While the exact fallout from Beijing’s takeover of Chinese foreign investment giant Anbang Insurance Co. last week is unclear, observers say B.C. - home to some major acquisitions by the company in recent years - will likely see its share of the impact.
On Feb. 23, state media from China started reporting that China’s Insurance Regulatory Commission, a Beijing government agency, has taken control of Anbang. The company’s former CEO, Wu Xiaohui, one of the most prolific Chinese investors on the global property scene in recent years, is being prosecuted for “illegal business practices,” reports said.
Andreas Schotter, professor of international business at the Ivey Business School at the University of Western Ontario, said the move is essentially Beijing’s way of dealing with businesses that are “too big to fail,” in contrast to the U.S. Government’s bailout packages to conglomerates like General Motors.
“Anbang had 30 million Chinese life-insurance clients on the ground, and the government exercised a Chapter-11 kind of protection move, Chinese-style,” Schotter said, adding that he suspects the change up top will affect all aspects of Anbang’s overseas investments.
Those properties include both Vancouver’s Bentall Centre (under full ownership of Anbang since 2016) and Retirement Concepts (B.C.’s largest owner of retirement homes, purchased by Anbang last year for $1 billion). A lot of what happens next, Schotter said, will likely be determined on a case-by-case basis by Beijing, depending on how authorities plan to recoup the company’s assets.
He surmised that overseas properties acquired by Anbang at a premium - with no consideration on cashflow or business efficiencies - will more likely be considered for a sale, although it will also depend on Beijing’s tolerance for losses on each property.
“It all depends on which ones of the investments yield positive returns and cashflow in the short run,” Schotter said. “Bentall Centre is certainly not in this category, as it was acquired at a premium. The question is, will it be sold at a loss?”
Retirement Concepts, meanwhile, has the potential to generate cashflow and growth, so it may be more likely to be kept.
A statement from Retirement Concepts confirmed that an interim management group from the Chinese government agency will oversee Anbang’s operations for one year. The statement also confirmed the Retirement Concepts’ operations remain remain regulated by B.C. laws and will not be affected by Anbang’s management change.
“No potential change is coming,” said Sheri Brown, marketing director for Pacific Reach Seniors Housing Management, the company in charge of Retirement Concepts’ local operations. “And all our residents are quite happy.”
