Dutch, Canadian Pension Funds Buy Stake in Stratford City

Dutch pension fund APG and the Canada Pension Plan Investment Board have acquired a stake in London’s Stratford City development for roughly 871.5 million pounds ($1.39 billion), Reuters reported. The funds are buying the 50% stake in the retail development, which will be built next to the site of the 2012 Olympics, from Australian shopping-mall owner Westfield Group.

(Reuters) – Australian shopping-mall owner Westfield Group is selling a stake in its London’s Stratford City development to Dutch and Canadian pension funds for 871.5 million pounds ($1.39 billion), Westfield said on Monday.

Westfield has agreed to sell a 50 percent stake in the retail arm of the development, which is being built next to the site of the 2012 Olympic Games, to Dutch pension fund APG and the Canada Pension Plan Investment Board.

“It will be one of the largest and best shopping centers in England and probably Europe, so we see it as a very good asset with very good management, and we’re getting in at the front end,” said Graeme Eadie, senior vice-president for real estate investments at CPPIB, which manages the national pension fund.

“I think the returns are going to be quite strong and we’ll see lots of growth over time,” he told Reuters.

Global pension funds, with their deep pockets and long-term investment horizons, have became important players in the private equity market in the wake of the global financial crisis.

Canadian funds have taken an especially active role. CPPIB, with some C$138.6 billion ($135.88 billion) under management as of Sept 30, has led the charge, participating in some of the largest global private equity deals of the past two years.

The Stratford City deal, due to be completed in late 2011, follows Westfield’s move to spin off half of its Australian and New Zealand property assets to create a new $12 billion fund that will not have offshore and development risks.

The main benefits of the Stratford deal are a 150 million pound profit on the development, which Westfield plans to reinvest in other projects, and an increase in the expected return on its stake to more than 9 percent from 7-7.5 percent.

The deal will also cut Westfield’s gearing by 2 percent.

The sale will have little impact on its operating earnings per share forecast of 74.6 cents in 2011.

The Stratford sale and Westfield’s spin-off are all designed to help perk up the group’s shares which have dropped 5.7 percent to A$11.82 so far this year, down slightly more than the broader market. ($1=0.6258 Pound, $1=$1.02 Canadian)

(Reporting by Mark Bendeich and Sonali Paul in Sydney; additional reporting by Pav Jordan in Toronto; Editing by Ed Davies)