By Aya Khodair
Chinese nationals have become the largest foreign buyers of US & Western World’s top property buyers in Canada, Australia and other parts in the World, hiking real estate prices in most destinations. Chinese insurance companies invested about $2.4 billion in U.S. hotels in 2015. In February 2015 Anbang Insurance Group purchased the Waldorf Astoria New York for $1.95 billion, the largest amount paid for a single hotel in U.S. history, held previously by Hilton for over a decade. Beijing-based Sunshine Insurance purchased the New York Baccarat hotel for $230 million that same month.
The Chinese commerce ministry removed a requirement in 2014 that previously required Chinese investors to gain approval for overseas investments of more than $100 million. Lifting that requirement has allowed Chinese investors to move faster through the investment process and not get tangled in government red tape.
Chinese insurance companies have also been encouraged by the Chinese government to invest overseas as a way to diversify their risk away from the Chinese real estate market and make them more resistant to downturns in the Chinese economy.
This indicates that the U.S. and other target markets like the U.K. will likely continue to see mega investments and acquisitions by Chinese companies. New York-based real estate research firm Cushman & Wakefield projects Chinese insurance companies will invest up to $73 billion in overseas real estate, including in the U.S., between 2016 and 2020 forecasting a sustainable hike in the US real estate market over the coming 5 years.
Chinese companies have also demonstrated a penchant for acquiring equity stakes in U.S. hospitality firms. Hainan Airlines, for example, purchased a 15 percent share of Red Lion hotels for about $21.5 million in June 2015. HNA Group, the Chinese consortium that owns Hainan Airlines, purchased 100 percent of U.S.-based Carlson Hotels in April 2016.
Last year, Chinese foreign direct investment in the United States reached $15.7 billion, a record, according to the consulting firm Rhodium Group. When it bought the Waldorf two years ago, Anbang said it was eyeing stable investment returns from property in North America. Anbang has been active with its investments in other sectors in the United States, snapping up Fidelity & Guaranty Life Insurance Company late last year.
A Glimpse at Anbang Insurance Group, the new Chinese World tycoon
Anbang Insurance Group started in 2004 with $75 million and a single branch in Beijing. Since then, it has steadily increased in value. By 2009, in 5 years the company’s assets grew up to $5.1 billion. Today Anbang Insurance Group is one of the largest insurance groups in China, with $250 billion in assets, 30,000 employees and more than 35 million clients. Its early investors were Shanghai Automotive Industry Corp., Chinese oil and gas company Sinopec and other large state-owned enterprises.
The company targeted paying $6.5 billion to buy Strategic Hotels and Resorts, a portfolio of 16 luxury hotels owned by New York private equity firm Blackstone Group. Its hotels include four Southern California properties: the Hotel del Coronado, the Ritz-Carlton Laguna Niguel, the Montage Laguna Beach and the Loews Santa Monica Beach. Blackstone had just completed its own acquisition of the portfolio in December.
On the 31st of March, 2016 Anbang and its consortium partners, J.C. Flowers & Co. and Primavera Capital Ltd. walked away surprisingly from their strong stand bid for Starwood Hotels & Resorts, which lead to Starwood’s acquisition by Marriott, in a move that has created the world’s largest hotel company.
