China Life Insurance Group Co, the country's largest insurer, has taken a sizable but undisclosed stake in a landmark New York office block, in a deal worth $1.65 billion.
The insurer is believed to be the largest investor in the Manhattan building, at 1285 Sixth Ave, in a transaction led by US developer RXR Realty LLC, according to media reports.
The purchase marks the latest high-profile property move by a Chinese company, in a trend experts said is being fueled by the desire to hedge against the risks of a slower Chinese economy and the yuan's depreciation.
"It is a reasonable move by China Life, given the expectation of a strong dollar and the sound economic recovery in the United States," said Grant Ji, executive director of capital markets for northern China at CBRE Group, a US commercial real estate company.
The 167,220 square meters Sixth Ave site houses tenants include UBS Group AG and the law firm Paul, Weiss, Rifkind, Wharton & Garrison.
Ji said trophy properties in prime locations such as New York and London are considered ideal targets for Chinese insurers, as they offer low-risk investments that generate stable yield.
Property deal tracker Real Capital Analytics told The Wall Street Journal recently that Chinese companies have been the most-active investors in the US since the start of the year, buying 47 properties worth $9.3 billion.
The China Life purchase also comes at a time when Chinese insurers have been suffering a significant decline in profits and investment returns, due to the sharp volatility of the A-share market.
"More life insurers are becoming interested in investing in foreign real estate to earn stable rental yields and to diversify their investment portfolio," said Sally Yim, senior vice-president at global rating agency Moody's Investors Service Inc.
"China Life's overall real estate holding is still small, so despite the illiquid nature of this kind of investment, we believe the risk is manageable," Yim said.
China Life was thumped by a 57.2 percent fall in net profit to 5.22 billion yuan ($793 million) in the first quarter of the year. Its investment return also dropped by 4 percent to 3.7 percent, during the period.
Last year, the company and its domestic rival Ping An Insurance Co jointly invested in a $500 million development project in Boston's Seaport District, both their first moves into the US property market.
