Photographer: Craig Warga/Bloomberg

China Life Invests in $2 Billion of Starwood Capital Hotels

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  • Insurer, other companies buy stake in portfolio of 280 hotels
  • Limited-service properties are located in 40 U.S. states

Starwood Capital Group sold a stake valued at about $2 billion in U.S. hotels to China Life Insurance Co., extending a streak of Chinese investment in overseas lodging properties and travel-related businesses.

China Life, the country’s largest life-insurance company, will be the lead investor in the properties, with sovereign-wealth funds and others also owning a piece of the 280 select-service hotels in 40 states, Starwood said in a statement Tuesday.  The whole portfolio is valued at more than $3 billion, according to Starwood. The Greenwich, Connecticut-based firm, which last year sold New York’s luxury Baccarat hotel to another Chinese insurer, will continue to be the asset manager.

“With this select-service hotel portfolio, China Life has an efficient vehicle for investing in the United States economy,” Barry Sternlicht, chairman and chief executive officer of Starwood Capital, said in the statement. “We look forward to working with China Life on additional opportunities across a wide range of real estate asset classes in the years to come.”

China Life shares fell 2.2 percent to HK$20.25 at 10:51 a.m. in Hong Kong. The shares have declined 20 percent this year.

Chinese investors have been buying hotel and travel businesses around the world as outbound tourism surges and China’s economy and wealth expand. Anbang Insurance Group Co. last month acquired 15 luxury U.S. hotels, including New York’s JW Marriott Essex House and the Westin St. Francis in San Francisco, as part of a $6.5 billion purchase from Blackstone Group LP.

China Deals

Anbang helped usher in a wave of Chinese investment in U.S. hotels with its February 2015 purchase of New York’s Waldorf Astoria for $1.95 billion, the highest price paid for an American hotel. The Beijing-based company started a bidding war for Starwood Hotels & Resorts Worldwide Inc. in March, before walking away and enabling Marriott International Inc. to proceed with its takeover. Starwood Hotels, which Sternlicht founded in 1995 and led for the next decade, has no affiliation with Starwood Capital.

Insurance companies have been among the largest Chinese buyers of foreign real estate as they diversify their portfolios after the industry regulator allowed such investments and started a new solvency system this year that raises capital requirements for all asset classes except property. Chinese insurers can invest as much as 30 percent of their total assets in real estate and a maximum 15 percent overseas, according to China Insurance Regulatory Commission rules issued in 2014.

Overseas Investments

China Life will diversify its overseas real estate investments into logistic and retail properties, although office assets will remain its focus, Vice President Zhao Lijun said at briefing in August. The insurer made its first foray into the area in June 2014 when it bought a tower in London’s Canary Wharf along with other investors for 795 million pounds ($978 million). In May this year, it invested in a $1.65 billion office building in New York City.

China’s HNA Group, owner of Hainan Airlines Co., earlier this month said it will acquire a group of golf-course properties from a company founded by former Microsoft Corp. executive Scott Oki for $137 million. HNA in April agreed to buy Minneapolis-based Carlson Hotels Inc. and its majority stake in Rezidor Hotel Group AB, and last year purchased a minority stake in Red Lion Hotels Corp.

Starwood is one of the biggest real estate managers in the world, with about $51 billion of assets under management.