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Westfield to sell half stake in British retail assets to CPP Board

LONDON, Ont. — The Canada Pension Plan Investment Board is spending nearly half a billion dollars to acquire a stake in a prime British retail property being developed next to the site of the 2012 London Summer Olympics.

LONDON, Ont. — The Canada Pension Plan Investment Board is spending nearly half a billion dollars to acquire a stake in a prime British retail property being developed next to the site of the 2012 London Summer Olympics.

British real estate company Westfield Group (ASX:WDC) said Monday it had struck a deal to sell a 50 per cent stake in the so-called Westfield Stratford City property to the CPP Board and its Dutch partner, APG, for 871.5 million British pounds or about C$1.4 billion.

The companies said the Canadian pension fund and its Dutch partner will each hold a 25 per cent stake in the development, each having invested 300 million pounds, or the equivalent of about C$486 million. In addition, each is financing its one quarter share with about $135 million pounds, or C$219 million, of debt.

The developers are trying to create a 1.9-million-square-foot major retail and entertainment complex to be completed in the third quarter of 2011. About three quarters of the shopping centre is either leased or committed.

“We are pleased to be investing alongside our established partners APG and Westfield to acquire a high quality shopping centre like Westfield Stratford City which we believe will deliver stable cash flows and good growth prospects over the long-term,” said Graeme Eadie, the board’s senior vice-president for real estate investments.

“It’s extremely difficult to find high quality major regional shopping centres to start with and this one is going to be, I think, the largest or second largest in England and about the same status in terms of Europe generally, so its a very significant asset,” Eadie said in an interview.

Eadie also cited the board’s relationship with Westfield, whom he described as a “terrific operator.”

The location near the site of the Olympics was also a factor.

“It certainly adds to it,” Eadie said. “This whole area has been revitalized and improved. I think the games will help us launch the shopping centre. Obviously they only take place for a short period of time, but it will give us a good launch.”

However, he added that the site itself is “very strong,” and will serve “a very large market that currently has to travel a fair distance for its shopping needs.”

Steven Lowy, Westfield Group’s managing director, said “Stratford City will be a landmark world class shopping centre.

“Today’s announcement continues our strategy of creating value through the introduction of joint venture partners into our assets globally, at the appropriate time. Importantly, this transaction delivers, a year ahead of opening, the value and profit we have created through the development of Stratford City.

The CPPIB already owns three office buildings in the United Kingdom, along with a number of other, smaller shopping centres, and is an investor in a Westfield fund which also owns a number of shopping centres.

The CPPIB invests money not required to pay benefits under the Canada Pension Plan. As of the end of September it had $138.6 billion in assets, up from $123.8 billion in assets a year ago.

Among its widespread investments, the pension fund manager has been buying up infrastructure and real estate assets around the world. It likes those investmentss because they have a predictable cash flow, offer inflation protection and are easy to maintain.