China Life Insurance has followed through on its promise to ramp up outbound real estate investment efforts by acquiring a $2 billion stake in a portfolio of US hotels from Starwood Capital Group.
According to a statement by Starwood Capital to NASDAQ, China Life is serving as lead investor for a group buying a stake in a set of 280 mid-range hotels in 40 states. The Connecticut-based firm said that the investor group, which also includes sovereign wealth funds, is buying a slice of a hospitality portfolio valued at more than $3 billion in total.
The deal for the set of select service hotels adds to China Life’s growing stack of overseas assets, with the Beijing-based insurer reported to have made $7.6 billion in cross-border deals to date, including real estate, investment trusts and other holdings. In May of this year, NYSE-listed REIT Hersha Hospitality Trust sold a stake in another set of select service properties, which normally carry lower staffing loads than five-star brands, to China’s Cindat Capital Management in a $571 million joint venture.
After this deal, Chin Life — which is the mainland’s largest commercial insurance company — could have an estimated $44.7 billion still available for outbound investment should it push its overseas holdings up to 15 percent of its total assets — the largest proportion allowed by China Insurance Regulatory Commission rules passed in 2014.
China Life’s overseas push comes after the firm recorded a 67 percent drop in profits during the first half of 2016.
China Life Pursues the American Dream
While China Life isn’t a major player abroad just yet, the deal with Starwood shows the firm continues to seek out opportunities in the US. The insurer made its way stateside in April 2015, joining with mainland rival Ping An Insurance to take a majority stake in a $500 million mixed-used project being developed by Tishman Speyer in Boston.
Later that year, it invested $1 billion in a US warehouse portfolio controlled by Singapore’s Global Logistics Properties. That deal followed a similar acquisition made by Ping An Insurance.
The US buying spree continued in May of this year when China Life announced it had teamed with New York developer RXR Realty on $1.65 billion deal for Manhattan office tower 1285 Sixth Avenue.
Starwood Continues To Find Willing Buyers in China
The China Life acquisition marks the fourth time a mainland firm has struck a deal with Starwood for hotel assets. The US-based private equity firm has now concluded more than $4 billion in deals with Chinese buyers during the past two years.
The US hotel investment firm sold French hotel Louvre to Shanghai’s Jin Jiang Group for $1.49 billion in late 2014. Another insurer, Sunshine Insurance, purchased Sydney’s Sheraton on the Park in Sydney from Starwood for US$401 million a week later.
Starwood then sold another property to Sunshine in 2015 with the mainland insurance firm spending $230 million for the then unopened Baccarat Hotel in New York. That deal set a record in New York for the highest price ever paid for a hotel on a per room basis with the property’s 110 rooms going for more than $2 million per room.