Last month, PERE broke the news Ping An Insurance, China’s second-largest insurer, had formed a $1 billion joint venture with Denver, Colorado-based real estate investment management firm Blumberg Investment Partners (BIP) to acquire assets across the US.
Under the venture, Ping An closed in April on an initial portfolio of newly built logistics assets located in the New York City metropolitan area, the Mid-Atlantic, the Pacific Northwest, South Florida, Atlanta and Colorado – for more than $600 million. The asset were sold by BIP and its development partner, SunCap Property Group. The new owners also have lined up an additional $400 million in build-to-suit properties.
The transaction marked multiple milestones. It was Ping An’s first real estate deal in the US, the first logistics transaction made by a Chinese insurance company in the US and the first programmatic joint venture by a Chinese insurer in the country.
The deal also is a sign of the times, said Eric Wurtzebach, senior managing director in the North American real estate group of Macquarie Capital, the capital advisory arm of Macquarie Group, which advised on the transaction. In its acquisition, Ping An negotiated a forward-purchase agreement where ownership will be transferred from BIP to Ping An upon delivery of the assets through 2016.
Wurtzebach said he expected forward-purchase agreements and other bespoke structured transactions to become more common for foreign investors in US private real estate. “Many foreign investors require more time to go through the investment committee process. As a result, they can’t move fast enough to compete in a traditional brokered auction,” he said.
Executing a structured transaction with a partner also is about capturing longer-term deal flow, Wurtzebach added. “Through a forward-purchase transaction the investor locks up an institutional quality portfolio they couldn’t buy in the open market and they secure a future pipeline of opportunities,” he said.
Wurtzebach said he had been very surprised at the willingness of foreign investors to do highly complex transactions. This is especially the case with a number of first-time investors in US real estate that historically have stuck to gateway markets and traditional property types.
For example, Anbang, the Chinese insurer that bought the Waldorf Astoria from Hilton Worldwide last year structured a deal where it intended to spin off a number of the hotel rooms into condominiums. The transaction also was Anbang’s first real estate deal in the US.
“When you think of Chinese institutional capital, there’s a false perception that this capital is flooding the US executing top-of-the-market deals. In reality, while the Chinese institutional investors have a great deal of capital to deploy, they’re willing to do complex transactions to find value,” he says. “It’s a smart way to deploy capital at this time of the cycle.”