July 9, 2018 / 1:11 AM / 5 months ago

Allianz Real Estate aims to raise China investment in new economy, logistics: APAC CEO

HONG KONG (Reuters) - The property investment arm of Germany’s Allianz SE (ALVG.DE) expects China to account for up to 50 percent of its Asia-Pacific fund allocation going forward from 40 percent now, with focus on the new economy and logistics sectors, a senior executive said.

Flags with the logo of Allianz SE, Europe's biggest insurer, are pictured before the company's annual shareholders' meeting in Munich, Germany May 3, 2017. REUTERS/Michaela Rehle

The insurer and asset manager on Monday said it bought an office tower in a Beijing software park that was fully leased to Chinese tech firms. It expects to complete another purchase in a Shanghai business park “within a couple of weeks”, said Rushabh Desai, Asia-Pacific chief executive at Allianz Real Estate.

“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 in a recent telephone interview. New economy refers to non-traditional industries such as biopharma and online retail.

Allianz Real Estate is just one of many foreign investment firms betting on growth in the commercial property markets of China’s top-tier cities, driven by high demand from small startups to large corporates.

The firm bought 98 percent of the Beijing office tower - dubbed ZLink and valued at $185 million to $195 million - in an all-cash deal from private equity firm KaiLong Group and Goldman Sachs Group Inc (GS.N), Desai said.

The ability to pay without financing and close the deal in eight weeks helped Allianz Real Estate secure the property, even though it might not have been the highest bidder, Desai said, as sellers prefer to avoid China’s lengthy financing periods.

He said the firm will look for opportunities in Beijing and Shanghai office space, as well as in warehousing. Its portfolio includes co-investing in two Shanghai office towers.

Allianz Real Estate is on track to meet its China portfolio growth target of over one billion euros ($1.17 billion) at the end of 2018, from around 800 million to 900 million euros at present, Desai said.

Globally, Allianz Real Estate manages 56 billion euros worth of assets, of which 10 percent is in the Asia-Pacific region, where around 40 percent is in China.

Desai said the trade spat between the United States and China has 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 quality of asset, quality of location and managers. 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’s all we try to do.”

(Corrects to show title in headline is “APAC CEO” not “APEC CEO”)

($1 = 0.8544 euros)

Reporting by Clare Jim; Editing by Christopher Cushing

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