country’s future, backed by rich natural resources, young population and strong household consumption.

“We are just waiting, and think there may be better opportunities,” said Gagne, who has led Ivanhoe’s expansion in Brazil and is doing the same in China.

To help the firm execute its Asia-Pacific strategy, Ivanhoe hired George Agethen as Hong Kong-based senior vice-president in August. Before that, he worked for Ping An Trust, a subsidiary of China’s second-largest insurer Ping An Insurance (Group) Co.

“Hong Kong is a very vibrant real estate market,” Agethen said. “It’s also very difficult to access opportunities as a foreign investor.”

The company is already in Australia, close to a deal in India and is looking at Indonesia and the Philippines too, although not entering these two regions immediately.