Grosvenor funnels Canadian capital into London venture

Canadian pension fund puts up £190m for London offices joint venture

Canada Pension Plan Investment Board is putting £190m into central London property via a £200m joint venture with Grosvenor Fund Management. The Grosvenor Office Partnership joint venture, in which Grosvenor will invest £10m, is the outcome of “a couple of years of discussion” between CPPIB and GFM, said Scott Rowland, commercial fund manager at GFM.

It is the Canadian fund’s first  investment with Grosvenor. Rowland said the partnership’s value-added strategy is to buy two to four “older, dilapidated buildings within the next two years in the West End and Midtown, for refurbishment, to turn them into core assets”. Grosvenor originally expected to raise a mult-investor fund to carry out this strategy. But Rowland said: “CPPIB said that given their size, they preferred to invest alongside a partner rather than in funds.

“It is not our strategy to bring in additional capital. It is a true joint venture.” There is no plan to gear the equity, as it is thought CPPIB’s priority is to invest the cash. GFM’s first Grosvenor London Office Fund has a different, core strategy. GLOF owns four well-let, high-quality buildings and  Rowland hopes to bring in more equity and make further investments, after the fund’s life was extended earlier this year.

Grosvenor Office Partnership is GFM’s first new investment vehicle in the UK for six years and follows hard on the heels of another partnership formed earlier this year with a Canadian investor and Dutch pension fund manager Bouwinvest. This venture bought six shop-ping centres from Unibail in Sweden and France.

The next new venture will probably be a pan-European fund. European managing director James Raynor said GFM launched Grosvenor Retail European Properties 2 on 1 July, when talks started with potential investors. Mark Preston, Grosvenor’s chief executive, said that he hopes GFM will double assets under management to over £7.5bn in the next five years.