China's Sunshine Insurance strikes big in Manhattan

While China's Anbang Insurance made big headlines for its buy of the Waldorf Astoria in New York, another Chinese insurer could be the biggest player in the hotel real estate market when it's all said and done.

Sunshine Insurance is reportedly set to purchase Manhattan's yet-to-open 114-room Baccarat Hotel from Starwood Capital Group for $230 million, a number which equates to more than $2 million per room, well higher than the approximate $1.4 million per room the Waldorf Astoria sold for. That would make it the most expensive hotel deal in history.

The imminent acquisition by Sunshine is another in the insurer's global portfolio, which it is building up.

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Back in November, Sunshine bought the 557-room Sheraton on the Park, in Sydney, Australia, from Starwood Hotels & Resorts Worldwide for around US$399 million—roughly $716,000 per key.

As we've noted before, here, China in recent years relaxed restrictions on how companies can deploy capital overseas. In 2012, the Chinese government started allowing insurers to invest abroad and, last February, it raised the share of their balance sheets that insurers can invest abroad from 5 to 15 percent, giving insurers more leeway to spend on U.S. real estate.

"Chinese insurers are buying for 50 or 100 years, and they are not worried about value going down in markets like New York,"  Ryan Meliker, hotel analyst for investment bank MLV & Co., told The Wall Street Journal, which first reported news of the deal. "It’s a great place to park money long term."

Real-estate broker JLL, as reported by WSJ, estimates Chinese companies will spend more than $5 billion on overseas hotel investments this year, up from $920 million last year and $130 million in 2012.

Now we are seeing it all play out, as these companies stalk for U.S. assets.

The Baccarat Hotel was built by Starwood Capital Group, headed by Barry Sternlicht.
 

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