Mirae in pact to acquire Anbang's U.S. hotels

The roller-coaster ride of Anbang Insurance Group's foray into the U.S.' luxury hotel space has come to an end. As predicted last month, South Korea's Mirae Asset Global Investments has entered into a definitive agreement to acquire a portfolio of 15 U.S. luxury hotels from the beleaguered Chinese insurance giant after a year of negotiations and bids. 

As Hotel Management reported in May, Chinese authorities divesting the insurance company's assets received offers of up to $5.8 billion from 17 potential buyers, including asset-management firm Brookfield, SoftBank-owned Fortress Investment Group, Singapore’s sovereign wealth fund GIC, private equity firm Blackstone Group and Mirae. 

Reportedly the biggest cross-border real estate investment by a South Korean company, neither business officially revealed a price for the deal, but according to Bloomberg citing an anonymous source, Mirae paid "a little more than $5.8 billion for the portfolio" and posted a 10 percent deposit earlier this week. Mirae has previously invested in U.S. hotels, buying the Fairmont San Francisco for $450 million in 2015.

The Portfolio

The collection, which Anbang purchased from Blackstone in 2016, includes the JW Marriott Essex House in New York; The Ritz-Carlton Half Moon Bay, Westin St. Francis, Montage Laguna Beach and Four Seasons Silicon Valley in California; Fairmont Scottsdale Princess and Four Seasons Scottsdale in Arizona; Four Seasons Jackson Hole in Wyoming; and InterContinental Hotels in Chicago and Miami.

The hotels are positioned to continue to benefit from the approximately $400 million in capital expenditures Anbang has invested since 2016, Mirae advisor JLL Hotels & Hospitality said in a statement.

"This project is the result of Mirae Asset’s continued effort in the overseas real estate market since 2003," said Choi Chang-hoon, head of the real estate unit at Mirae. "We will continue to strive to provide investors with the opportunity to diversify their portfolio with core real estate assets located in key global markets." 

JLL Hotels & Hospitality is the buy-side valuation and financing advisor on behalf of Mirae Asset Global Investments. Bank of America Merrill Lynch is acting as sole financial advisor to Anbang on the portfolio sale.

Hold Ups

According to The Wall Street Journal, the deal was delayed when Anbang found "a series" of fake deeds to transfer ownership for as many as six of the properties. The insurance company found the fraudulent deed transactions during "a routine title search," insiders told the Journal. At least four hotels in California had been transferred to LLCs, the WSJ reported, noting, for example, the Montage Laguna Beach was sold by Shr Holding Group LLC to a company listed as Andy Bang LLC, according to state property records.

According to the Journal, the deeds to the Westin St. Francis, Loews Santa Monica and Four Seasons Silicon Valley also went to LCCs, while deeds to the Ritz-Carlton properties were "faked." Insiders told the paper the transactions were arranged "without Anbang’s knowledge or approval." The Journal only identifies "a California individual" as responsible for the allegedly falsified documents.

End of a Saga

The deal caps one saga of Chinese investment in U.S. hospitality. Blackstone sold New York City's Waldorf-Astoria (which is not included in the current deal) to Anbang in 2014 for $1.95 billion. Following its failed bid to buy Starwood Hotels & Resorts Worldwide, Anbang acquired Strategic Hotels & Resorts from Blackstone for about $6.5 billion in 2016, with many of the hotels from that deal included in the Mirae/Anbang deal.

By 2017, the Chinese government began cracking down on outbound investment and took over Anbang's operations the following year after an investigation from China’s Insurance Regulatory Commission ended with former Chairman Wu Xiaohui sentenced to 18 years in prison for fundraising fraud. The government created Dajia Insurance Group to take over Anbang's domestic operations earlier this year.

According to New York-based research firm Rhodium Group, total direct investments from China to the U.S. dropped to $4.8 billion in 2018, down 84 percent from $29 billion in 2017 and 90 percent from $46 billion in 2016, the lowest level in seven years. By comparison, in 2015 Chinese outbound capital investment into global commercial real estate markets across all sectors exceeded $10 billion in a year for the first time, CBRE reported in early 2016.