Strategy

China Life Invests in Starwood Capital Hotels

China's largest insurer acquires a stake in a $2 billion portfolio of select-service hotels as it continues to step up its overseas investments.
Matthew HellerOctober 19, 2016
China Life Invests in Starwood Capital Hotels

China’s largest insurance company has invested in a portfolio of select-service hotels owned by Starwood Capital Group, continuing the flow of Chinese capital into U.S. real estate assets.

Starwood on Tuesday said the portfolio of 280 hotels in 40 states is worth roughly $2 billion and China Life Insurance Co. would serve as its anchor and leading investor for a group that also includes sovereign wealth funds and other investors. Terms of the deal were not disclosed.

“We are honored to have been given the opportunity to serve as stewards of China Life’s capital,” Starwood CEO Barry Sternlicht said in a news release. “With this select-service hotel portfolio, China Life has an efficient vehicle for investing in the United States economy as a whole.”

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Private investment firm Starwood owns about 2,600 hotels globally, including Groupe du Louvre, TMI Hospitality, InTown Suites, and manages about $51 billion in assets.

China Life has been stepping up overseas investments as it seeks to diversify its $360 billion portfolio which is largely exposed to domestic Chinese market. In May, it acquired 1285 Avenue of the Americas in New York City for $1.65 billion, the city’s highest value office building deal so far this year.

“Chinese buyers are also targeting overseas real assets to protect against a depreciating currency and as they seek higher yields,” Reuters noted, with the first five months of 2016 seeing $17 billion in Chinese outbound real estate investment.

Recent hotel deals by Chinese investors include Anbang Insurance Group’s $1.95 billion purchase of New York luxury hotel Waldorf Astoria. “I would almost call it a new source of capital,” Sternlicht told The Wall Street Journal.

Rick Kirkbride, a partner at the Paul Hastings international law firm, said the Starwood deal is one of the few Chinese investments in the U.S. that doesn’t include a core or “trophy” asset such as the Waldorf.

The Starwood hotels “are not trophy assets, but they’re good, solid long-term investments that have a limited number of investors who are after them,” he told the South China Morning Post. “They generate solid, steady cash.”