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Portfolio deals in vogue for Asian outbound investors

Portfolio deals by Asian outbound investors has doubled in the first half of the year as they look to scale up their property holdings quickly, according to CBRE. 

Portfolio deals are increasingly becoming the preferred outbound investment route for Asian institutional investors, according to a report published by real estate consultancy CBRE.

In its H1 Asian outbound investment report, CBRE has estimated that investors in the region committed capital to 26 portfolio transactions in the first half of this year, a substantial increase from the 13 recorded in the same period last year.

In total, approximately $45.2 billion of Asian outbound capital was directly invested into global property this first half, marking a 98.4 percent year-on-year rise against $22.8 billion allocated last year.

“The appetite of Asian investors for high quality cross-border real estate assets remains solid and sustainable for the foreseeable future,” said Tom Moffat, executive director, capital Markets, CBRE Asia. “However, the type of transactions and the geographic and sectoral diversity is where we see the most significant change in 2017.”

The standout deal remains Chinese state fund China Investment Corporation’s (CIC) €12.25 billion acquisition of Blackstone’s pan-European logistics portfolio Logicor. The transaction has given the Chinese investor ownership of a portfolio of 147 million square feet of logistics space in 17 countries. Another example is China Life Insurance’s purchase of 48 US single-tenant net lease properties from ElmTree funds in late May via a $950 million recapitalization. As PERE reported earlier, the Chinese insurer has been known to veer towards acquiring diversified real estate portfolios instead of trophy assets to focus on an income play.

Explaining the evolution of Asian investors’ overseas buying appetite, Robert Fong, director of research, CBRE Asia Pacific, said: “There is increasing interest in forming partnerships and joint ventures with local developers or operators. Investors are keen to get scale. We have already seen more portfolio or platform investments. In additions, there is growing interest in purchasing equity stakes in real estate companies to gain overseas exposure indirectly.”

Given some of the assets in these portfolio buys are likely to be in secondary markets as well, the move beyond gateway cities is also reflected in CBRE’s data. In H1 2017, there was a drop in Asian investors’ allocation to the top five urban markets to 31 percent from 54 percent in H1 2016.

Correspondingly, the size of outbound deals has also increased, with the property services firm estimating 74 percent of the total committed investments to have been deployed in big ticket deals over $250 million, versus 56 percent in the first half last year.