FED­ERAL SCRU­TINY

Ot­tawa re­viewed Ben­tall deal

Vancouver Sun - - FRONT PAGE - JOANNE LEE-YOUNG

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.”

GERRY KAHRMANN/FILES

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.

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