SHANGHAI—State-owned China Life Insurance Co. is investing more than $1 billion in U.S. warehouses, according to a person with knowledge of the deal, marking its largest cross-border real-estate purchase to date.

China Life will take about a 30% stake in warehouse operations that have recently been acquired by Singapore-listed Global Logistic Properties Ltd., the person said. Global Logistic Properties, a warehouse owner part-owned by Singapore's sovereign-wealth fund, said in July it plans to buy the assets of Denver-based Industrial Income Trust Inc. The acquisition was completed Thursday.

Global Logistic Properties said in a statement Thursday it is establishing a new fund to manage these assets and that China Life Insurance and two institutional investors have jointly invested in 66% of the fund.

Global Logistic Properties and China Life didn't immediately respond to requests for comment.

China Life is joining the ranks Chinese insurance companies that see value in foreign real estate. Last week, a unit of Ping An Insurance (Group) Co. of China formed a $600 million fund with U.S. property fund Blumberg Investment Partners to invest in real-estate assets across the U.S., including logistics assets. Ping An, China's largest insurer by premiums, also has purchased two office towers in London since July 2013.

In April, non-insurance subsidiaries of Ping An and China Life took a one-third stake each in a $500 million development project in Boston, joining with Tishman Speyer Properties. In June 2014, China Life acquired a 70% stake in London's 10 Upper Bank Street, which has more than a million square feet of office space along the Canary Wharf. Anbang Insurance Group, the firm that bought the Waldorf Astoria hotel in New York last year, recently bought an office tower in Toronto.

Chinese insurers are looking to expand their overseas real estate portfolios as a hedge against slowing economic growth at home. Apart from Ping An, Chinese insurers allocate only 1% of their capital to real estate compared with the 5%-15% allocation by their peers in the U.S. and Europe, according to data from property brokerage JLL.

"This leaves big potential for further inflows to overseas real estate," said Darren Xia, head of JLL's International Capital Group of China, adding that Chinese insurers could potentially allocate up to $240 billion in real estate abroad based on current metrics.

Until 2012, regulations prohibited Chinese insurers from buying foreign property, but they have since been given looser quotas to invest in foreign assets, including stocks and bonds abroad. The China Insurance Regulatory Commission now allows insurers to invest at most 15% of their total assets in offshore holdings including real estate.

Logistics real estate in the U.S. has been the darling of investors this year, as tenant demand and rents grow alongside the country's economic growth. Prologis Inc., the world's largest industrial landlord, completed its acquisition of warehouse owner KTR Capital Partners for $5.9 billion in June.

In its latest earnings report, China Life Insurance said its third-quarter net profit plunged 73% from a year earlier to 2.5 billion yuan, without giving a reason. Its nine-month net profit, however, rose 23% to 33.8 billion yuan.

Write to Esther Fung at esther.fung@wsj.com

 

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(END) Dow Jones Newswires

November 04, 2015 20:25 ET (01:25 GMT)

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