Allianz and TH Real Estate buy outlet malls in China as part of regional push
Company sees the boom in online shopping in China as not affecting outlet malls because of strong demand for discounted luxury goods
German insurer and asset manager Allianz Real Estate has teamed up with US property investment firm TH Real Estate to raise US$750 million to acquire two premier outlet shopping centres in China in a bid to boost the two companies’ presence in the Asia-Pacific region.
The pair aim to acquire Florentia Village Jingjin, between Beijing and Tianjin in northeast China, and Florentia Village in Shanghai, they said in a statement.
The fund is seeking to take advantage of favourable economic conditions in China as the country looks to reform its economy, according to Rushabh Desai, Asia-Pacific CEO of Allianz Real Estate.
China “still has a six per cent [economic] growth, very good growth”, Desai said in an interview on Monday. The country “is moving away from manufacturing and rebalancing to a service-led economy and consumer economy, which fits with what we are trying to do,” he added.
The planned acquisition of the two malls comes as e-commerce takes off in China. Total online sales of goods increased 28.6 per cent year on year in the first half of 2017 to 2.37 trillion yuan (US$357 billion), according to a report by Fung Business Intelligence. On November 11, the Singles’ Day online shopping event in China generated sales of US$25 billion in just one day.
Online shopping has helped buoy overall retail sales in China, although in October retail sales grew 10 per cent from the same month a year earlier, the slowest pace in a year.
However Desai said that while traditional bricks-and-mortar retailing has faced challenges from the popularity of online shopping, high-end outlet malls have not been as affected.
“There is a middle class of aspirational buyers who nowadays want branded products, but they still want them at a discount, so they tend to go to outlet malls to get the branded product at a discount,” he said.
“A second group would be upper class buyers who used to go to countries like Japan to do their shopping for branded products, but who are now able to buy their branded product closer to home.”
Both types of buyers still prefer to go to outlet malls to buy luxury items, rather than purchase them online, he said.
Allianz Real Estate, which has around US$63.5 billion in assets, will own a majority 30 per cent of the fund, the company said in a statement announcing the deal, which is part of a strategy to allocate around 5 per cent of its global real estate portfolio to the Asia-Pacific region.
The remainder of the fund will be held by other long-term investors, including TH Real Estate, which will also act as the fund’s manager, while RDM Asia, part of the Fingen Group of Italy, will manage the assets.
Allianz and TH Real Estate jointly invested in the Europe Outlet Mall Fund in 2004 and in the UK Mall Fund in 2008.
“They have done extremely well, so we have tried to expand that relationship and success to other parts of the world,” Desai said.