Brookfield Property Partners (BPY) has agreed to invest up to $750 million alongside institutional partners in China Xintiandi, a wholly owned entity of Hong Kong listed developer Shui On Land, in the firm’s first property investment in China.
According to a firm statement the publicly-traded real estate business of the Toronto- and New York-based alternative asset manager Brookfield Asset Management will initially invest $500 million, giving it a 22 percent stake as a “cornerstone partner” in property owner-operator-manager China Xintiandi alongside several of its institutional investors.
The transaction is scheduled to close in Q1 of 2014, and is understood to be Brookfield’s first sizable foray into the Asia property market ex-Australia. BPY will have the option to invest the remaining $250 million at a later date. In addition, the firm has announced plans to raise an extra $500 million for other China real estate investments.
Brookfield Asset Management owns a 92 percent stake in BPY, which has deployed approximately $13.7 billion into investments worldwide. BPY makes investments out of Brookfield’s private funds and its own capital. Most recently, the listed firm bought Atlanta-based operator Industrial Development International for $1.1 billion on behalf of Brookfield’s first global real estate opportunity fund, Brookfield Strategic Real Estate Partners, which closed on $4.4 billion of commitments in July.
This investment will give Brookfield access to Hong Kong-listed developer Shui On Land's premier portfolio of office and retail assets in Shanghai. The initial portfolio includes the iconic Xintiandi retail property in Shanghai and the immediately surrounding commercial office properties: Shui On Plaza and Corporate Avenue 1 and 2. Also included is Shui On Land's 2.2 million square foot mixed-use development, “The Hub,” located at the center of Hongqiao Transportation market.
“China is an important market in Brookfield's long term growth. The partnership with Shui On Land to invest into China Xintiandi is an ideal way for us to enter this market,” Bill Powell, Australasian chief executive of Brookfield, said in the statement.
Shui On Land established Xintiandi last year to act as the owner of its completed commercial real estate assets across China. According to the statement, Xintiandi is expected to expand through further acquisitions and the growth of the portfolio in Shanghai and other major cities in China.
“[Brookfield and Shui On] share a common vision on the tremendous prospects of China's commercial property sector because of the massive urbanization program and the continuous rise in personal income in China,” Vincent Lo, Chairman of Shui On Land and China Xintiandi, said in the statement. “Our common goal is to forge a long term, successful partnership.”
Other private equity investors in Shui On Land assets used to include Winnington Capital which acquired minority investments in five of its developments, including a separate site at Shanghai’s Xintiandi, for its Trophy Property Development fund. That fund was restructured in September and now owns a majority stake in Shanghai Xintiandi only.
Brookfield Property Partners operates a global portfolio of over 300 office and retail properties encompassing approximately 250 million square feet, as well as 82 million square feet of office and industrial properties in development.