Union Life Insurance is looking to expand its overseas investment exposure beyond the US and into European real estate.
David Wang, managing director and the US region head at the Chinese life insurance company, told PERE that the investor is actively exploring investments in the industrial sector in Europe.
Union Life Insurance, with $20 billion in assets under management, has less than 5 percent of its overall portfolio invested in real estate assets. The investor has long been investing in real estate development projects in the senior housing sector within China, and started investing in the US in 2015. So far, all its US real estate investments, totaling $600 million, have been in senior housing.
In late 2016, the life insurer partnered with Cindat Capital Management and the New York-listed real estate investment trust Welltower to form a $930 million joint venture to acquire Welltower’s portfolio of senior housing and long-term/post-acute care real estate assets. Union Life and Cindat jointly own 75 percent of the portfolio, comprising 11 senior housing properties and 28 long-term/post-acute care facilities, while Welltower retained a 25 percent share.
In a bid to expand its niche investment strategy, Wang said that the firm is now looking at industrial assets, hospitals and medical office buildings in the US. Union Life has an investment staff of around 15 people, of whom five are based in the US.
Capital controls imposed by Chinese regulators in the past two years have had a material impact on the pace of overseas investments by some of Union Life’s peers in the Chinese institutional investment community. Mainland Chinese investors deployed around $4.5 billion in US real estate in 2017, a huge drop from $18.3 billion invested in 2016, according to research by Cushman & Wakefield.
While Wang admits that Union Life has not closed any deal in the US since the Welltower transaction in March 2017, he insists that was not because of any regulatory restrictions. Rather, the firm did not find the “right project, which made sense both in terms of price and structure,” he said. He added that the firm in fact sought to buy one senior housing asset but lost to a bidder that paid a higher price.
What also helps is having an offshore investment strategy that is encouraged by Chinese regulators. Wang said that Union Life has done many senior housing deals in China and so investing overseas was the result of “organic growth” for the insurer.
While there has been much talk about capital restrictions, a Chinese investor’s ability to deploy capital overseas depends more on its communication with the government agencies. “The main purpose is to be clear about what kind of projects the firm will invest in and not doing short-term or speculative investment,” Wang explained. “We plan to hold the assets for a long time. We also learn a lot of management experience from our US partners and can convert that expertise into our Chinese practice, which will help to grow our business in China.”
Wang adds: “Senior housing is an area that is supported by the government because this skill set is important for the Chinese society. The Chinese society is going to face an ageing society very soon and we would need senior housing facilities in China.”
Wang will be speaking on a panel at PERE Investor forum: Shanghai on 28 June 2018. For further details, please visit: http://perenews.com/shanghai