Vancouver’s new property player has deep pockets - and a rich Chinese communist pedigree
Anbang Insurance, reported buyer of Vancouver’s Bentall Centre, is spending incredible amounts on foreign assets around the world
Anbang Insurance, the privately owned Chinese firm that was last week reported to have made one of Vancouver’s most significant real estate purchases in years, boasts global ambitions and astonishingly deep pockets.
It also features a stellar pedigree of Chinese communist connections that manages to shine through despite a rather opaque roster of shareholders, who own what was described by Bloomberg in October 2014 as a “minor-league Chinese insurer”.
The mix and the nature of these connections has chopped and changed, but they have reportedly included over the years the late paramount leader Deng Xiaoping’s granddaughter, who married Anbang chairman Wu Xiaohui; a son of the revered military commander Marshal Chen Yi; a son of former premier Zhu Rongzhi; and Long Yongtu himself, who spent 15 years engineering China’s accession to the WTO in 2001 as Beijing’s chief negotiator.
The Vancouver Sun and Financial Post last week reported that Anbang had bought a two-thirds stake in all four towers of downtown Vancouver’s Bentall Centre, held by Ivanhoe Cambridge, in a deal that valued the entire property at C$1 billion.
The Sun reported that Maple Tree Financial, a Vancouver-registered firm associated with Anbang, was making the Bentall purchase. Maple Tree Financial did not respond to the SCMP’s requests for comment.
Despite being overshadowed in the insurance business by mega firms like Ping An and China Life, Anbang has become famous in China for its huge foreign plays. In 2014, it bought New York’s storied Waldorf Astoria hotel for US$1.95 billion, a price some saw as greatly overvalued.
Then in February 2015, Anbang embarked on a week-long US$3 billion worldwide shopping spree, picking up a Fifth Avenue tower in New York, a controlling stake in South Korea’s Tongyang Life Insurance, and Dutch insurer Vivat Verzekeringen. And last November, Anbang dropped another US$1.6 billion in cash to buy Iowa-based Fidelity & Guaranty Life.
Behind these foreign purchases is a vast pool of funds. According to the well-regarded Chinese investigative magazine Caixin, Anbang more than quintupled its registered capital in 2014, to 61.9 billion yuan (currently worth C$13billion).
Priced at C$1billion, the 1.5 million sq ft Bentall Towers 1-4 works out at about C$680 per existing square foot. If it turns out that that price covers only 66 per cent of the property, the valuation spikes to an unheard-of C$1,020 per square foot.
Yet even this latter valuation makes sense if we consider the thinking of Anbang’s chairman Wu.
That thinking should also give pause to anyone bewildered by Vancouver’s explosive growth in property values – including a jaw-dropping 40 per cent increase in the average sale price of detached homes last year.
In a forum for students at Harvard University in January 2015, Wu said that he considered the Waldorf purchase “very cheap” - when compared to prices in Beijing.
“Someone, by simple calculation, may consider the purchase price per room to be too costly,” said Wu, in his Harvard comments posted to Anbang’s website. “However, any investment decision is based on two basic principles: one is profitability, the other is the sustainability of its business model. Waldorf Astoria hotel has more than 1,400 rooms, spanning a total area of 163,000 square metres. The total investment of US$1.95 billion can be roughly translated into 73,000 RMB per square metre [currently equivalent to C$1,435 per square foot]. Such a life-time ownership of this trophy hotel is very cheap in my eyes compared to properties auctioned at 100,000RMB per square metre [C$1,950 per square foot] on Beijing’s financial street with 40-year land-use rights.”
Who owns Anbang Insurance?
If Wu’s thinking on what constitutes good value is coupled with his publicly stated desire for Anbang and its subsidiaries to eventually go public with IPOs around the world, the firm’s foreign investment strategy becomes perfectly clear.
What is less than clear is who exactly owns Anbang.
Chen Xiaolu, 69-year-old son of Marshal Chen, became the subject of intense scrutiny last January when Southern Weekly (another Chinese publication known for hard-hitting investigative work) reported that he was the true power behind Anbang.
But that claim was repudiated by Chen who took to WeChat to flatly deny that he, and not Wu, ran Anbang. “I wish I were the real boss so I could give red packets to all my friends,” he said. “I’ve worked with Wu for almost 15 years as a consultant. In that position, I gave advice and acted as a platform though receiving neither shares nor wages. I have not got involved in actual operations of the company’s management.”
In an interview with Caixin , Chen said that he had advised Wu to start spending overseas. “Now that you have money, you should not just put all the money in one basket. China’s economy is going downhill but the US economy is picking up. So, you should try to buy dollar assets,” he described himself telling Wu, who Caixin said had worked as a car salesman before joining one of Chen’s companies.
The report said Chen mumbled his way through an answer about his ownership stakes in a company with shareholdings in Anbang. Caixin later reported that Chen was listed as one of nine directors on Anbang’s board, according to its business registration. Nevertheless, Caixin concluded it was “certain”, that “Wu is the only person in charge of Anbang”.
Caixin continued to pursue the Anbang story, and a month later reported on the firm’s incredible growth in just over a decade, to the point that it held assets worth 1 trillion yuan.
The report said Anbang had been established in 2004 with seven shareholders and registered capital of 500 million yuan. Stakeholders would come and go, but major changes took place in 2014, when more than 30 investors came aboard, bringing billions with them that would boost Anbang’s registered capital by about 400 per cent.
“Most shareholders are small, obscure companies, including auto dealerships and mine operators. Most are registered in Chengdu, Shanghai, Shenzhen or Hangzhou,” Caixin reported.
“Some new shareholders share addresses. For example, registration documents show nine new investors registered their businesses in the southwestern city of Chengdu on the same day – December 10, 2012. Each held an initial shareholder meeting at the same venue. They also use the same accountants and bank.”
Caixin said that reports about Anbang’s links to relatives of Deng Xiaoping had prompted a meeting of the Deng clan in late 2014, at which it was concluded that the links did not exist.
Much of the fascination with the firm’s provenance is due to chairman Wu’s reported marriage to Deng’s granddaughter, Zhuo Ran, whose mother Deng Nan is a party heavyweight in her own right. Caixin said that Zhuo and Wu have a son, but the couple is believed to have separated.
The magazine reported that Zhuo had owned stakes in two of Anbang’s 2014 investors, but had sold these as of December that year.
Zhu Yunlai, the son of former Chinese premier Zhu Rongji, was meanwhile listed as director of Anpang, but Caixin reported a source as saying that he had actually declined an invitation to join the board. He had his name removed from the directors’ list in September 2014.
Another notable, Long Yongtu, “was one of the first directors on Anbang’s board until quitting in November 2013”, Caixin said.
Close connections between Chinese conglomerates and party figures and their families are not particularly unusual in China, something that Chen Xiaolu himself noted in his January 2015 WeChat comments.
“I’m like a platform, working with Wu,” said Chen. “That was the same as many veteran cadres invited to take part in certain activities. That’s what many ‘Second Generation Reds’ [children of the founding Communist Party fathers] would also do. They do not even need not be paid for doing that.”
The Hongcouver blog is devoted to the hybrid culture of its namesake cities: Hong Kong and Vancouver. All story ideas and comments are welcome. Connect with me by email [email protected] or on Twitter, @ianjamesyoung70 .