The property investment arm of German financial services giant Allianz expects China to soon account for up to half of its Asia-Pacific fund allocation, up from the current 40 per cent, with a focus on the new economy and logistics sectors.
Rushabh Desai, its Asia-Pacific chief executive, revealed on Monday the insurer and asset manager has just bought an office tower in a Beijing software park, already fully leased out to Chinese tech firms.
It expects to complete another purchase in a Shanghai business park “within a couple of weeks”, he added.
“We want to be aligned to the new economy and contribute toward China’s growth in the sector; we’re investing based on that thesis,” Desai said. By new economy he refers to non-traditional industries such as biopharmaceuticals and online retail.
Allianz Real Estate is just one of a number of foreign investment firms betting on growth in the commercial property markets of China’s top-tier cities, driven by high demand from small start-ups to large companies.
The firm has effectively bought the Beijing office tower – dubbed ZLink and valued at US$185-195 million – outright (98 per cent) in an all-cash deal from private equity firm KaiLong Group and Goldman Sachs, Desai said.
The ability to pay for such deals without financing and close them in just eight weeks was vital in helping Allianz secure the purchase, Desai said, even though it might not have been the highest bidder as sellers prefer to avoid China’s lengthy financing periods.
He said the firm is on the hunt for opportunities in Beijing and Shanghai office space, as well as in warehousing. Its portfolio already includes co-investing in two Shanghai office towers.
Allianz Real Estate has a global portfolio growth target of over €1 billion (US$1.17 billion) by the end of 2018, from around 800 million to 900 million euros at present and is well on track to meeting that, he said.
The property investment business also manages €56 billion worth of assets around the world, a tenth of which is in Asia-Pacific. Desai said the trade spat between the United States and China has had little impact on his firm’s investment decisions, and that post-deal asset management is more important.
“We monitor political risk but we keep it out of our investment decisions and try to focus on asset level,” he said.
“As an asset investor, we look at the quality of asset, their location and management. We look to outperform the market, so even if there’s a trade war or impact, we hope our investments will do better than our competition. That is all we try to do.”