Two of China’s largest insurers took their first steps into the US market real estate market this week as American developer Tishman Speyer announced that China Life Insurance and Ping An Insurance would take a majority stake in a $500 million mixed-use project along Boston’s waterfront.
The deal by the two state-owned Chinese insurance giants represents the first time that Chinese insurers have backed an early stage development project, as well as the first major foray for mainland buyers into the Boston real estate market.
The transaction is also a landmark in the progress of Tishman Speyer in turning the relationships it accumulated through development projects in China into funding sources for its new buildings in the US.
Buying 100 Condos and 13 Floors of Offices on Boston’s Waterfront
China Life and Ping An are each putting $167 million into the project’s first phase, according to an account in the Wall Street Journal, and are said together to be acquiring a majority stake. Tishman will maintain a minority stake, and serve as the general partner and property manager for the project. According to sources familiar with the off-market transaction, property consultancy JLL advised Ping An Insurance on the investment.
The project that Ping An and China Life are buying into is on Boston’s Pier 4, a redevelopment area in the city’s Seaport District. Tishman plans to convert the one-time restaurant location into a 13-storey commercial building with 34,652 rental square metres (373,000 square feet) of office space and a nine-storey, 100 unit luxury condo complex.
Construction on the development, which includes a new public park, is scheduled to begin in the fourth quarter of this year, according to a statement from Tishman.
Insurers Moving into US Secondary Cities
Other Chinese insurance companies have already been active in New York, however, with Anbang Insurance buying the Waldorf Astoria hotel last year for $1.95 billion, and Sunshine Insurance buying Manhattan’s Baccarat Hotel for $230 million in February.
The two insurers did break into new territory, however, by being the first Chinese investors to acquire a major property in Boston. To date, New York, with its large supply of high value assets with more predictable returns has seen most of the action for institutional and insurance sector investors from the mainland, with San Francisco and Los Angeles increasingly becoming the target for Chinese developers.
Ping An and China Life Take New Level of Risk
The most significant breakthrough for this deal, however, is the decision by the two insurers to invest in a development project which hasn’t even broken ground yet, thus taken on the challenges of project delays, market variations and other risks usually reserved for more aggressive investors.
It’s been less than three years since Chinese insurers were first granted permission to invest in real estate overseas and less than two years since Ping An made the first major overseas property by for a mainland insurance firm when it bought the Lloyd’s of London building for ₤260 million ($384 million) in July 2013.
Tishman Cashes in on China Relationships
The investment is also a major milestone for Tishman Speyer, the New York-based real estate developer that first secured the license for the Boston site late last year.
Tishman has already notched a win through its cooperation with China Vanke in developing San Francisco’s Lumina project. The two companies tied the investment knot in early 2013 to develop the 655 unit luxury condo project where homes start at $1 million and go for as much as $49 million. According to sources familiar with the transaction, Vanke took a 70 percent stake in that $620 million project.
Tishman’s leadership attributes their ability to attract mainland partners for their US ventures to the company’s experience developing in China.
“Tishman Speyer has been an active investor and developer in China for more than a decade,” said Tishman Speyer Co-CEO Rob Speyer. “In that time, we have forged strong, productive relationships with both China Life and Ping An.”
The privately held New York company currently has completed one project each in both Shanghai and Chengdu, and has new developments underway in Shanghai, Chengdu and Suzhou.