China’s Ping An Insurance has made its second acquisition of a major London real estate asset by acquiring Tower Place in the city’s insurance district for ₤327 million ($490 million) according to sources familiar with deal.
The purchase of the Norman Foster-designed Tower Place is the latest move into London’s real estate market by Chinese investors, and part of a growing wave of outbound investment from China which is increasingly being led by the country’s state-owned insurance giants.
China has significantly relaxed controls on overseas investment by its corporate giants as investors accustomed to double-digit rates of return look for alternatives to the country’s slumping domestic real estate market.
Ping An Buys a Stabilised Asset
Unlike many of the real estate developers from China that have bought their way into the London market, Ping An is picking up a stabilised asset, which is nearly fully occupied.
According to a statement this week by Gaw Capital, which advised Ping An on the deal, the 35,700 square metre (384,000 square foot)office building, which was completed by Tishman Speyer in 2003, is now 99.3 percent occupied. The primary tenant is US consulting firm Marsh & McLennan, which uses the building as its UK headquarters.
Ping An is buying Tower Place from a real estate fund represented by RREEF Investment GmbH.
China’s Insurers Lead the Way Overseas
This latest deal by the state-run insurer, which is China’s second-largest by market capitalisation, is part of a growing wave of outbound real estate investment – a trend in which insurance companies are playing a growing part.
Ping An was one of the pioneers of big outbound deals from China when it purchased the Lloyd’s of London building in London for ₤260 million ($390 million) in July 2013.
Since that time, other Chinese insurers have made even larger acquisitions including Sunshine Insurance’s $460 million purchase of a Sydney hotel in November, Anbang Insurance Group’s $1.95 billion deal for New York’s Waldorf Astoria in October, and China Life’s $1.35 billion deal for a tower along London’s Canary Wharf in June.
The trend by Chinese insurers to invest in overseas real estate assets is driven both by declining returns from a domestic real estate market that has slumped for more than eight months now, and by recent regulatory reforms that make it easier for Chinese companies to move their cash out of the country.
London is Tops With the Chinese
Although China’s investors are free to put their money in most any city they want now, they continue to show a preference for London’s red hot market.
Since Ping An’s first project in 2013, not only have other insurers picked up properties in the European financial capital, but a number of other corporates, and even government investment funds have bought their own pieces of the London market.
In late 2013, Chinese sovereign wealth fund CIC picked up a London office park for £800 million, and state-owned China Construction Bank acquired its own office building in the city for £110 million in June last year.
Developers from China have also pursued a number of large projects in London, with Greenland Group picking up two sites in the city, and Dalian Wanda already well under way with its $1 billion One Nine Elms development.