Ping An Insurance, one of China’s largest insurance companies, has made its international property investment debut.
The insurer, which controls approximately RMB 2.63 trillion (€330 billion; $428 billion) in assets, has acquired the Lloyd’s of London Building in the City of London from Commerz Real, the property company of German bank Commerzbank, in a deal valued at £260 million (€302 million; $388 million). The transaction reflected a net yield of 6.1 percent.
Ping An was advised on the purchase by Downtown Properties, an affiliate company of Hong Kong-based private equity real estate firm Gaw Capital Partners, which focuses on investments outside of China and outside of Gaw’s main Gateway opportunistic fund series.
In addition to being Ping An’s first overseas transaction, the purchase of Lloyd’s represents the first real estate purchase by a Chinese insurance company in the UK. It is expected to precipitate many more now that Chinese regulators have permitted its insurers to invest into the asset class after previously prohibiting them from doing so.
The sale brings Commerz Real’s eight year tenure as landlord to a close. The 14-story building – famous in the City of London for having all its ‘intestines’ – including elevators, toilets and pipes – on the outside – is fully let to insurance market the Society of Lloyd’s up through 2031. The building has won several awards for its innovative architecture.
Commerz first bought the Lloyd’s of London in 2005 for £231 million for a closed-end, single asset CFB Fund 154. While the deal’s yield was 6.1 percent, together with dividends over the past eight years, it will give Commerz a 7.8 percent EBITDA yield, according multiple statements.
“We are delighted with the transaction and it has been a major success for our investors,” Roland Holschuh, the member of the Management Board of Commerz Real AG responsible for the real estate business, said in one statement. “The current liquidity and investor demand within the London market presented an ideal time for us to seek an exit in line with our original business plan.”
Commerz Real manages both closed-ended and open-ended funds, with assets under management adding up to €13.5 billion, including equities.
To read further coverage of the transaction, click here.