China Life Insurance

China Life invests more than US$1b in American warehouses

GLP teams up with mainland’s biggest insurer and two other institutional investors to acquire logistics facilities worth US$4.55b

PUBLISHED : Thursday, 05 November, 2015, 6:15pm
UPDATED : Thursday, 05 November, 2015, 6:15pm

China Life Insurance, the mainland’s biggest insurer, is entering the US logistics property market by investing more than US$1 billion in more than 200 US warehouses in its largest overseas real estate investment.

It is following in the footsteps of the mainland’s second-largest insurer Ping An Insurance (Group), which last week announced the launch of a US$600 million fund with a US property fund to invest in US logistics assets.

Singapore-listed Global Logistic Properties (GLP) said on Thursday it had teamed up with China Life and two other institutional investors to form a fund that had acquired a group of logistics facilities worth US$4.55 billion from a US-based real estate investment trust.

The assets represented one of the highest quality industrial portfolios in the United States, it said.

China Life and the two other institutional investors jointly hold 66 per cent of the fund. A source with direct knowledge of the deal said China Life had the biggest stake among the three institutional investors, which means it owns at least 22 per cent and has invested more than US$1 billion. The company did not respond to a request for comment.

GLP, one of the world’s biggest modern warehouse operaters, said it expects to pare down its stake to 10 per cent after additional investers join. It will continue to be the asset manager and take care of the operation of the warehouses.

“China Life’s partnership with GLP is necessary as the assets contain over 200 warehouses,” the source said. “That is much complicated than Ping An’s case, which only operates seven to eight properties, in terms of finding tenants.”

The newly acquired logistics assets, totalling 58 million square feet, are spread across 20 major markets, including Los Angeles, the US capital Washington and Pennsylvania. The are expected to have a 5.6 per cent annual return.

With the e-commerce boom, the need for warehouse facilities, especially high-quality warehouses that can satisfy same day or next day delivery is growing significantly, in both the US and China.

Last year, China Life, together with investors including China Development Bank and Bank of China, bought a 34 per cent stake in GLP’s China portfolio for US$2.5 billion. GLP is the largest provider of warehouses in China.

Dwight Hotchkiss, who oversees the US market at global commercial real estate consultancy Colliers, said he expected US warehouse rents to rise by 5 per cent to 7 per cent next year.

“The demand is strong and will continue to be,” Hotchkiss said.