Brookfield in talks to buy Shanghai property for US$2 billion even amid China-Canada spat after Meng Wanzhou’s arrest

Canadian companies continue to pursue deals in China notwithstanding the diplomatic spat between the two countries that has seen tit-for-tat arrests of each other’s citizens.

Two Canadians were imprisoned in China after Huawei’s chief financial officer Sabrina Meng Wanzhou was arrested by Canada on December 1 in response to an extradition request from the US.

Brookfield Asset Management, a Toronto-based alternative asset manager, is in talks to buy a commercial property site in Shanghai for around US$2 billion, Bloomberg reported on Wednesday, citing sources.

If the transaction goes ahead, it would be the second-biggest commercial property deal in China by a foreign firm after Singapore’s CapitaLand and the city state’s sovereign wealth fund GIC jointly splashed nearly 20 billion yuan (US$2.98 billion) in November 2018 for Shanghai’s tallest twin towers.

The Canada Pension Plan Investment Board (CPPIB), one of the world’s largest pension fund managers, is also eyeing investments in the country.

CPPIB said last month that it was considering opening its first mainland office in Beijing as soon as next year.

The pension fund has already invested US$4 billion in a Chinese logistics venture with Australia’s Goodman Group catering to the rising storage demand from e-commerce businesses. It has also invested in Alibaba Group Holding, Meituan Dianping and some leading Chinese private equity funds. Alibaba owns the South China Morning Post.

Brookfield is the latest among a growing bunch of offshore investors chasing commercial property in China’s top cities. It has been biding its time as a rare window of opportunity has opened up since its once cash-flush local competitors have been reined in by Beijing’s deleveraging campaign. Commercial property investments in China rose 9.5 per cent last year to a record 296 billion yuan, with nearly one-third of that coming from overseas investors, according to Cushman & Wakefield.

Shanghai, the primary target of foreign capital, saw 61 per cent of its deals from offshore investors.

Brookfield’s latest acquisition target in Shanghai is Greenland Huangpu Centre, a 320,000 square-metre development along the Huangpu River comprising three office towers, a mall and luxury flats from a unit of Greenland Hong Kong Holdings, according to Bloomberg and Chinese financial media 21st Century Business Herald.

Greenland bought it in 2013 for about 6 billion yuan.

Trading in Greenland’s Hong Kong’s stock has been halted since Monday pending a “notifiable transaction”. Its parent company in Shanghai declined to comment. Brookfield also declined to comment.

“Land supply in major Chinese cities’ core area is extremely limited,” said Shaun Brodie, senior director and head of occupier research, Greater China, at Cushman & Wakefield. “Investors in China with the financial means are always on the lookout for prime plots in major cities. The value of these plots will always be at a premium no matter China’s real estate market is in a downturn or not.”

Early last year Brookfield said it planned to raise its Greater China investment to a third of its global portfolio, up from just 9 per cent that also includes other Asian markets. In July it bought two small malls in Shanghai for an undisclosed amount. In 2014, it invested US$500 million in property developer Shui On Land’s landmark Shanghai Xintiandi entertainment complex.