As Global Head of Real Estate, Peter is responsible for the Canada Pension Plan Investment Board (CPP Investments) global real estate portfolio, which is diversified across twenty global markets and currently exceeds C$50 Billion. During the hour-long Zoom session, Peter shared his personal views with 20 ULI UK Young Leaders: a selection of the topics are summarised below.
Operating and Career Planning in Uncertainty
Throughout his career Peter worked in a variety of business environments, from consulting to institutions. He found early in his career that it is impossible to follow an exact plan and important to be adaptive, reactive, and open minded.
Peter suggested that passion is one of the most important contributors to success – what one likes, skillset and environment / culture suitability.
For many analyst level professionals this will be the first recession they operate in. It should be viewed as an opportunity to learn and see how the market reacts – what strategies come out as successful and how certain investments perform over time. It is a chance to build a skillset for the next recession when current young leaders will be in decision-making roles. Real Estate is not going away, even if that means some asset classes will need to be repurposed.
CPP Investments Business Model
Historically CPP Investments was active in funds, however as the business grew it transitioned to direct investing through JV with operating partners.
Its real estate team is relatively small with 80 investment professionals spread across seven offices. They focus on scalable relationships to allow for global growth. They have partnered with Goodman and jointly have projects in the UK, US, Hong Kong, China, Australia and Brazil. Whilst the relationships are managed locally, we benefit from global efficiencies in terms of documentation, communication and governance. CPP Investments seeks to ensure alignment with our operating partners as much as possible.
In their various offices they hire local professionals from a diverse range of backgrounds. Its investment committee is emblematic of this principle as Peter is the only Canadian out of the nine committee members.
Growing the Business
Peter joined CPP Investments in 2007, and since this period the business’s growth has been focused on both size and geography. Timing was a key component for their growth as this was right after the Great Financial Crisis (GFC) and they were deploying capital into the market whilst many others were retrenching. They have a broad sector exposure from PRS and medical to data centres.
When Peter joined, the majority of staff and assets were in Canada, but within a few years they opened offices in Hong Kong and London. As the global head of real estate and chair of the investment committee, Peter’s main role is overseeing investment. He spends a lot of time going to the various offices. He rarely needs to run transactions and typically gets involved if something goes wrong.
Impact of COVID-19
With the exception of the Hong Kong office which is operating an A/B rotation; CPP Investments’ employees are working remotely. As in the wider market, working from home has been received with mixed views and the firm is focused on actively engaging to support staff who need it.
From a real estate perspective, this has impacted the sectors with varying results. Industrial and data centres can be seen to trade at a premium whilst misplaced retail will likely struggle. The buying opportunities have been in the listed market which can react much faster to market conditions. There is currently limited private distress as it needs to filter through the banking system. Regardless, trophy assets will still trade well relative to valuations, but complex projects will likely encounter destress in the short-term. Even real estate owners who are not levered may struggle due to operating cashflow issues, but the bigger platforms should be able to absorb this.
Corporate social responsibility (CSR)
Social and environmental responsibility is a huge focus for CPP from both a moral and business perspective. These factors directly contribute to sustaining the long-term value of the asset and reducing obsolescence thus protecting the downside.
It goes beyond the investor. If buildings don’t meet the evolving requirements of high-quality tenants for health and well-being and sustainability, there will be a major determent to value.