Asian investment in European hotels will reach €20 billion in 2015, fuelled by the liberalisation of domestic controls governing outbound investment, according to the latest research from CBRE.
Asian hotel real estate acquisitions in Europe surged by 90% year-over-year in 2014 and by 20% globally. With limited investable stock available in domestic markets, CBRE forecasts that hotel acquisitions by Asian investors could rise by as much as 58% in Europe this year.
Asian institutional funds are generally under-allocated to real estate because of stringent regulations, especially around overseas assets. Most of their overseas allocations are in liquid assets such as equities, cash, fixed income and government bonds. This situation is changing as China, South Korea, Taiwan and other countries have started to allow overseas direct investments, higher allocations to real estate, and a simplified approval process.
Hotel real estate is an ideal asset class for insurance companies diversifying their portfolios; fixed-income lease terms are often longer than other asset types and yields are presently above traditional real estate segments, even in prime locations. This has made hotels in large European cities such as Paris, Frankfurt and particularly London attractive for Asian investors.
CBRE predicts that the combined effect of an increase in the total value of assets held by Asian insurers and increasing liberalisation will result in their investment assets growing from €114 billion in 2013 to €180 billion in 2018. This would translate into additional inflows of about €66 billion into real estate – including direct and indirect investment.
High-profile acquisitions by Chinese investment groups into overseas real estate, particularly hotels, indicate that a large portion of global hotel transactions will be completed by Asian capital in 2015. Fosun, China’s largest privately held conglomerate, acquired French Club Med for €22 million per share, valuing the company at €839 million. Hilton Worldwide recently completed the sale of the Waldorf Astoria hotel in New York to China-based insurance firm, Anbang Insurance, the most expensive sale of a U.S. hotel to date. Beijing counterpart, Sunshine Insurance Group, has announced plans to buy the Baccarat Hotel New York for $230 million.
CBRE Hotels currently has over €2 billion worth of assets as secured mandates to sell on behalf of owners. As part of an on-going recruitment drive to strengthen the EMEA Hotels team, Jileen Loo has been appointed to focus on European-bound global capital with a particular emphasis on Asia. Based in London, Ms Loo joins the CBRE’ Hotels team from China where she spent eight years working with corporate investors, state owned enterprises and real estate related government bureaus on a number of significant transactions; five of those eight years were spent with CBRE China.
Ms Loo, Director, CBRE Hotels, EMEA, commented: “The first wave of Asian hotel buyers was largely by REITS, high net worth individuals or emotive purchasers looking to acquire trophy hotel assets for wealth preservation and prestige. Due to a series of relaxations in domestic government policies, Asian insurance funds, particularly from China, are now entering the global hotel market in a big way. These buyers are finding limited investable stock available for consideration in domestic markets and when quality assets become available, the competition is fierce.
“Legal liberalisation will speed up the pace of global real estate investments by Asian insurance companies and we expect that further overseas hotel acquisitions will take place as regulators gain more confidence about overseeing such investments and insurance firms become savvier about investing globally.”
