Ping An Insurance buys second London landmark

Rebounding overseas realty markets attracting cash-rich Chinese insurers

Ping An Insurance (Group) Company of China Ltd has acquired another landmark site in London, a move which experts said over the weekend highlights Chinese insurers' increasing appetite for overseas properties after the sector was allowed to invest abroad since 2012.

The Tower Place, an office building located in London's EC3 insurance district, was bought by China's second-largest insurer in terms of market value, the deal's adviser Gaw Capital Partners said in a press release e-mailed to the Global Times on Friday.

The Hong Kong-based private equity fund management company did not disclose the value of the contract in the statement, while Reuters reported on Saturday the figure hit 327 million pounds ($490.04 million), citing the seller Deutsche Asset & Wealth Management's statement.

Neither Ping An Insurance nor Deutsche Asset & Wealth Management could be reached for comment on this by press time.

It is not the first time Gaw Capital has bought property in London on behalf of Ping An Insurance, following its consulting efforts for the insurer's acquisition of Lloyd's Building for 260 million pounds in the city's financial district in July 2013, according to the press release.

"The property industry in the EU and US has started to rebound amid economic recovery, marking a good timing for investment," Li Zhanjun, research director of Shanghai-based E-house China R&D Institute, told the Global Times Sunday.

The prices of office buildings in central London and Manhattan, for instance, rose 15 percent and 11 percent respectively during the nine months ending September 2014, according to media reports.

The Tower Place property, covering 35,700 square meters, appears to be able to provide a stable return. The property is currently 99.3 percent occupied, primarily leased to Marsh & McLennan Co as the US insurance giant's UK headquarters, said Gaw Capital.

Analysts, however, are concerned that the deal will hardly cause a big spurt in Ping An Insurance's profit growth, as the property yields in developed countries and regions are lower than those in China.

The yields in overseas mature realty markets are stable, but on average usually stand at single digits, in comparison with the average rate of 20-30 percent in the Chinese real estate industry, said Song Ding, director of the tourism and real estate center of Shenzhen-based China Development Institute.

Despite the fairly low yields, overseas properties, especially in international gateway cities like London and New York, still draw a lot of investment from the Chinese insurance sector, especially after China's industry regulators gave insurers and other financial institutions the freedom to invest overseas properties in 2012.

A group led by Ping An Insurance's major rival China Life Insurance Co bought an office building along Canary Wharf in London for 795 million pounds in June 2014. And on January 13, global law firm Mayer Brown said on its website that it has advised Taikang Life Insurance Co on the purchase of London's Milton Gate.

"Gaining money is not the top priority for cash-rich Chinese insurers, who are actually trying to find a safe place to take care of their abundant capital," Song told the Global Times Sunday.

"Overseas stable and well-regulated realty markets are good options and it is better not to put all the eggs in one basket."

Zhou Yanli, vice chairman of China Insurance Regulatory Commission, said at a press briefing in Beijing on Friday that the total assets of the country's insurance industry surpassed 10 trillion yuan ($1.6 trillion) in 2014.

And as of 2014, outbound investment by domestic insurers stood at $24 billion, with about 20 percent going to properties and most of the rest flowing into stocks and equity products, Zhou said.

Song noted that more Chinese investors would flock to recovering overseas property markets, but they need to be prepared for local authorities' stringent scrutiny over purchases involving large amounts of money.

Anbang Insurance Group Co's $1.95 billion takeover of New York's Waldorf Astoria Hotel reportedly brought on a US governmental review over security concerns in October 2014.

No final result has been made available to the public yet.