From listed to unlisted: CBRE’s Caledon acquisition

While CBRE began offering listed infrastructure in 2011 through its affiliate CBRE Clarion Securities, the real estate-focused firm has long had an eye on the unlisted space. But the firm’s leadership understood that entering the market would be a challenging undertaking.

“This isn't a space that you hire a person or two and say, ‘Go create a capability’. It is a big asset class,” Ritson Ferguson, CBRE Global Investors’ chief executive, recently told Infrastructure Investor. “It requires a lot of expertise and a lot of resources. So we weren't going to be in it just to say that we were in it.”

The opportunity materialised with the firm’s acquisition of a majority stake in Caledon Capital Management, a Toronto-based investment management business with $7 billion in assets under management focusing on infrastructure and private equity. The agreement was announced in June, with the deal finalised earlier this month.

Caledon, founded in 2006, will now operate as a separate business unit of CBRE Global Investors, with the Caledon team remaining intact. Caledon’s management team, led by founding partner David Rogers, will retain an ownership share, though the amount of this share has not been disclosed.

Ferguson said contact between the firms began more than four years ago, when Jeremy Anagnos, a principal at CBRE’s listed infrastructure division, sat on a panel with Caledon principal Martin Day. This led to an ongoing dialogue, with the firms comparing notes on the sector, and culminated in 2016 in discussions beginning over combining forces.

“We had been approached before” by potential buyers, Stephen Dowd, Caledon’s head of infrastructure, told Infrastructure Investor. “But we never found the right circumstances. We are still a young company, and we didn’t want to be pulled into another culture and be essentially subsumed by that culture.”

For CBRE, demand for opportunities in infrastructure has been increasing in recent years – a trend the firm expects to continue. “Our clients indicated that what were originally their real estate allocations were evolving to become real asset allocations,” Ferguson noted. “And infrastructure was a fairly significant part of that.”

Caledon has focused on OECD countries, with investments including telecoms, gas infrastructure and renewables in the US, gas transmission in New Zealand and water and sewage in the UK. The firm has also invested in several infrastructure funds.

“We are not looking for what is the hottest sector right now,” Dowd said. “We are looking to build balanced portfolios, and that means finding opportunities across the diverse sectors and industries.”