(Yicai) March 20 -- Cash-rich Chinese insurance companies started buying commercial real estate in the second half of last year after prices tumbled, according to industry sources. “We’re not done yet,” one said. “We’re just waiting for properties that fit our business plan to come on the market.” 

Another source in the investment department of a big insurance firm noted how eager Chinese insurers are to acquire real estate. Property accounts for about 20 percent of their international peers’ investment portfolios, the person said, but while a 10 percent level is considered healthy among Chinese insurers, their property ownership is far below that.

At many leading domestic insurers, property only makes up 4 percent to 4.5 percent of the assets they have invested in, leaving considerable room for growth, he said.

“In past years, we were unable to fulfil our annul investment target for real estate, not because we were short of cash, but because there were not many quality assets available,” the person said. “Of the few projects we carefully selected and bought, some turned out to be overpriced or didn’t yield the expected cash flow.”

With the property market in a slump, buying opportunities are emerging. Since last year, institutional investors ever cautious about overpaying for real estate have seized the chance to buy at low prices, another insider told Yicai. Increasing numbers of cash-strapped developers, particularly those at risk of default, have begun actively offloading high-quality projects to institutional investors and asking prices have dropped significantly.

Many insurers, including industry giants Ping An Life Insurance of China, Taikang Life Insurance, AIA Life Insurance, and China Pacific Life Insurance, have logged successful real estate deals in the past year, according to the Insurance Association of China. And they are not done yet.

Ping An Insurance, China’s biggest insurer, is stepping up efforts to find real estate investment opportunities that can eventually form part of its long-term holdings, such as commercial office buildings, logistics warehouses, industrial parks, rental housing compounds, and retirement communities, another source said.

For example, market speculation were circulating last year that Blackstone Group was looking for a buyer for its logistics parks in China, and a subsidiary of Ping An Insurance was one of the parties that contacted Blackstone to discuss a deal.

AIA Life, the Chinese mainland unit of Hong Kong-based multinational insurance and financial giant AIA Group, acquired a controlling stake in an office building in Beijing’s central business district in late January for CNY2.4 billion (USD333.4 million). This was AIA Life’s first direct property investment in the capital since it was set up.

Editors: Tang Shihua, Futura Costaglione