China Life chairman Zhao Lijun has stepped into a new niche
China’s sovereign wealth fund and its largest insurer are backing a consortium of investors to buy the biggest parking operator in North America in a deal estimated to top $1 billion, the companies revealed last week.
A unit of China Investment Corporation (CIC) and insurance giant China Life are teaming up with a group led by Fortune 500 financial services firm TIAA Private Investments and Antarctica Capital to buy Chicago-based InterPark, according to a statement. Although the price was not disclosed, news website Axios, citing a source, reports that the total deal size was in the vicinity of $1.1 billion.
The consortium is buying the company from investment funds managed by Alinda Capital Partners, an infrastructure investment firm headquartered in Connecticut. The deal gives the partners ownership over 57 parking garages and surface lots containing 49,000 parking spaces across the US.
Chinese Investors Parking their Capital in Alternative Assets
“The InterPark investment has the elements of real assets and stable cash flows along with growth potential, which all fit into CIC Capital’s infrastructure investment strategy,” said Qing Zhang, Executive Vice President of CIC Capital Corporation in a statement.
The other mainland party to the deal also sees opportunity in the alternative asset class. “We believe infrastructure investment can offer a welcome addition to a balanced and diversified portfolio,” commented Fengming Zhang, President of China Life Investment Holding Company Limited, a private equity wing of China Life, which led the investment by the top mainland insurer.
TIAA, the Manhattan-based retirement financial services provider, is managing the consortium along with global investment firm Antarctica, which is also headquartered in New York. Besides the mainland duo, the institutional investment consortium includes Munich Re Group, a leading German reinsurance firm, and PFA Pension, a Danish life insurer.
Alinda bought InterPark from GE Real Estate for $300 million in 2011, and reportedly spent an additional $150 million to add more facilities and modernize infrastructure. Founded in 1997, InterPark has a portfolio of parking lot properties in major business districts and airports in 13 cities across the country, including Atlanta, Boston, Chicago, Phoenix, San Francisco, and Washington, D.C., according to the firm’s corporate website. InterPark says it parks over 16 million cars annually.
Acquiring a Taste for High-Yield Parking
An InterPark parking facility in Pittsburgh, Pennsylvania
Parking assets offer the potential for high returns in a sector traditionally overlooked by many investors, as office yields continue to compress in gateway cities across the US. According to one expert, active investors in parking lots can earn yields in the range of 12 to 18 percent, driven by sharp demand from companies where employee growth has far outstripped the capacity of existing parking structures.
These double-digit yields are among the factors drawing institutional investors like CIC and China Life to the niche asset class, as they deploy billions of dollars of capital into property investments worldwide. CIC, which had more than $813 billion under management in 2015, has emerged as China’s biggest buyer of overseas real estate and was the top investor in New York office properties in the 12 months through this past March, scooping up some $1.73 billion in skyscraper deals.
Chinese Giants Getting into Niches
The parking lot deal comes as CIC, China Life and other mainland institutions have been looking into non-traditional asset classes in search of returns. Last month, private equity giant Blackstone confirmed that it was selling its European logistics platform Logicor to CIC for $13.82 billion.
China Life, the mainland’s biggest insurer by assets, has recently shown a tendency to shun trophy buildings in favor of large portfolios of no-name properties in the US. This past May, the company took a 95 percent stake in a $950 million US industrial, healthcare and business park platform held by a fund managed by ElmTree Funds.
Six months before that, China Life led a mainland consortium in buying a $2 billion stake in a portfolio of budget hotels from Starwood Capital Group.
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