Keen to woo Sunshine Insurance Group to take equity in its hotel management company, Starwood Capital Group has secured Sunshine’s agreement to jointly set up a fund to develop a hotel brand in a deal that also involves Starwood selling its flagship New York Baccarat Hotel for US$230 million to the Chinese insurance company.
This acquisition, the first by a Chinese insurance company in 2015, follows a series of overseas ventures by other Chinese insurance companies, including China Life’s purchase of London’s Canary Wharf Building in 2014 and Ping An Insurance’s acquisition of The Lloyd’s Building for US$410 million in July 2013.
UK Barratt Homes Beijing CEO Louis Bai predicts that Sunshine Insurance is but the first of many insurance companies to invest abroad this year.
Sunshine Insurance’s overseas investments
The luxury Baccarat Hotel, with more than a third of its 114 rooms as luxury suites, commands rates to the tune of US$18,000 per night for its most deluxe suites. The hotel also boasts 15,000 top-grade crystal ware pieces exclusively shipped from the Baccarat factory in France.
The strategic partnership between Starwood Capital and Sunshine Insurance is a first for both parties and sets the precedence of a Chinese insurance company partnering a renowned overseas hotel management company.
Starwood Capital founder Barry Sternlicht was a co-founder of Starwood Hotels Group and was personally involved in the creation of its St. Regis, Westin and W hotel brands. Mr. Sternlicht set up the Starwood Capital Property Fund to create the Baccarat international hotel brand and the eco-friendly 1Hotel brand after establishing the independent Starwood Capital Group.
The Baccarat Hotel is not the first overseas acquisition for Sunshine Insurance it also acquired the Sheraton on the Park in Sydney, Australia for a reported AUD$463 million on November 21, 2014, and at the same time entered into a long-term strategic partnership with Starwood Hotels Group for hotel management.
An insurance law expert said insurance companies must consider the following when making investments overseas. “ Firstly, they must find a suitable investment target like a hotel project with mature operations and a profitable business model. Next, they must consider the foreign exchange factor in their transactions. Finally, they should consider the acquisition method, holdings acquisition is the most common method at present but there are other methods as well,” he said.
Sluggish domestic real estate sends Chinese investors abroad
Barratt Homes’ Mr. Bai said the high growth period for the domestic property market has past and Chinese companies are now forced to invest in overseas real estate.
He thinks that more and more companies will look abroad for assets as the Chinese property market’s downturn continues. “Developers are confident in the sustained stable growth for major markets like London or New York, making them the secure nests that risk-averse Chinese investors are looking to place their golden eggs,” he said.(Translation by David)
