Ottawa reviewed Bentall deal
The deal by China’s Anbang Insurance Group to pay around $660 million for a controlling stake in downtown Vancouver’s Bentall Centre was eye-catching for its dollar value, which triggered a federal review.
The Ministry of Innovation, Science and Economic Development Canada wasn’t able to offer any specific details about its recent review of Anbang’s purchase.
But, between the deal first being reported on Feb. 17 and it finalizing in a share sale in April, much more has come to light about Anbang.
Starting in April 2015, under the Investment Canada Act, the threshold for a review of an investment in Canada by a foreign company to control a Canadian business was raised to $600 million. Along with this higher thresh- old, there are new information requirements. For investments that fall below $600 million and don’t trigger a full review, a foreign investor must reveal the names of its board members, five highest paid officers, any person or entity that owns 10 per cent of its equity or voting interests, and whether it is “owned, controlled or influenced, directly or indirectly by a foreign government and sources of funding for the investment.”
If a deal exceeds the $600-million mark and sparks a review, more onerous questions must be answered, according to legal experts.
(To compare, when German billionaire Klaus-Michael Kuehne bought Royal Centre, another downtown Vancouver property, reportedly for around $400 million, the ministry, in March, noted the deal as an investment from Germany but did not subject it to a review.)
Anbang’s Canadian vehicle for buying Bentall Centre is Vancouver-based Maple Red Financial Management Canada.
From its Granville Square office, Maple Red now controls about 66 per cent of the Bentall Centre property, which includes four office towers and underground retail space totalling 1.5 million square feet. It started assembling the stake after taking majority ownership of three Canadian companies, a move reflected in address and director changes on land documents filed April 19 and 20.
(The other owner is Great-West Life Assurance Co.’s Torontobased property arm, GWL Realty Advisors.)
For the most part, large institutional and corporate players from mainland China such as Anbang have been absent from the Vancouver market.
Instead — along with more immigrants and investors with ties to mainland China buying homes in Vancouver — it’s been smaller companies backed by private wealth that have bought commercial land and buildings here. In general, they are holding or redeveloping these into mixed-use properties with condos, townhouses and retail shops.
Anbang is markedly different from these ventures. It had already purchased the Waldorf-Astoria New York hotel for $1.95 billion in October 2014 in what was the biggest acquisition of a U.S. real estate asset by a Chinese buyer.
Following news of the Bentall sale — but before the transaction was approved by Ottawa and closed in land title documents — Anbang took centre stage in U.S. business with its surprise offer on March 10, along with two smaller Chinese companies, to pay $12.8 billion in cash for Stamford, Conn.-based Starwood Hotels & Resorts.
Anbang had previously bid for the hotel chain in 2014, but retreated.
However, at this point, Marriott had already cleared U.S. regulatory hurdles to acquire Starwood for $12.2 billion.
Then, on March 18, Starwood accepted a $13.2-billion cash offer from the Anbang-led group. This pushed Marriott to come back with an offer of $13.6 billion.
By March 28, Starwood said Anbang would go to $14 billion. At the same time, Starwood was also pressing Anbang for proof of financing and regulatory approval.
During the back and forth, Anbang’s pursuit of what was heading toward becoming the largest deal ever by a Chinese company in the U.S. started drawing intense scrutiny. Who was behind it?
Anbang was offering more cash, but Marriott urged Starwood investors to focus “on the certainty of (its) financing and the timing of any required regulatory approvals.”
On March 28, the Wall Street Journal described Anbang as being “opaque both at home and abroad,” with a “complicated web of investors that is difficult to unravel.”
The Journal said Anbang’s ownership, according to its most recent public filings, isa“ma sh of corporate shareholders, with multiple layers of holding companies registered all around (mainland China.) Anbang told the Journal “it is owned by more than 30 corporate investors that don’t participate in the daily operation of the company.”
Anbang joins a well-worn path used by Chinese companies that entered the global financial system with ties to China’s political elite.
On March 29, the New York Times described Anbang as a “reclusive Chinese insurer” with unclear backing.
“Anbang joins a well-worn path used by Chinese companies that entered the global financial system with ties to China’s political elite,” it said. Following other international and Chinese publications, it had details of Anbang chairman Wu Xiaohui’s links “to some of the most powerful families in China. He married Zhuo Ran, the granddaughter of Deng Xiaoping.”
It also said: “A close examination of Anbang’s shareholding structure shows that 37 companies control more than 93 per cent of Anbang, while two Chinese state-owned companies own the rest. … The companies could not be reached for comment, and their common website now contains only links to pornography and gambling services.” The Times article continued: “The companies injected billions of dollars in capital into Anbang in 2014, its documents show, increasing its registered capital fivefold from 2011 levels and making it bigger than any other Chinese insurance company.”
The next day, on March 31, Anbang unexpectedly said it was walking away from the deal, citing “various market considerations.”
China’s Anbang Insurance Group has a 66 per cent stake of the Bentall Centre it acquired through its Vancouver-based Maple Red Financial Management Canada.