Chinese realty sprees overseas to continue
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E-mail Shanghai Daily, February 27, 2015
Insurers seen as major players
What seems clear is that real estate investment overseas is becoming the norm. Cash-rich insurers are emerging as major players after the government relaxed restrictions to allow them to invest up to 30 percent of their assets in real estate, with a maximum 15 percent permitted offshore.
In a most recent deal, China's Sunshine Insurance said on February 9 that it will purchase Manhattan's luxurious Baccarat Hotel from Starwood Capital Group for US$230 million, or an equivalent of more than US$2 million per room. That followed the acquisition of Sheraton on the Park in Sydney last November. The Beijing-based insurer has also acquired the 100-room Chateau Elan Hotel in the Hunter Valley in the Australian state of New South Wales, according to media reports.
Sunshine Insurance's strong interest in hotel properties is probably sending a signal that Chinese investors are going to be dominant players in the global hotel market.
Global hotel transactions may hit an eight-year high of between US$65 billion and US$68 billion this year, with Chinese investors among the top participants, Jones Lang LaSalle Hotels and Hospitality Group predicted earlier.
In the Asia-Pacific, transactions are expected to rise 15 percent this year to about US$8.5 billion, with Chinese buyers accounting for US$5 billion.
"This will place Chinese investors, not featured in the Top 10 list just a few years ago, among the ranks of top capital exporters, alongside US-based private equity funds and Middle East investors," said Scott Hetherington, chief executive officer for Asia at Jones Lang LaSalle Hotels and Hospitality Group.
Despite the rosy outlook, pitfalls remain, such as cultural hurdles, the legal environment and public concern overseas about property falling into the hands of foreigners, industry experts warned.
Addressing concerns about too much prime farmland under foreign control, Australian Prime Minister Tony Abbot earlier this month announced changes to regulations governing land purchases by foreign entities. The threshold for review of those acquisitions will be dropped to A$15 million from A$252 million and will be applied to cumulative sales.
Simon Henry, co-founder of Juwai.com, which matches Chinese investors with international investment opportunities, including 2,775 current Australian agricultural listings, said the new rules will make Australia less competitive for foreign investors, according to a report by the state-owned broadcaster ABC.
"It is essential for Chinese investors to understand and learn about the various overseas markets," said Kitty Liu, senior director, CBRE global capital markets. "In addition to developing an international team, we suggest that Chinese investors work with third-party professional service firms or local partners who are familiar with the dynamics and operations of local markets."
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