CPP Investments, CDPQ Expand Life Sciences and Logistics Properties

CPP Investments announced a deal with Lendlease for a joint venture at the Milano Innovation District: 

International property and investment group Lendlease today established a joint venture with Canada Pension Plan Investment Board (CPP Investments) for the investment in a dedicated Italian real estate alternative investment fund (the Fund) pursuing the development of Phase 1 of the West Gate area of the Milano Innovation District (MIND). The joint venture between Lendlease and CPP Investments builds upon a strong relationship already established across projects at both Barangaroo in Sydney, Australia, and Elephant Park in London, U.K.

Housed on the former 2015 World Expo site, MIND is set to become a leading innovation district anchored by life sciences and technology. The development will comprise over one million square metres in surface area when including the public institutions. Lendlease’s private development rights cover around half the district’s area, which is 480,000 square metres, with an estimated development end value of circa €2.5 billion. Public and private institutions form the foundation of MIND, which will deliver the new university campus of the Statale University for more than 18,000 students and the IRCSS Galeazzi hospital with more than 500 beds.

The district will also be home to the Human Technopole, Italy’s new research institute for life science and other research centres; as well as the Federated Innovation™, an innovation ecosystem where more than 100 companies will be focused on co-creating discoveries in technology and life sciences. Offices, laboratories, new homes, retail, and public realm elements will sit alongside public institutions in a precinct where up to 60,000 people will live and work each day.

CPP Investments and Lendlease have agreed to jointly invest circa €400 million of equity as a 50:50 joint venture in the Fund for the development and long-term ownership of approximately 150,000 square metres of the 480,000 square metres that Lendlease has private development rights for. The Fund will develop part of the West Gate area of MIND; the mixed use area will become a recognisable destination for researchers, workers, residents and other visitors to the district’s west entrance. The Fund will be managed by Lendlease Italy SGR SpA and Lendlease Services Srl will undertake the role of development and project manager.

Sustainable design will be a major feature of MIND, in line with Lendlease’s global target to be a 1.5°C aligned company. MIND is planned to be a zero-carbon precinct powered only by renewable energy sources; a private smart grid is being developed on site as well as a next-gen low temperature, high efficiency district heating and cooling network. Renewable electricity will come from a variety of sources including solar panels on site.

Andrea Ruckstuhl, Head of Continental Europe for Lendlease, said: “Partnering with CPP Investments is an important milestone for this exciting project in Milan. Our partnership will honour the legacy of the former Milan World Expo site and help realise the vision of establishing a world-class innovation district.

“Innovation districts are becoming more and more a new asset class; there is a new sensibility on the importance of human centre innovation, in line with the objectives of the European Recovery Plan. MIND is the physical infrastructure where we will set the base and the foundation for the future, working on the talent attraction, the knowledge economy, the greatest challenge of our time, such as the decarbonization, and the social inclusion of the community. The momentum behind MIND is gaining pace and it is set to become a pioneering project for innovative modern design and sustainability. This agreement further demonstrates the value of Lendlease’s integrated model and our ability to provide major capital partners with access to high-quality investment products on a global scale. Our work at MIND exemplifies Lendlease’s commitment not only to create the best places, but also to projects that advance our future through the delivery of world-class innovation facilities.”

“MIND represents an excellent opportunity for CPP Investments to extend our relationship with an experienced existing global partner and an expansion of our investments in the life sciences sector, building on our experience at Milton Park in the UK,” said Andrea Orlandi, Managing Director, Head of Real Estate Investments – Europe, CPP Investments. “This new destination in Milan is set to become one of the top life-sciences campuses in Europe, supported by a new leading Italian hospital and the University of Milan Life Science campus and research institute. We are providing long-term capital for this project which will ultimately generate strong risk-adjusted returns for CPP contributors and beneficiaries.”

Lendlease aims to create value where communities thrive by delivering best in class urban regeneration precincts in its key global gateway cities. The Group’s ability to deliver major urbanisation projects through its integrated business model, together with more than two decades of experience creating large scale mixed use urban precincts has enabled the Group to deepen its expertise and sophistication to become the preeminent urbanisation specialist.

With end-to-end capabilities across all aspects of real estate – from concept and planning, to design and delivery through to funding and investment management, Lendlease is able to generate superior economic, social and environmental outcomes. As a result, the company is using that expertise to convert and deliver a £27bn pipeline of work in Europe alongside new and existing capital partners.

About CPP Investments

Canada Pension Plan Investment Board (CPP Investments™) is a professional investment management organization that manages the Fund in the best interest of the more than 20 million contributors and beneficiaries of the Canada Pension Plan. In order to build diversified portfolios of assets, investments are made around the world in public equities, private equities, real estate, infrastructure and fixed income. Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, San Francisco, São Paulo and Sydney, CPP Investments is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. At March 31, 2021, the Fund totalled $497.2 billion. For more information, please visit www.cppinvestments.com or follow us on LinkedIn, Facebook or Twitter.

About Lendlease

Lendlease is a leading international property and investments group with operations in Australia, Asia, Europe and the Americas. Our purpose is: Together we create value through places where communities thrive. Headquartered in Sydney, Australia, and listed on the Australian Securities Exchange, Lendlease has approximately 10,900 employees internationally. Our core capabilities are reflected in our operating segments of Development, Investments and Construction.

According to Wikipedia, the Milano Innovation District (MIND) site is about 15 kilometres (9.3 mi) northwest of Milan, in the municipalities of Rho and Pero, and covers an area of 1.1 km2 (0.42 sq mi). The site includes the reuse of the same exhibition areas used for Expo 2015.

I also found an interesting presentation on the Milano Innovation District by Filippo Adarii of PlusValue which you can download here. 

The presentation is a bit dated (2016) but I still think it is worth looking at it and I will bring four slides to your attention here:

I am sharing this presentation with you to provide a background on why CPP Investments in entering into a joint venture with Lendlease to develop the Milano Innovation District (MIND).

CPP Investments isn't the only large pension expanding its life sciences properties.

I recently discussed how OMERS's real estate subsidiary, Oxford Properties, is expanding its life sciences platform in the UK.

Yesterday, CDPQ's real estate subsidiary, Ivanhoé Cambridge, announced along with Lighthouse Canton, it will invest in life science R&D office labs portfolio in India’s largest biotech cluster, Genome Valley, Hyderabad:

Mumbai – Ivanhoé Cambridge, a global real estate subsidiary of the Caisse de dépôt et placement du Québec (CDPQ) one of Canada’s leading institutional fund managers, announced its investment in a 0.85M sf life science R&D office-labs portfolio in Genome Valley, Hyderabad. The portfolio will be acquired alongside Lighthouse Canton, the existing asset manager with a track record of managing the portfolio with an experienced on-the-ground management team.

India is an established pharma and life science innovation hub for global and domestic companies and the world’s largest vaccine manufacturing destination characterized by a technically sound talent pool and world class R&D capabilities. Genome Valley is India’s first master planned cluster for life science R&D activities with India’s largest concentration of multi-tenanted lab space. It offers a deep life science ecosystem and a synergistic environment facilitating infrastructure sharing, technical collaboration, and access to a world class pool of scientists. The portfolio is occupied by 20+ leading global and domestic pharma and bio-tech companies, vaccine manufacturers and contract research organisations.

The MN Park portfolio will receive investment from Ivanhoé Cambridge and Lighthouse Canton in an 80:20 ratio, respectively. The initial focus will be on consolidating the portfolio with select value accretive acquisitions in relevant life science R&D clusters in India. The transaction also includes the completion of development on identified land options within the portfolio to cater to tenant expansion requirements.

“This new investment in MN Park allows us to reinforce our conviction in life science real estate, a key focus area of our diversification strategy into high growth, innovation-focused sectors”, commented Chanakya Chakravarti, Managing Director, India, at Ivanhoé Cambridge. “We anticipate that India will further cement its position in the global life science arena in the post pandemic world. A new healthcare focus positions office-labs as a unique and exciting opportunity. We look forward to participating in this high growth sector by expanding the portfolio through select acquisitions in partnership with an aligned asset manager.  MN Park offers diversification to Ivanhoé Cambridge’s India exposure, thereby enhancing portfolio resilience.”, he added

MN Park is India’s largest privately owned portfolio of leased life sciences R&D office labs. It offers fully fitted lab spaces, incubation and R&D facilities, storage spaces, office spaces, large open recreational spaces, and a host of amenities occupied by global and domestic credit tenants operating strategic R&D facilities engaged in mission critical, core innovation focused healthcare research.

Speaking on the investment by Ivanhoé Cambridge, Mr. Shilpi Chowdhary, CEO, Lighthouse Canton, said, “The life sciences office labs has been a high conviction theme for the firm since our acquisition of MN Park portfolio in 2016. We are pleased to be co-investing with Ivanhoé Cambridge, a firm which is deeply aligned with this strategy. We aim to continue delivering high quality infrastructure that will set a benchmark for such assets in the country and look forward to continue supporting the growth of the life sciences sector across India.“

Ivanhoé Cambridge’s investment in MN Park is in line with its global strategy of focusing on sectors that foster innovation and long-term growth fundamentals. In March 2021, Ivanhoé Cambridge partnered with Lendlease to develop a 1.15-acre project featuring a state-of-the-art life science building with world-class amenities, located at 60 Guest Street, a land parcel in the Boston Landing campus in Allston/Brighton, Massachusetts (read about the project.)

Ivanhoé Cambridge also announced that it is part of the LOGOS Consortium that signed the $1.67 billion acquisition of Australia’s largest intermodal freight facility and Sydney’s pre-eminent industrial logistics estate, Moorebank Logistics Park:

Leading Asia-Pacific logistics specialist LOGOS and its partners today announced the signing of a binding agreement with Qube (ASX:QUB) for acquisition of Australia’s largest intermodal logistics facility at Moorebank in south-western Sydney for $1.67 billion.

The acquisition of Moorebank Logistics Park (MLP) is a landmark investment by a consortium comprised of leading investors (the “LOGOS Consortium”) with a deep commitment to furthering the logistics, e- commerce and distribution landscape in Australia.

LOGOS has joined with existing partners, Ivanhoé Cambridge, AustralianSuper, and TCorp (NSW Treasury Corporation) as well as a new partner, AXA IM Alts, to deliver this milestone strategic investment. In addition to its investment alongside the consortium, LOGOS is appointed as the investment and development manager for MLP.

By acquiring MLP, the LOGOS Consortium will establish a new benchmark for logistics development in the Asia-Pacific and contribute to ongoing further innovation in the sector globally.

MLP is Australia’s largest intermodal freight facility, offering unparalleled industrial warehousing opportunities and rail-to-port connectivity. The site includes approximately 243 hectares of land which will be developed into high quality industrial property and infrastructure including potential for up to 850,000sqm of warehouse opportunities directly adjacent to Australia’s largest rail intermodal facilities with direct linkage to Port Botany.

The LOGOS Consortium said: “This acquisition positions the LOGOS Consortium at the heart of a logistics revolution that will capture powerful economic benefits as the MLP’s intermodal terminals ramp up, increasing the efficient transfer of goods from Port Botany to customers around Australia.

“Our collective vision for MLP represents a fundamental shift in east coast logistics, as a fully automated port-to-site rail link. The high levels of automation across the intermodals and warehousing will drive significant long-term cost advantages and improve supply chain predictability which will offer important labour efficiency and stock availability. The scale of a logistics site with this range of benefits, within a 30- minute drive of a major global CBD, has not been seen in Australia before.”

Changes in consumer behaviour and expectations, especially since the emergence of COVID-19, have driven significant impacts on supply chains. This has forced distributors and retailers to look for longer-term solutions to meet customer demand in food, cold storage, pharmaceutical, freight and distribution as a whole.

LOGOS Head of Australia and New Zealand, Darren Searle, said: “Connectivity, efficiency and intermodal capability are critical components of a pre-eminent logistics site, and no site is better equipped to facilitate market-leading levels of scale and automation than the Moorebank precinct.

“The demand from global and domestic customers for high-quality, larger, automated distribution warehouses and fulfilment centres has continued to grow, and the LOGOS Consortium is delighted to be advancing NSW’s pre-eminent position in the national logistics network through the acquisition of MLP,” Mr Searle said.

Qube Managing Director, Paul Digney, said: “We are delighted to announce Qube’s entry into a binding sale agreement with LOGOS, who is an ideal partner for the Moorebank project as they recognise the high quality and significant long-term strategic value of MLP. We are looking forward to partnering with the LOGOS Consortium to realise MLP as Australia’s leading logistics site and to build on the value of the infrastructure that Qube already built at the precinct.”

With the growth of the e-commerce industry, strength and resilience of supply chains is critical which is why the unique value of MLP’s location makes it a leading infrastructure project in the country. The site’s location in Sydney’s South West precinct is highly strategic, providing direct access to the M5 motorway, M7 motorway, and Hume Highway, servicing key freight corridors through NSW. In particular, the access provided to Port Botany by MLP is unrivalled – providing tenants a direct uninterrupted link to Port Botany.

Mr Searle said: “The supply chain benefits offered by the increased access to freight by rail over road will benefit the tenants of MLP enormously, and the connectivity between Port Botany, the distribution centre at Moorebank and the warehouses on site will offer unparalleled operational savings for importers and exporters.

“The site benefits extend far beyond just the tenants. By 2030, MLP is aiming to reduce Sydney and interstate truck travel by 243,000km per day, and lower carbon emissions by the equivalent of removing 11,000 vehicles from the road for a full year. We are proud to have leading sustainable practices and outcomes at the centre of our investment process,” Mr Searle said.

The LOGOS Consortium will acquire the 243 hectares of MLP for $1.67 billion, with an end estimated value of $4.2 billion once the site is fully developed. The successful acquisition of the MLP site increases LOGOS’s Australian and New Zealand assets under management to $11.5 billion, emphasising its commitment to market-leading investment and development in the sector.

The LOGOS Consortium is also well advanced in developing plans to deploy the largest array of rooftop solar panels on a single site in Australia, powering the extensive automation on-site. Extensive green buffers together with biodiversity offsets and elements of site design and layout will reduce the heat emissions from the site by approximately 4^oC. Additionally, all new buildings on-site will achieve a market leading level of Greenstar certification for industrial development.

The national significance of the MLP development project has been recognised by both the Federal and NSW Governments, with more than $500 million of combined investment in MLP and infrastructure that benefits the site. MLP is expected to deliver over $11 billion in economic benefits over 30 years through improved productivity, reduced business costs, reduced growth in congestion and a better environment.

MLP is the only site in Sydney’s southern corridor able to accommodate built-to-suit warehouses, giving tenants access to innovative, competitive, personalised options for their logistical needs. Anchor tenants Woolworths and Caesarstone Australia have already committed substantial capital to technology and fit-outs.

The transaction is subject to various approvals, including the consent of Moorebank Intermodal Company and FIRB.

The LOGOS Consortium was advised by Grant Samuel and Allens.

Wow, talk about a great long-term deal along with a powerhouse consortium. 

The key passage is this: "The growth of the e-commerce industry, strength and resilience of supply chains is critical which is why the unique value of MLP’s location makes it a leading infrastructure project in the country."

Once completed, this site will be worth considerably more than the initial investment and it will reduce greenhouse gas emissions in Sydney:

“The site benefits extend far beyond just the tenants. By 2030, MLP is aiming to reduce Sydney and interstate truck travel by 243,000km per day, and lower carbon emissions by the equivalent of removing 11,000 vehicles from the road for a full year. We are proud to have leading sustainable practices and outcomes at the centre of our investment process,” Mr Searle said.

The LOGOS Consortium will acquire the 243 hectares of MLP for $1.67 billion, with an end estimated value of $4.2 billion once the site is fully developed. The successful acquisition of the MLP site increases LOGOS’s Australian and New Zealand assets under management to $11.5 billion, emphasising its commitment to market-leading investment and development in the sector.

I am giving you a glimpse of major real estate deals taking place at two of Canada's largest pension funds and I expect more deals like this will be announced as large Canadian pensions expand their investments in real assets. 

By the way, I updated my last comment on OTPP's big push into international private markets because I learned today that OTPP and Macquarie Group announced they have entered into an agreement to jointly acquire Puget Sound Energy from CPP Investments.

As you can see, there are a lot of deals happening and sometimes, it's between "Canadian frenemies". 

Below, a clip on the Milano Innovation District (MIND). Don't ask me to translate but I do love the Italian language. 

Also, hear from Julia Hinwood, Head of Economic Infrastructure at the CEFC and Michael Yiend, Director of Development at Qube about the Moorebank Logistics Park in Sydney.

Lastly, Blackstone President Jon Gray discusses how the firm is navigating the latest phase of the COVID recovery. Take the time to watch that video clip here.