Wednesday, November 07, 2007

Your Pension Plan At Work

We may end up owning an airport in New Zealand. I can't wait to retire and visit.

WELLINGTON (Reuters) - The Canadian state pension fund said on Wednesday it would make a partial all-cash offer for NZ's Auckland International Airport Ltd (AIA.NZ: Quote), a week after the company rejected a previous offer.

The Canada Pension Plan Investment Board said it would offer NZ$3.6555 a share for up to 40 percent of Auckland Airport shares valuing the company at around NZ$4.5 billion ($3.5 billion). CPPIB said Auckland Airport shareholders encouraged it to bid again, after the board rejected the previous proposal as too risky.

Shares in Auckland Airport, 23 percent owned by two local authorities, closed on Tuesday at NZ$2.91, having traded between NZ$2.06 and NZ$3.50 over the past 12 months.


In response to a stinging snub from the board of New Zealand's largest airport, the Canada Pension Plan Investment Board (CPPIB) has fired back with a plan to take its partial takeover offer directly to shareholders.

After a months-long friendly process in which the Canadian pension fund manager was given ample access to Auckland International Airport Ltd.'s books, its board put out a surprising and sharply worded release last week quashing the CPPIB's bid.

Four of its five members voted against the offer for up to 49 per cent of the company. The revised all-cash offer is valued at $1.8-billion New Zealand ($1.3-billion Canadian) for 40 per cent.

Alongside its concern about the level of debt involved in the partial privatization, Auckland International's board also took an unusual poke at the expertise level of the $120.5-billion (Canadian) pension fund manager, which is considered by many to be one of the world's most sophisticated investors in infrastructure.

The CPPIB's second wind, however, has come from institutional investors including the airport's largest, the Auckland City Council.

The council owns a 12.75-per-cent stake and has encouraged the pension fund to continue on with its plan.

"We are really going down this route because shareholders have lobbied us to find a way to opine on the proposal," Mark Wiseman, CPPIB senior vice-president, private investments, said in an interview.

The airport's other large shareholders include the Manakau City Council, the city just south of Auckland in which the airport is located, along with infrastructure investors Macquarie Bank of Australia and New Zealand's Infratil Ltd.

Actually this is another case of public sector funds being used as a P3 Public-Public-Partnership. Privatization by another name,except all the investors are publicly owned institutions or pension funds. Ironic that.

Privatization of infrastructure is now being paid for by public funds. No capitalist is willing to invest in long term infrastructure. Not private equity companies or Hedge Funds. So while neo-cons promote the myth that private capital is willing to invest in public infrastructure the reality is that it is workers pension funds, public funds that are used to rescue the public sector and the commercial private sector investments in infrastructure.

Canadian pension plans, Australian bank to acquire Puget Energy

A multinational consortium lead by an arm of Australia's Macquarie Bank and including three Canadian public-sector pension plans is acquiring Puget Energy (NYSE:PSD) amid continued infrastructure investments by major Canadian pension funds seeking more lucrative returns to pay pensions.

The deal values the U.S. utility company at US$7.4 billion, including $3.2 billion in shareholder capital provided by the consortium, $2.6 billion in existing debt that will be assumed and $1.6 billion of newly issued debt.

In addition to Macquarie, the consortium includes the Toronto-based CPP Investment Board, British Columbia Investment Management Corp. and Alberta Investment Management.

"PSE is Washington's oldest and largest energy utility - it is a strong, stable company with a growing customer base in a market that has displayed consistent demand over time," Christopher Leslie, chief executive of Macquarie Infrastructure Partners, stated Friday.

TORONTO, ONTARIO--(Marketwire - Nov. 1, 2007) - RioCan Real Estate Investment Trust ("RioCan") (TSX:REI.UN) today announced its financial results for the three and nine months ended September 30, 2007.

Financial Highlights

RioCan reported net earnings for the quarter ended September 30, 2007 of $35,917,000 ($0.17 earnings per unit basic and diluted) as compared to net earnings of $41,763,000 ($0.21 per unit basic and diluted) for the three months ended September 30, 2006. For the nine months ended September 30, 2007, RioCan reported a net loss of $32,790,000 ($0.16 loss per unit basic and diluted) as compared to net earnings of $120,377,000 ($0.61 per unit basic and diluted) for the comparable period in 2006.

For the quarter ended September 30, 2007, rental revenue was $160,559,000 as compared to $145,339,000 for the three months ended September 30, 2006. Rental revenue for the nine months ended September 30, 2007 was $483,824,000 versus $429,291,000 for the comparable period in 2006.

FFO for the quarter ended September 30, 2007 was $76,029,000 ($0.36 per unit) as compared to $72,533,000 ($0.36 per unit) for the three months ended September 30, 2006. For the nine months ended September 30, 2007, FFO was $227,120,000 ($1.09 per unit) as compared to $209,440,000 ($1.06 per unit) for the nine months ended September 30, 2006.

RioCan's Consolidated Financial Statements, Management's Discussion and Analysis and a Supplemental Information Package for the three and nine months ended September 30, 2007 are available on RioCan's website at

FFO is a widely accepted supplemental measure of a Canadian real estate investment trust's performance and should not be construed as an alternative to net earnings or cash flow from operating activities determined in accordance with Canadian generally accepted accounting principles. RioCan's method of calculating FFO may differ from certain other issuers' methods and accordingly may not be comparable to measures reported by other issuers.

Portfolio Stability

At September 30, 2007:

- Portfolio occupancy was 97.6%;

- 65.1% of rental revenue was derived from properties located in Canada's six high growth markets (including and surrounding Calgary, Edmonton, Montreal, Ottawa, Toronto and Vancouver);

- 82.6% of annualized rental revenue was derived from, and 83.1% of space was leased to, national and anchor tenants;

- Approximately 49.7% of annualized rental revenue was derived from its 25 largest tenants; and

- No individual tenant comprised more than 5.7% of annualized rental revenue.

Development Activity

With over a billion dollars at cost of ongoing developments, project activities remained strong throughout the third quarter as RioCan continues to focus on its development program. At the end of the third quarter, approximately 8 million square feet was under development, of which RioCan's ownership interest was approximately 3.4 million square feet. Third quarter highlights include:

- Oakville, Ontario - RioCan Centre Burloak, located at the intersection of Burloak Drive and Queen Elizabeth Way, is a 552,000 square foot new format retail centre anchored by Home Depot (retailer owned), SilverCity Oakville Cinemas, Longo's and Home Outfitters. This joint venture with the Canada Pension Plan ("CPP") Investment Board is 100% leased with approximately 92% to be occupied by national and regional retailers.

Construction is well underway and store openings are now being phased-in. A number of retailers have recently opened for business including Home Depot, Nike, Sony and Tommy Hilfiger. Additional retailers opening by the end of 2007 include SilverCity Oakville Cinemas, Suzy Shier, Guess, La Vie En Rose, Reitmans, Le Chateau, Urban Barn, Benix & Co., Bowring and many more. Other retailers such as Longo's, Home Outfitters, Urban Planet, Kitchen Stuff Plus, Structube, Solutions, Kelsey's, Montana's and Swiss Chalet will be opening in 2008.

- Edmonton, Alberta - Construction is ongoing at RioCan Meadows, another development joint venture with CPP Investment Board. Upon completion, this 502,000 square foot new format retail centre will be anchored by a Real Canadian Superstore (retailer owned) and Home Depot. Some retailers that recently opened for business include Winners, Dollarama, TD Canada Trust and Wok Box. Additional retailers opening later this year and in 2008 include Petsmart, Reitmans, Laura, Scotia Bank and Swiss Chalet.

- Calgary, Alberta - Also moving towards completion is the construction of RioCan Beacon Hill, a 788,000 square foot new format retail centre featuring shadow anchors Costco and Home Depot, both of whom are open for business, as well as Canadian Tire and Shoppers Drug Mart, both of which are expected to open in spring 2008. This joint venture with Trinity Development Group Inc. and CPP Investment Board boasts a number of national retailers, many of which are already open for business, including Winners, HomeSense, Royal Bank, Linens 'N Things, Golf Town, Michaels, The Shoe Company, Mark's Work Wearhouse, LaSenza, Thyme Maternity and Sport Chek. Additional retailers such as EB Games, Telus and Bell Mobility are anticipated to open later this year.

However what remains lacking is shareholder control of our pension funds. Without that we have no checks and balances on how our funds are being used, for instance if jobs are cut at the airport which are not in our interests or those of the workers affected.

Or in the case of affordable housing our pension funds are being used for commercial real estate investments instead of creating affordable housing in overheated markets.

While institutional funds, as our public pension funds are called in the investment industry, cry for more control over the boardrooms of the companies they invest in, we the owners/shareholders of these funds have no say in their boardrooms.

This is an issue the labour movement and civil society needs to address soon.
Canada says G7 to discuss state investment funds

Group of Seven finance ministers will discuss the need for more transparency by state-backed investment funds in a meeting on Friday and will likely mention the issue in their final statement, a Canadian government official said on Tuesday.

Ministers from the world's richest nations will gather in Washington on Friday to discuss the global economic outlook following this summer's credit crunch as well as possible regulatory changes for financial market players.

But sovereign wealth funds are also high on the agenda and will be the subject of an "outreach session" with non-G7 members Friday evening, said the official, who declined to be named.

Although they are not new, these funds have grown in number and size in recent years as the central banks of oil-rich Middle Eastern countries and countries such as China, which have huge reserves, invest in riskier assets in search of higher returns.

The main concern in Canada and other countries is that not enough is known about the huge capital flows from these funds, which can create imbalances in the global financial system. The funds need to be guided by clearly stated market-based principles to assure the countries hosting their investments that they are not motivated by anything other than economics, the official said.

At a special meeting that will also include China, Korea, Kuwait, Norway, Russia, Saudi Arabia, Singapore and the United Arab Emirates, Canada will hold up its Canada Pension Plan Investment Board as a model of accountability that could be adopted by state-owned investment funds. Norway's state fund is another model.

The CPP Investment Board is responsible for investing pooled pension assets worth C$120.5 billion and operates at arm's length from the government, with an independent board of directors. It undergoes external audits every year and tri-annual reviews by government authorities.

It is required also to hold public meetings periodically and to disclose its investment performance on its Web site.

Charge higher CPP premiums to firms without pension plans

The National Union of Public and General Employees (NUPGE) is launching a campaign to change Canada Pension Plan rules, requiring employers without workplace pension plans to pay higher Canada Pension Plan (CPP) premiums.

The extra money would be used to pay higher CPP benefits at retirement to workers who do not have a workplace pension plan.

NUPGE outlined the proposal at a recent conference attended by more than 300 union representatives and leading pension policy experts. The event was arranged by the Canadian Labour Congress (CLC), which brings together affiliated unions with a combined membership of more than three million members.

NUPGE is one of Canada's largest unions, representing 340,000 public and private sector workers across the country. Collectively, the NUPGE members participate in pension funds with combined assets of more than $100 billion.

The union recently released a research report identifying an alarming decline in pension coverage in Canada. The report revealed that the percentage of the Canadian workers covered by a pension plan declined from 46% in 1991 to 38.5% in 2005.

Employers lack incentives to provide pensions

Larry Brown, NUPGE's national secretary-treasurer, says Canada now provides few incentives for employers to create pension plans, despite the obvious social and economic benefits of doing so for workers and for society in general. In fact, disincentives exist to discourage employers from setting up their own plans, he said.

Brown says employers with pension plans now pay exactly the same CPP premiums as those without plans. At the same time, they assume legitimate administrative costs and requirements set out in pension legislation, including funding obligations and reporting and actuarial evaluations, he said.

“Employers have a moral obligation to their employees to provide decent pensions, but our system does very little to encourage this behavior. Instead, it subjects employers who provide pensions to necessary but often complex legislative requirements,” Brown notes.

"Why should an employer assuming the burdens and obligations of providing a pension plan pay the same CPP premiums as employers who do not?" he asks.

“We don’t think that makes sense and we’re launching a campaign that calls for an extra payment to the CPP from those employers that don’t offer a workplace pension plan,” he says.

"We are saying that employees should receive improved CPP benefit coverage during any years they work for employers without a workplace plan, and those benefits should be financed by additional CPP premiums collected from employers who do not offer pension plans.”

Brown says this would create an incentive for employers to provide pension plans. "They would pay for a workplace pension plan, or pay higher CPP premiums. Either way, they would be required to meet their moral obligations to their employees”, he said.



AIM High

P3 Myth Busting

Infrastructure Collapse

Fire Sale

Dumb and Dumber

Public Pensions Fund Private Partnerships

Golden Parachutes

Your Pension Dollars At Work

P3= Public Pension Partnerships

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