Chinese Insurers Will Drive Outbound Deals to $20B in 2015 Says JLL

Cross-border real estate acquisitions by Chinese investors are on a path to reach a record $20 billion in 2015, as mainland insurers go after overseas assets, according to property consultancy JLL.

With trophy deals such as Anbang Insurance’s $1.95 billion acquisition of the Waldorf Astoria hotel, or more recently, a pair of $1 billion investments in US logistics real estate, Chinese insurers have been among the most aggressive acquirers of real estate assets this year.

And 2015 should still be early days for acquisitions by Chinese insurers, with JLL calculating that the mainland’s insurance companies could invest up to $240 billion into real estate outside the country’s borders.

Cross-Border Deals Rise More Than 40%

Outbound investments in real estate by Chinese companies, institutions and individuals have totaled $15.6 billion so far this year, according to JLL’s calculations. Should the deal flow reach JLL’s predicted number of $20 billion, mainland investors would have achieved an increase of 43 percent over last year’s total of $11.5 billion (from Mingtiandi figures).

And much of the reason for this increase is due to increased activity by insurers, says JLL.

“We are seeing a structural shift with Chinese insurance companies globalizing their investment portfolios, including real estate,” said David Green-Morgan, Global Research Director at JLL.

Insurance Deals Already on the Upswing

Since 2012, when China first turned its insurers loose to roam across the border looking for investments, companies such as Ping An, China Life and Anbang have begun building the teams and expertise necessary to execute cross border deals.

If the Waldorf Astoria deal is counted towards the 2015 total (it was announced in 2014, but received final approval in February) then Chinese insurers made more than $3.9 billion in cross-border deals this year. That total is a far cry from 2013, when Ping An made the first overseas acquisition of an overseas asset by a Chinese insurer (and the only such deal that year) when it bought the Lloyd’s of London Building for $388 million.

Two of the biggest deals involving mainland insurers this year have happened in the US logistics sector with both Ping An and China Life committing as much as $1 billion to the sector in the last month.

The same two rival companies also cooperated on a mixed-use development deal in April this year, when each committed $167 million to the Pier 4 project being developed by Tishman Speyer in Boston.

Anbang Insurance has also been active this year, buying an office building in New York during February for over $400 million.

Mainland Insurers Just Getting Started in Real Estate

According to JLL, given the total assets managed by China’s insurers, and the amount that they are legally allowed to put into real estate, the total cross-border real estate investments by mainland insurance companies could eventually reach as much as $240 billion.

“Currently, Chinese insurance companies’ portfolios do not have a significant allocation to real estate with many funds probably holding just 1 percent of their invested capital in the sector,” says Darren Xia, Head of JLL’s International Capital Group (ICG) in China. “This compares with US or European funds, which tend to have a real estate allocation target of between 5 percent and 15 percent. This leaves big potential for inflows to the asset class as China’s insurance industry develops.”