Korea’s Mirae Asset Management has agreed to buy a portfolio of US luxury hotels from China’s Anbang Insurance for $5.8 billion, according to a report by the Wall Street Journal earlier today.
The deal comes more than one year after the nationalised mainland insurer had begun marketing the set of 15 high-end hospitality properties and more than three years after Anbang had purchased the Strategic Hotels and Resorts portfolio from Blackstone for $5.5 billion.
The transaction was agreed to this week despite an earlier discovery by Anbang that titles for several of the hotels had been fraudulently transferred to entities set up by an unnamed California individual, according to the Wall Street Journal account, which cited sources familiar with the transaction.
Neither Anbang nor Mirae has yet to make any official statement regarding the portfolio sale.
Korean Investments on the Rise
Mirae’s purchase gives it ownership of a set of both urban hotels and resort properties across the US including Manhattan’s Essex House, San Francisco’s Westin St Francis and Four Seasons Hotels in Palo Alto East and near Jackson Hole, Wyoming.
Where Anbang had purchased the Strategic Hotels and Resorts portfolio from Blackstone in 2016 at the height of China’s outbound investment boom, this latest transaction comes as institutions from South Korea account for a bigger slice of cross-border property buys.
Korean investors purchased $5.3 billion in overseas real estate assets during the first six months of 2019, according to a recent report by property consultancy JLL. The purchases amount to the largest half year volume of cross-border property purchases by Korean institutions ever. JLL Hotels and Hospitality served as the buy-side valuation and financing advisor in the transaction on behalf of Mirae Asset.
The acquisition by Mirae comes just two months after the company’s investment brokerage affiliate, Mirae Asset Daewoo, teamed up with a French asset manager to purchase Paris’ 45-storey Majunga Tower for KRW 1.08 trillion ($925 million).
Year-Long Sale Saga Comes to a Close
Mirae’s decision to move forward with the sale should bring to an end a year-long disposal process by Anbang, which, at the reported $5.8 billion price would realise a more than 5 percent mark-up over what it paid to purchase the set of hotels from Blackstone in 2016.
Anbang had originally agreed to buy 16 properties from Stephen Schwarzman’s alternative investment giant for $6.5 billion, however, the Hotel del Coronado in San Diego was eventually excluded from the transaction due to concerns over its proximity to a US naval base in the area.
The Chinese insurance company was first reported to be searching for a buyer for the hotel portfolio in August last year, around six months after China’s insurance regulator seized control of the company as its then chairman, Wu Xiaohui was brought under investigation for fraud in February of 2018.
The company, which seized the global stage with its $1.95 billion purchase of New York’s Waldorf Astoria Hotel in 2014, was brought under control of a Chinese government controlled fund in June of last year, which promptly began searching for buyers for the company’s overseas assets.
The Waldorf Astoria, which is currently under renovation in preparation for sale of condo units in the building, was not included in the Strategic Hotels portfolio. Wu Xiaohui was sentenced to 18 years in prison in May of last year for fraud and embezzlement.
In November 2018 Anbang engaged Bank of America to sell the Strategic Hotels and Resorts portfolio and Mirae reported one month ago to be the lead bidder for the properties.
In March Anbang sold the Bentall Centre in Vancouver to Blackstone and California’s Hudson Pacific Properties for an undisclosed sum and in July Liang Tao, Vice Chairman of the China Banking and Insurance Regulatory Commission, which is overseeing the liquidation of Anbang’s assets, said that RMB 1 trillion of the company’s assets had been sold off or were in the process of being disposed of.
Deed Fraud Slows Sale
The sale of Anbang’s US hotels might have been completed last month, if not for some funny paperwork which was discovered during a title search by Anbang, according to the Journal account.
At least four California hotels had paperwork filed with California authorities showing new ownership, with the Montage Laguna Beach resort in southern California having been re-registered to an entity named Andy Bang LLC, the media account said, citing state property records. The Westin St Francis, the Loews Santa Monica hotel and the Four Seasons Silicon Valey were also transferred to new entities, although no sale prices were recorded for the transactions, according to titles on file.
The deeds for the Ritz-Carlton Half Moon Bay and Laguna Niguel in California had also been fraudulently changed without Anbang’s knowledge or approval, the news account said, citing sources familiar with the discussions.