Abu Dhabi Investment Authority, the world’s third-largest sovereign wealth fund, has agreed to sell a retail portfolio in China to Brookfield Asset Management for approximately 9 billion yuan ($1.4 billion; €1.15 billion), PERE can reveal.
Under a value-add/opportunistic approach, Brookfield entered into a sales and purchase agreement with the Middle East investor at the end of last week, according to four sources close to the situation. PERE understands that the two parties started discussions about a year ago when the investor first put the portfolio on the market. JLL and Cushman & Wakefield jointly brokered the transaction.
One source told PERE that the portfolio received interest from both domestic and international investors. Held in a separately account managed by Macquarie, the portfolio consists of five retail assets in China, according to one of the four sources. Although the portfolio has weathered the pandemic well given its community retail focus, a number of asset enhancement initiatives are planned or under way to drive value in the short term, PERE understands.
Both Brookfield and ADIA declined to comment on the transaction.
Brookfield has been known as a contrarian investor in retail real estate, notably paying $15 billion to acquire General Growth Properties, the second-largest US mall owner, in 2018. Although the pandemic has further hammered the performance of the retail sector, the firm continues to be optimistic about the asset class. In April 2020, Brookfield further increased its retail exposure by acquiring a portfolio of seven shopping centers from struggling UK mall giant Hammerson for $475 million.
Brian Kingston, managing partner and chief executive officer of Brookfield’s Real Estate Group and Brookfield Property Partners, told PERE in a separate interview that he believes high-quality real estate assets, including retail assets, will hold or rebound in value when the economy recovers. He compared the similarities in retail sentiment between now and in 2010, when the firm brought GGP out of bankruptcy via its Real Estate Turnaround Consortium.
“People were saying the same things they’re saying today: nobody’s ever going to go to a mall again, every retailer is going to go bankrupt, etcetera, and that allowed us to make that investment in a very opportunistic way at a very attractive basis,” he said.