Allianz Buys $196M Beijing Asset From Goldman and Kailong in Drive for $1.1B China Portfolio

Allianz has acquired its first Beijing office building as the German financial giant works to substantially boost its China holdings.

The company’s real estate investment division, Allianz Real Estate, purchased ZLink, a business park complex in the city’s Zhongguancun high tech hub valued at between $185 million and $196 million from Goldman Sachs and the KaiLong Group in a deal announced on 9 July.

“The ZLink deal underscores our strategy to align our investments with the secular growth of the new economy in China, driven by the IT, technology and innovation sector,” said Rushabh Desai, CEO, Asia-Pacific at Allianz Real Estate, the Allianz Group property investment arm executing the deal.

Property in Technology Park

Allianz’ acquisition of the 31,426 square metre, three-storey complex came just over two years after the Hong Kong-based investment manager had acquired the asset from Ascendas’ A-REIT in May 2016 for S$160 million ($118 million).

Under the terms of the deal KaiLong will maintain a two percent stake in the property close to Beijing University and Tsinghua University, with Allianz holding 98 percent.

With Zhongguancun providing the China home for tech giants such as IBM, Lenovo, NetEase and Microsoft, ZLink is fully occupied by Chinese technology companies, including Baidu.

“Zhongguancun area is a sought after hub for IT and technology companies. Over the last 5 years, the Zhongguancun Software Park has seen strong rental growth and one of the lowest levels of vacancy in Beijing,” Desai noted in the statement.

In an interview with Reuters, Desai indicated that Allianz’ ability to pay all cash for that asset enabled it to close the deal quickly and to triumph despite not necessarily being the highest bidder.

The 2004-vintage structure has now changed hands for the third time during this decade, after A-REIT had purchased the complex in 2011 for RMB300 million ($45 million). Pricing for this latest transaction was not disclosed.

Allianz Pushes Up China Percentages

The acquisition is part of a drive by Allianz Real Estate, with €56 billion in assets under management, to increase the weighting of China in its portfolio. In addition to taking Asia-Pacific funds allocated to China from 40 percent to 50 percent, the firm’s overall goal is to have €1 billion invested in the country by the end of 2018. The total is now €800-900 million.

“We want to be aligned to the new economy and contribute toward China’s growth in the sector; we’re investing based on that thesis,” Desai said in a recent telephone interview. New economy refers to non-traditional industries such as biopharma and online retail.

Desai told Reuters that Allianz’ investment thesis centres on opportunities aligned with growth in China’s new economy, and that it is on the look out for office buildings in Beijing and Shanghai as well as warehouses. It is expecting to complete an acquisition in a Shanghai office park within weeks.

Last August, Allianz stayed in the shadows as it backed Alpha Investment Partners and Keppel Land’s $525 million purchase of the Hongkou SOHO office tower from developer Soho China. The German group took a 30 percent stake in that acquisition.

Just three months ago Allianz again travelled to Shanghai to partner with Gaw Capital in the $798 million acquisition of two of the four towers at Sky SOHO in the Hongqiao District of Shanghai. In that transaction, Allianz took about 23 percent of the equity.

KaiLong Active in the Market

The Beijing disposal marks the second sale of an office park asset this year by Kailong, which is 40 percent owned by an affiliate of Warburg Pincus.

In January 2018, KaiLong sold an eight-storey office building in Shanghai’s Zhangjiang Hi-Tech Park to a buyer believed to be Beijing-based Hony Capital. The asset, which it upgraded, was acquired just three years earlier. In 2016, the company sold a Shanghai hotel-to-office conversion only two years after purchasing the property.

Following the sale of Zlink, the company has nine business park assets in China, all of them in Shanghai. In addition to ZLink, KaiLong has exited three business park investments. It also has two office buildings in China, one in Chengdu and the other in Dalian.

Since being founded in 2004, Kailong has invested a total of $2.9 billion in 49 properties. It has exited 28 of the projects.