Life insurance companies in China, now able to invest up to 30 percent of their assets under management in real estate, are clearly taking advantage of some of the property investment options available to them, thus creating a win-win situation with indebted developers in the country.
For example, one such major developer, Shanghai-based Shui On Land Ltd., has been quite active with investors of late through sales, partnerships and the corporate restructuring of its business in an effort to pay down its debt and improve its cash position.
This past December, Shui On Land and its subsidiary China Xintiandi entered into a 3.32 billion yuan ($548 million) strategic partnership with China Life Insurance Co. to acquire Shui On Land’s entire stake in the company that owns the large-scale Taipingqiao mixed-use project in Shanghai’s Huangpu district expected to be completed this year.
Prior to this deal, Brookfield Property Partners agreed to invest up to $750 million in China Xintiandi, which will initially hold a portfolio of six Chinese property assets (Shanghai Xintiandi, Xintiandi Style, Corporate Avenue 1, Corporate Avenue 2, Shui On Plaza and The HUB).
Additionally, in November 2013, Sunshine Life Insurance Co. agreed to acquire Shui On Land’s office asset Chongqing Tiandi, also known as Corporate Avenue 2, in the city of Chongqing for 2.4 billion yuan ($396 million).
As more and more investors seek to capitalize on real estate’s long-term income-producing qualities and potential for asset appreciation in China’s growing cities, it won’t be surprising if such deals become even more commonplace.
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Jennifer Molloy is editor of The Institutional Real Estate Letter – Asia Pacific.
