Insurance Companies Diversifying Into Real Estate: Deal Of The 21st Century?

Given that a number of Chinese insurance companies have already diversified into the real estate business with lucrative results, does this move represent the “Deal of the 21^st Century”? 

By: Ringo Bones 

As of late, a number of Chinese insurance companies had diversified into the real estate / real property business during the past few years with lucrative results profit-wise. As far back as October 2014, Hilton Worldwide Holdings agreed to sell the storied Waldorf Astoria hotel to Anbang Insurance Group Co. of China after Anbang Insurance offered a bid of 1.9 billion US dollars. But it is only during the last week of January 2015 that US regulators gave the green light for the purchase. Anbang Insurance Group Co. sealed the 1.9 billion US dollar purchase of New York’s Waldorf Astoria hotel, which has been used by foreign dignitaries including Queen Elizabeth II. The Lloyd’s Of London building has also been recently bought up by a top Chinese insurance firm. 

Chinese insurers have been drawn to European office buildings because they are typically anchored by tenants with a 10-year leases and offer yields as high as 5 percent. This compares to Shanghai offices where 3 to 5 year leases and 4.5 percent interest yields are typical. 

“We consider high quality overseas property as a good substitute for fixed income investment” says Hing-Yin Lee, a senior executive director who manages overseas property investments for Ping An’s trust unit, told an investor conference back in December 2014. “Core offices in prime locations not only offer investors stable rental returns, the property prices may also go up in a few years”. With such investment returns, it looks like insurance companies diversifying into the real estate / real property business might as well be the “Deal of the 21^st Century”.