South Korea's Mirae could acquire Anbang's U.S. hotel assets

Could this be the end of Anbang Insurance's U.S. hospitality saga? According to Bloomberg, South Korea’s Mirae Asset Financial Group is emerging as the top bidder to acquire a number of the Chinese insurance giant's luxury hotels across the country.

A year ago, Anbang put up for sale a collection of luxury hotels it had acquired two years earlier, pricing the portfolio at $5.5 billion in a bid to raise money following its seizure by the Chinese government. 

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. 

According to the report, an affiliate of Mirae is working to arrange financing and reach an agreement on terms of a purchase. The acquisition could value the 15 properties at more than $5.5 billion, but the details of the deal have not been confirmed.

In the months since the 17 potential buyers were eyeing the assets, all but two—including Mirae—have reportedly dropped out. Should Mirae's bid be successful, the South Korean firm is looking to make its nonrefundable deposit before September. Mirae has previously invested in U.S. hotels, buying the five-star Fairmont San Francisco Hotel for $450 million in 2015.

The 15 hotels in the portfolio include the Fairmont Scottsdale Princess, several Ritz-Carlton properties (including those in Half Moon Bay near California's Silicon Valley), several Four Seasons hotels, the JW Marriott Essex House on Central Park South in New York City, the InterContinental in Chicago and the Westin in San Francisco.

Highs and Lows

The past four years have been a roller-coaster ride for Anbang. Blackstone sold New York City's Waldorf-Astoria hotel to Anbang in 2014 for $1.95 billion, ushering in a period of major Chinese investment in U.S. real estate assets. Following its failed bid to buy Starwood Hotels & Resorts Worldwide, which set up a bidding war between it and eventual winner Marriott International, Anbang acquired Strategic Hotels & Resorts from Blackstone for about $6.5 billion in 2016, acquiring many of the hotels it is now looking to divest.

But 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 that ended with former Chairman Wu Xiaohui sentenced to 18 years in prison for fundraising fraud. In June, the government created Dajia Insurance Group to take over Anbang's domestic operations.

Direct investments from China to the United States dropped to $4.8 billion in 2018, down 84 percent from $29 billion in 2017 and 90 percent from $46 billion in 2016. According to New York-based research firm Rhodium Group, it was the lowest level in seven years. For comparison, in 2015, Chinese outbound capital investment into global commercial real estate markets exceeded $10 billion in a year for the first time ever, CBRE reported in early 2016. 

The current U.S. trade war with China is unlikely to boost west-bound investment and Anbang's former stance as a major player in America's hospitality industry is unlikely to be repeated soon by Dajia or any other Chinese firm.