Â鶹ӳ»­

Chinese investors may become the new owners of one of Europe’s most iconic ensemble of buildings as well as one of the largest commercial real estate financiers on the Continent as they renew their efforts to diversify investments outside their home market.

In Germany two Chinese groups - Fosun International and insurer Ping - are battling it out to acquire the €1.5 bn Potsdamer Platz portfolio in Berlin from SEB Investment Management.

The portfolio, which is owned by SEB's Immoinvest open-ended fund in liquidation, comprises 18 properties in the centre of the city including the Mandala Hotel, a Cinemaxx cinema and the Arkaden shopping mall. SEB AM declined to comment.

Designed by renowned architects including Renzo Piano and Richard Rogers, Potsdamer Platz opened in 1998 and has become a landmark in the German capital, attracting capital both from Qatar, whose sovereign wealth fund bought the Hyatt hotel, and from South Korea’s SWF which in 2010 bought the nearby Sony Center.

The assets offer over 250,000 m2 of restaurants, offices, apartments and shops. New tenants include ICBC, China’s largest bank, which moved in earlier this year with a lease term of 15 years. Eastdil Secured is marketing the package for SEB IM, which bought the assets back in 2007 from German car maker Daimler for €1.5 bn.

Lender for sale
Also in Germany, Anbang Insurance Group of China is believed to be in talks to buy pbb Deutsche Pfandbriefbank from its parent Hypo Real Estate Holding (HRE) in a deal said to be valued at €1.5 bn. According to a news report by the Wall Street Journal, the Chinese insurer has tabled a bid for the real estate lending platform which has a balance sheet of some €76 bn, of which about €24 bn in real estate finance.

pbb Deutsche Pfandbriefbank was officially put on the market in February through Citigroup and Deutsche Bank with its parent group looking to divest its entire stake or exit through an initial public offering.

Record investment
Europe emerged as one of the top destinations for Chinese foreign investment globally last year when investment hit a new record of $18 bn (€25 bn), partly driven by new sectors including real estate, according to research from Baker & McKenzie. From virtually zero before 2013, Chinese investment in European commercial real estate surged to $2.8 bn in 2013 and $3 bn in 2014, not including future development costs. ‘What we're seeing is the maturing and normalization of Chinese investment processes in line with the international economy,’ said Thomas Gilles, chairman of the EMEA-China Group at Baker & McKenzie.

A downturn in the Chinese domestic market in 2013 and 2014, and the boom in the overseas Chinese population during the same period – tourists, student, and emigrants - were the major drivers for outbound real estate FDI. Policy liberalisation for outward investment by institutional investors such as sovereign wealth funds and insurance companies also contributed to greater real estate investment, the law firm said.

While Chinese direct real estate investment last year focused on the UK – with the largest deals including China Investment Corp’s acquisition of London’s Chiswick Park for $1.3 bn and China Life Insurance’s purchase of the 10 Upper Bank Street building in the UK capital for $740 mln, most recent developments clearly indicate that the target has broadened.

Chinese global players Fosun and Jin Jiang International Hotels this year bought French hospitality groups Club Med and Louvre Hotels Group for $4.3 bn and $1.5 bn respectively. Fosun International, which is backed by Chinese billionaire Guo Guangchang, has recently been associated with Potsdamer Platz in Berlin, broker C&W (eventually taken over by peer DTZ) and emerged as the buyer of Unicredit's former headquarters in its largest property foray ever in continental Europe. The Shanghai-based conglomerate offered €345 mln for the historic building in Milan, outbidding a joint venture of asset manager Hines and the Abu Dhabi sovereign wealth fund ADIA.

Ping An, the insurance firm which in 2013 bought the Lloyd’s of London building and most recently Tower Place in the English capital, is believed to have tabled a bid for the €1 bn Squaire in Frankfurt before the sale was cancelled by its owner, IVG Immobilien. Similarly, Chinese conglomerate Dalian Wanda Group has acquired one of Madrid's highest towers after having committed £700 mln in the acquisition and redevelopment of the One Nine Elms mixed-use site in London's South Bank regeneration area.

‘Chinese investment in Europe has become much more diverse in recent years and is now extending into all parts of Europe,’ Gilles of Baker & McKenzie said. ‘We remain bullish that the next decade will see a further expansion in Chinese investment into the EU.’