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Report on Business Blackstone Group to buy Vancouver office complex Bentall Centre from Anbang

Bentall Centre 1 and Bentall Centre 2 are seen in downtown Vancouver, in January, 2019.

Rafal Gerszak/The Globe and Mail

Private equity company Blackstone Group and a Los Angeles real estate trust have a deal to buy Anbang Insurance Group’s office complex in Vancouver, the companies announced on Wednesday.

The acquisition of the four office towers called Bentall Centre will give Blackstone and Hudson Pacific Properties Inc. a stake in one of the hottest office markets in Canada and the United States.

The deal marks the beginning of Anbang’s exit from Canada, about three years after the Chinese insurance conglomerate vastly outbid rivals for big Canadian properties.

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The sale is part of the indebted Anbang’s wider restructuring, which includes potential divestitures of U.S. properties.

Anbang, which was seized by Beijing in early 2018 amid debt and corruption charges, is now looking for a broker to handle the potential sale of a much smaller office building in downtown Toronto, according to two sources. The sources were granted anonymity by The Globe and Mail because they were not authorized to comment publicly on the matter.

That building is known as 70 York Street and could attract a larger group of buyers, given that the price tag will be substantially lower than the $1-billion-plus that Anbang was seeking for Bentall Centre. The state-controlled company has not yet taken concrete steps to sell its other Canadian asset, a B.C. seniors-living chain.

“Anbang has been toast for a while. The bureaucrats are selling assets they can get better prices on,” said Derek Scissors, an economist with American Enterprise Institute, who has been tracking global Chinese investment for nearly 15 years.

“At the end of the process, we either get a new Anbang, which will be state-owned, or they sell the remaining assets at a steep discount to other Chinese firms and wind Anbang up entirely,” he said.

It is unknown whether Anbang will recoup the money it spent to acquire Bentall Centre in 2016, the most expensive commercial real estate deal in Vancouver’s history.

Blackstone and Hudson did not disclose the purchase price.

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The nationalization of Anbang, along with Beijing’s attempts to stop capital from leaving the country, has eliminated a handful of big players from Canada’s property market, along with other industries.

Chinese investment in Canada dropped to $4.43-billion last year from $8.35-billion in 2017, according to the University of Alberta’s China Institute. Globally, Chinese investment declined by 40 per cent, according to data collected by Mr. Scissors.

Until the Bentall Centre deal was announced on Wednesday, it was unclear whether there would be buyers with both the capital and appetite for large Canadian properties now that Canadian pension funds are more focused on developing their own buildings and investing abroad.

Bentall Centre is Hudson’s first Canadian acquisition. The West Coast real estate investment trust has formed a partnership with Blackstone to acquire and renovate the 1.45 million square feet of office and retail space.

Hudson said it has always seen Vancouver as a natural expansion for its portfolio of offices and studios. Since 2016, Vancouver has had the second-lowest office vacancy rate in Canada and the United States.

“The acquisition will provide us with immediate scale in the city’s financial core,” Hudson said in a statement.

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Hudson will own 20 per cent and be responsible for day-to-day operations and development, while Blackstone will own 80 per cent and serve as the managing partner, the companies said. They plan to upgrade the retail area, as well as indoor and outdoor common areas and could also build an additional office building next to the current complex.

Blackstone plans “to own and invest in this property for the long term,” said the private equity company, which is buying the property through Blackstone Property Partners.

The sale is a potential loss for Quebec real estate company Canderel, which was managing the property for Anbang and had pitched the Chinese company on remaining as the manager.

Canderel said it is supporting the transition from Anbang to its new owners. “We are having conversations about additional services that we can provide,” said Canderel chief executive Brett Miller. Those services include leasing and redevelopment.

The Globe first reported in February that Blackstone, Hong Kong tycoon Li Ka-shing’s company CK Asset Holdings Ltd., and Canadian private equity real estate company KingSett Capital had made preliminary bids for Bentall Centre.

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