Korea’s Mirae Sends Termination Notice on $5.8B Anbang Hotel Deal

South Korea’s Mirae Asset Management has sent a notice of termination to Dajia Insurance, formally scrapping its $5.8 billion acquisition of a portfolio of 15 high-end US hotels that the mainland group had taken over in the restructuring of troubled insurer Anbang.

The Seoul-based asset manager said in a statement on Monday that it had sent the notice to its counterpart in the deal on 3 May, alleging that the insurer had breached its contractual requirements over the proposed sale of the properties, which include the landmark JW Marriott Essex House on Manhattan’s Central Park South.

“Mirae Asset will protect its rights vigorously in accordance with the terms of the agreement,” the statement said, as reported by Reuters and local Korean media.

The move by the $400 billion asset manager came six days after Dajia, which took over much of Anbang’s business last year after the mainland government had nationalised the troubled insurer, filed a lawsuit at Delaware Chancery Court in the US suing Mirae for failing to complete payment for the portfolio by the 17 April deadline.

Alleging Breaches of Contract

Dismissing claims made by Anbang that it had pulled out of the deal because it could not finance the transaction, Mirae said on Monday that it had terminated the contract after the insurer had sought to close the transaction despite being in breach of “certain material obligations”.

Mirae described these obligations as including the insurer’s failure to remedy various material encumbrances and liabilities impairing the hotels, as well as its failure to continue operating the properties in accordance with contractual requirements.

A Mirae Asset representative said that the asset manager had discovered that Anbang was “embroiled in a lawsuit” with a third party and had declined to provide Mirae with the legal documents when requested.

Mirae noted that it had, in accordance with the contract, requested that the deposit – reported to be in the region of $600 million – be returned by the escrow agent.

Finding Dubious Paperwork

The collapse of the deal comes eight months after Mirae had agreed to purchase the hotel portfolio from Anbang in a transaction which would give the Korean firm ownership of a set of urban hotels and resort properties across the US including Manhattan’s Essex House, San Francisco’s Westin St Francis, the Intercontinental in Chicago, and several Four Seasons and Ritz-Carlton properties.

Reports in September, when the sale and purchase agreement was signed, indicated that the deal had already been delayed by the discovery of inconsistent paperwork relating to the ownership of some of the hotels.

The Montage Laguna Beach resort in southern California had been re-registered to an entity named Andy Bang LLC, while the Westin St Francis, the Loews Santa Monica hotel and the Four Seasons Silicon Valley were also transferred to new entities, although no sale prices were recorded for the transactions.

The deeds for two other California hotels – the Ritz-Carlton Half Moon Bay and Laguna Niguel – had also been fraudulently changed without Anbang’s knowledge or approval.

Racing to Service a Debt Mountain

In response to Mirae’s allegations, Anbang said in a statement on Monday that the lawsuit referred to in the termination notice had ended, with ownership of the hotels resolved.

The insurer, which acquired the luxury hotels from Blackstone in 2016 for $5.5 billion, had been seeking a buyer for the portfolio since August 2018, just two months after Anbang had been taken over by a Chinese government-controlled fund and three months after founder Wu Xiaohui was sentenced to 18 years in jail for fraud and embezzlement.

The company, which changed its named to Dajia Insurance Group last year, is racing to service a debt pile that it built up during an acquisition spree between 2014 and 2016, which included the $1.95 billion purchase of New York’s Waldorf Astoria.