Caisse de Depot et Placement du Quebec is selling some of its European property and redeploying proceeds in assets such as infrastructure while the euro-area economy shrinks, Chief Executive Officer Michael Sabia said.
About 20 percent of the Caisse’s C$18 billion ($17.5 billion) of real estate assets are in Western Europe, according to its 2012 annual report. Canada’s largest public pension-fund manager oversaw net assets of about C$176 billion at the end of last year, including C$6.31 billion in infrastructure such as toll roads and a stake in London’s Heathrow Airport.
“We are selling real estate assets in Europe,” Sabia said in an interview yesterday at the Bloomberg Canada Economic Summit in Toronto. “Real estate pricing among top quality, platinum-quality assets -- the pricing is quite good, and we are trying to benefit from that and in some other asset categories as well, where selectively asset prices are high.”
The euro-area economy contracted 0.2 percent in the first three months of 2013, data from the European Union’s statistics office showed last week. That extended the recession in the zone to a sixth quarter.
While stressing “it’s the right time to be counter-cyclical in Europe,” Sabia said he and his investment team will approach investing in the region with extreme caution. The Caisse had 7.2 percent of its total assets in the euro region at year-end, according to its annual report.
‘Dark and Foggy’
“There’s a dark night going on in Europe, a dark and foggy night where bad things come out of trees and bite you,” Sabia said. “It’s a pretty scary place. In Europe there are investments to be made, and I think it’s possible to be successful there but there’s no place in the world, other that maybe emerging markets, where the word selectivity is fundamentally important.”
Sabia didn’t specify which European properties the Caisse is planning to sell.
On May 7, the Caisse’s Ivanhoe Cambridge real-estate unit sold the Paris building that houses the headquarters of Vivendi SA to French insurer Assurances du Credit Mutuel. Terms of the deal weren’t disclosed.
In addition to infrastructure, cash from asset sales may be reinvested in distressed debt or “situations where a current shareholder needs to liquidate an asset,” Sabia said. “We are trying to, in effect, help build our future by trying to benefit frankly from some of the issues and difficulties that other institutions in Europe have right now.”
Sabia, 59, said in January that the Caisse plans to add C$10 billion to C$12 billion in what it calls less-liquid investments in the next two years. The fund manager seeks to have about 30 percent of its assets in private equity, real estate and infrastructure by the end of 2014, up from 25 percent, the CEO said at the time.
Real estate was one of the best performing asset classes for the Caisse last year, returning 12.4 percent. The pension fund manager’s overall return was 9.6 percent.