Anbang Insurance, the Chinese company that made headlines with its $1.95 billion purchase of New York's Waldorf Astoria Hotel last October, is dipping into the Manhattan market again less than five months later.
The Beijing-based insurer has agreed to buy an office building on New York's Fifth avenue for between $400 million and $500 million, according to sources familiar with the deal that spoke with Bloomberg.
The deal appears to have capped off a busy week for the state-controlled company, which was revealed to have picked up nearly $3 billion in overseas assets just during the past few days.
China Buys Another Piece of Prime Manhattan Real Estate
Anbang is buying the 350,000 square foot (35,200 square metre) office building at 717 Fifth Ave from U.S. private equity giant Blackstone. The building is located in a prime area of Manhattan, at the intersection of Fifth Avenue with 56th Street in Midtown's Plaza District.
Anbang's new building is just a few blocks away from the Plaza Hotel near Central Park. (Image... [+]
The acquisition includes 22 floors of the 26-story building, leaving out the tower's valuable retail space, according to an account in Crain's New York Business.
Riding the Anbang Investment Wave
Anbang seems to be creating its own investment boom recently with the Fifth Avenue deal being the firm's fourth major acquisition over the last five months.
On Monday of this week the state-owned company, which accounts for about four percent of China's life insurance market, agreed to buy Dutch insurer Vivat Verzekeringen in a deal worth at least €1.4 billion (US$1.59 billion).
According to SNS Reaal, which sold the insurer to Anbang, the Chinese firm will acquire 100 percent of Vivat's equity for €150 million (US$170 million) while also injecting €770 million-€1 billion (US$875 million-$1.1335 billion) into the insurer to improve its equity.
On Tuesday Anbang was reported to have agreed to acquire a 57.5 percent stake in Korean insurer Tong Yang for 1.13 trillion won (US$1 billion). The insurer will also be buying two more minority stakes from other shareholders to bring its stockholding in the Korean company to 63 percent, according to press reports.
The deal for 717 Fifth Avenue was first reported in New York on Wednesday. And the week is not over yet.
Some reports indicate that Anbang, which was founded by the husband of a grand-daughter of former Chinese leader Deng Xiaoping, is preparing for a $2 billion IPO later this year, potentially in Hong Kong.
Chinese Govt Companies Competing for Big Ticket Real Estate Assets
The deal by Anbang appears to mark the latest point along a crescendoing line of international real estate purchases by Chinese state-run companies, particularly from the insurance and financial sector.
Since Anbang's own deal for the Waldorf Astoria last October, its competitor Sunshine Insurance bought a hotel in Sydney for $401 million, as well as last week picking up the Baccarat hotel in Manhattan for more than $230 million.
A third Chinese insurer, Ping An, made its second acquisition of London real estate in January, when it acquired an office building in the city's financial district for $490 million.
China's banks and sovereign funds have also been in the market for overseas real estate assets, with the Bank of China buying its own office building in Manhattan in December for $600 million. Meanwhile, Chinese sovereign fund CIC bought a Tokyo commercial complex this month for $1.2 billion, and Ginkgo Tree, another Chinese sovereign fund, picked up an office tower in Belgium for $319 million during December.
Exchange Rates and Policy Changes Encouraging Chinese Investment Surge
These purchases are driven both by changes in Chinese government policy that encourage investment in a broader range of overseas assets, including real estate. The wave of outbound investment is also spurred along by fluctuations in global exchange rates that have made assets in Australia and Europe cheaper to Chinese buyers, whose currency is pegged to the U.S. dollar.
And given recent adjustments to the Chinese yuan's peg to the dollar, U.S. real estate could be a good hedge for Chinese companies looking to park large sums of capital. The yuan lost 2.5 percent against the U.S. dollar last year, and has slid another 0.8 percent this year. Many analysts predict that China will let its currency devalue still further this year as the country struggles with less competitive exports and slowing economic growth.
Chinese Companies Forming Global Relationships
This latest deal sees Blackstone continuing to profit from its good relations with the Chinese. In addition to the 717 Fifth Avenue sale, the private equity firm also sold a Sydney office tower to China's Dalian Wanda for $329 million during December, and in November 2013 sold a London office park to CIC for $1.2 billion.
Property brokerage Eastdil Secured, which represented represented the Hilton Hotel group when it sold the Waldorf Astoria to Anbang, in this latest deal advising the Chinese insurer. Eastdil also was involved in CIC's Tokyo acquisition, where it represented Japan's Mori Trust, which sold the commercial complex to the Chinese sovereign wealth fund.
