China’s insurance companies continued their global shopping spree this week when Sunshine Insurance agreed to buy the still unopened Baccarat Hotel in New York for more than $230 million.
According to sources familiar with the transaction, Sunshine is paying the highest price ever for a New York hotel on a per room basis with the hotel’s 110 rooms going for more than $2 million per room.
The deal for the Manhattan hotel, which the Chinese insurer is purchasing from partners Starwood Capital Group and New York developer Tribeca Associates, comes less than two-and-a-half months after Sunshine bought the Sheraton on the Park in Sydney, Australia for $401 million, and is part of a growing wave of overseas asset purchases by China’s insurance companies.
Starwood Racks Up China Deal Number Three
A story in the Wall Street Journal indicated that the price per room for Starwood’s sale of the Baccarat surpassed the $2.04 million per room that India’s Sahara group paid in 2012 to acquire the Plaza Hotel in New York. The Plaza Hotel deal had held the valuation record in the city for more than two years and has frequently been cited as a case of over-exuberant investment.
The exuberance of China’s state-run corporations for overseas real estate is quickly becoming a boon to Starwood, however, with the US-based private equity firm now having concluded more than $2.13 billion in deals with Chinese government owned firms in the last few months.
With the Baccarat transaction, Starwood has now sold off two hotels to Sunshine, with Sydney’s Sheraton on the Park, which the investment group sold in November, also having been a Starwood property.
Also in November, Starwood sold French hospitality chain Louvre Hotels to Chinese hotel giant Jin Jiang Group for $1.49 billion.
Hotels Becoming a Favored Asset Class
Apart from Starwood, other international hotel companies have been profiting from China’s newfound appetite for overseas real estate investment, with the Hilton Hotel group having sold New York landmark the Waldorf Astoria to China’s Anbang Insurance Group for $1.95 billion in early October.
A recent report by property consultancy JLL predicts that Chinese companies will spent at least $5 billion on buying hotels outside of China this year, making the asset class a serious rival for the office investments that traditionally have been favored by big investors.
China’s insurance companies have also been active in the market for office buildings, with Ping An Insurance picking up its second office block in London last month for ₤327 million ($490 million), and last year China Life led an international consortium that paid $1.35 billion for a tower along London’s Canary Wharf.