Two largest insurance companies in China are making their first investment in the commercial property market, buying a majority stake in a $ 500 million in Boston, according to a person briefed on the transaction.
China Investment Group Life Insurance Co. and Ping An Insurance Co., along with New York developer Tishman Speyer Properties, marks the latest sign that Chinese insurance companies are becoming a force in the global investment real roots.
Boston The development includes an office building of 13 floors and an apartment tower nine stories with 100 units. The project in the popular district of Port city most of Pier 4, which was known for Anthony Pier 4, a popular restaurant that was closed two years ago and plans to redevelop the site will be moved.
Rob Speyer, co-CEO of Tishman Speyer, confirmed China Life and Ping An's participation in the agreement, but refused to disclose the size of their holdings. A person briefed on the deal said that each insurer was taking a share of third, while the remaining third would be owned by Tishman Speyer fund will be the managing partner of the firm. China Life and Ping An did not respond to requests for comment.
Until 2012, the Chinese government banned Chinese insurance companies from buying foreign goods. Now they are joining other Chinese investors to be increasingly active in US and European markets. Both China Life and Ping An bought property in London, but have not purchased in the US before.
So far in 2015, Chinese insurance companies bought $ 2.5 trillion in foreign assets, more than they bought in all previous years, according to Real Capital Analytics. In general, Chinese investors in 2014 bought $ 13.6 billion in foreign real estate, slightly lower than $ 15.3 billion in 2013 figure, but still well above the $ 5.4 billion they bought in 2012, said Real Capital.
Beijing has been encouraging Chinese companies to venture abroad and loosened exchange controls and administrative procedures in recent years. The government in 2012 crowned estate assets of insurance at 15% of its total assets. In 2014, the regulator of the insurance companies, the Insurance Regulatory Commission of China, increased this threshold to 30%. Movements allowed insurers to invest in commercial building mature properties and offices in prime locations abroad.
The companies have enormous buying power. China Life Insurance Co. is the largest insurer by premiums, while Ping An Insurance Group ranks second. Overall, total assets of Chinese insurers reached 10550000000000 yuan ($ 1.7 trillion) in late February, 70% over the same month three years ago.
For Tishman Speyer, the Boston transaction shows that its China strategy is paying off. The company entered the China market as a developer there, but lately also been using the contacts he has made to partner with Chinese investors in US deals. Tishman Speyer in 2012 sold a building developed in Chengdu to Ping An for an undisclosed amount.
"We have made China's relations with both investors and tenants who have paid dividends in other parts of the world," said Mr. Speyer.
Tishman Speyer, one of the leading developers in the US, owns about 3 million square feet of office space in the business district of Boston. Directed by Mr. Speyer and his father, Jerry Speyer, the assets of the firm Tishman include Rockefeller Center and the Chrysler Building in New York, São Paulo and OpernTurm North Tower in Frankfurt.
The Pier 4 project in Boston is the first development in the Seaport area. The firm acquired the site last year and plans to complete the part of the project office in the second half of 2017 and condominium tower in the first quarter of 2018.
Boston Seaport District has long been a dream of planners who recognized the potential development of the coastal zone which was mainly populated by parking lots and aging industrial property. Led by developing Fan Pier, a 21-acre mixed-use development that started about 10 years ago, the district has managed to attract a critical mass of business, residential and retail uses.
The new project is moving forward without any preleasing office space, increasing the risk of Tishman Speyer and its Chinese partners. But Mr. Speyer said he is confident that there will be strong demand for office space and condominiums.
"We have seen a significant rise in demand for a wide range of companies in the past two years," he said. "There is a significant demand that wants new product and there is little new product under development in Boston."
Tishman Speyer has developed nearly 4 million square feet of space in China; which has about 20 million square feet in the line of development there. The firm is the only US company to raise funds denominated in yuan in China for projects in the country. It has raised two, for a total of $ 700 million.
Tishman Speyer has also raised a $ 50 million investment wealthy Chinese individuals in New York, Washington and Boston. The company is developing a condominium project of 655 units in San Francisco, with China Vanke Co., one of China's largest property developers by market capitalization.
Mr. Speyer, who has been playing a leading role in the company in implementing its strategy of China, said he hopes to be doing more projects with Chinese partners.
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