Brookfield Buys Shanghai Complex From Greenland for RMB 10.6B

Canada’s Brookfield Asset Management has agreed to purchase a commercial property project in Shanghai’s South Bund area from Greenland Hong Kong at a valuation of RMB 10.57 billion, according to a stock exchange filing today by the Shanghai-based developer.

The Toronto-based real estate investment management giant is providing the Hong Kong-listed unit of Greenland Group, the largest developer based in Shanghai, with an equity consideration of RMB 2.8 billion for the Greenland Huangpu Center, a 154,500 square metre (1,663,010 square foot) mixed-use complex located just over four kilometres (2.6 miles) south of People’s Square at 788 Mengzi Road.

The transaction also includes Brookfield taking responsibility for outstanding debt obligations for the largely-completed complex.

The transaction is ranked among the biggest commercial property acquisitions in China by a foreign firm, and comes just under five months after Singapore’s CapitaLand and GIC teamed up for a joint purchase of the RMB 12.8 billion Star Harbour International Center project in Shanghai’s North Bund last November.

Brookfield Picks Up Nearly-Completed Complex

“We are excited at the opportunity to add the Greenland Huangpu Center to Brookfield’s global portfolio of market leading mixed-use developments,” Stuart Mercier, senior vice president and head of Asia (Real Estate) at Brookfield, told Mingtiandi in an email,

Brookfield’s acquisition includes three office towers and a retail mall which combined total 154,500 square metres (1,663,010 square feet) of floor space. At the gross asset value of RMB 10.57 billion agreed to between the two parties, the transaction works out to RMB 68,414 per square metre.

Offices at the facility, which is still under construction near the World Expo Museum along the south bank of the Huangpu River are expected to be ready of occupancy in October of this year, with Brookfield indicating that it will target international and domestic corporates in professional services, tech, finance, consumer and industrial services as potential tenants.

Located in Huangpu’s Wuliqiao sub-district, the mall element of the Greenland Huangpu Center is position as a mid-to-high end lifestyle center, and is expected to open in mid-2020, according to the Canadian alternative asset manager.

“We look forward to working towards completing the Greenland Huangpu Center and having it become a landmark property on the iconic Huangpu River bank,” Brookfield’s Mercier said. “This acquisition reinforces Brookfield’s long-term commitment to the China market, through our continued contribution to industry-leading portfolio management and development capabilities.”

Brookfield is said to be in talks with banks for a loan of as much as $1 billion to back the Greeland Center purchase, according to an account by Bloomberg. The financing would include both onshore and offshore tranches, it said, citing unnamed sources.

Greenland Refills Cash Reserves

Greenland Group originally bought the the 55,590 square meter parcel for Greenland Huangpu Center in 2013 for RMB 5.95 billion, with the project slated to become the Group’s global headquarters. State-backed developer China Resources Land was said to have once co-invested in the project, but is understood to have later divested.

Brookfield’s purchase represents the largest portion of a total of four office buildings, two residential towers and a shopping mall which the Shanghai government-backed developer built on the site. Greenland previously sold one of the four office towers with local media accounts indicating that the buyer of that asset was an unnamed state owned enterprise.

The company launched sales of apartments in the residential towers in 2016 and online listings show units in the project currently being marketed at an average of RMB 170,000 per square meter.

Greenland said that the disposal will enhance the company’s cashflow, as well as providing additional capital resources for the company to capture other investment opportunities. Proceeds generated by the disposal will be used for general working capital and future business developments of the group it said.

Trading of Greenland Hong Kong’s stock has been halted since Monday this week pending the publication of this announcement. Greenland said it has applied for the resumption of trading with effect from 1 pm today.

Brookfield Joins Flow of Foreign Capital into China Real Estate

Brookfield’s acquisition of the Huangpu district asset came just nine months after it entered into a partnership with Shanghai-based retail specialists CCH Asset Management.

That investment with CCH, which was co-founded by Mapletree Investments graduates Enoch Lim and Derek Ng, included the Canadian firm acquiring a pair of suburban Shanghai malls from the investment management firm for an undisclosed sum.

Earlier in 2018, Brookfield executives had said that the firm expected invest RMB 2 billion in China over the next five years. In 2013, the group agreed to invest $500 million into Shui On Land’s Xintiandi commercial property spinoff.

Commercial property investments in China rose 9.5 percent last year to a record RMB 296 billion, with about one-third of that coming from overseas investors, according to Cushman & Wakefield.

In late March, Keppel Capital and Keppel Land, along with a consortium of co-investors acquired 100 percent of the equity in a recently completed commercial development in Shanghai’s Hongkou district for RMB 4.6 billion.

Also in the same week, Swiss private equity fund manager Partners Group made public its purchase of a majority equity stake in Dinghao Plaza, a 176,976 square meter office and retail complex in Beijing’s Zhongguancun area, at a total transaction value of $1.34 billion.