Brookfield looks to snap up cheap assets from distressed developers in China

Brookfield Asset Management is on the lookout to acquire premium commercial property from distressed mainland developers, aiming to increase its footprint in the world’s second-largest economy where fresh capital is needed to bail out the troubled real estate sector.

Yang Yiwen, senior vice-president of real estate portfolio management for Brookfield in China, said the Toronto-based firm would target prime properties in first-tier cities as they had potential to generate good longterm returns.

“We are seeing opportunities and are pursuing lucrative deals,” she said. “There will be drawn-out negotiations because of pricing gaps to close.”

Some cash-strapped mainland developers, under pressure to repay debts and cut leverage ratio, are putting up for sale office buildings and shopping centres – which are viewed as rare assets in the country’s most developed cities like Shanghai.

Brookfield is among a clutch of foreign investors chasing property assets on the cheap in China.

The firm, which manages about US$750 billion of alternative assets including US$106 billion in Asia-Pacific across real estate, infrastructure, renewable power, private equity and credit strategies, said it was committed to China and planned to invest and manage property assets that have a synergy with its global businesses.

“We will ramp up investment in those assets in which we have strong capability to manage,” Yang said. She did not disclose the assets Brookfield was targeting.

The Canadian company in September bought three buildings in Shanghai’s northeastern Yangpu district from KWG Group and Guangzhou R&F Properties.

While Brookfield did not reveal the transaction value, Guangdong-based media outlet Time News reported the company spent 1.3 billion yuan (HK$1.4 billion) on the three towers, citing unidentified officials from KWG.

The amount translated into a 60 per cent discount to the price the two developers paid for the assets in 2010.

Brookfield is preparing to offer 413 flats and 144 hotel rooms in the next six to eight months in China’s biggest commercial hub.

In April 2019, the firm agreed to pay 10.57 billion yuan to take over the Huangpu Centre on the South Bund in Shanghai from Greenland Hong Kong, a subsidiary of Shanghai’s largest developer Greenland Holdings, according to an exchange filing by Greenland Hong Kong.

Foreign investors are increasingly keen on Chinese commercial properties as they shrug off worries about a slowing economy and a downturn in the country’s property sector.

In October, United States bank Goldman Sachs set up a joint venture with Shanghai-based logistics firm Sunjade to focus on investments in warehouses and logistics facilities.

Private equity group Blackstone raised more than US$7.8 billion for its Asian opportunistic real estate fund in late September, betting on growth in Asian economies including China.

According to the China Index Academy consultancy, foreign institutions such as BlackRock, Daiwa House Group, e-Shang Redwood and CapitaLand have recently bought land parcels or property assets in China.