Chinese insurer snaps up iconic US hotels for $6.5bn
Published 29/09/2016 | 02:30
Anbang Insurance Group Co. has completed most of its $6.5bn acquisition of Strategic Hotels & Resorts Inc., helping to bolster the Chinese company's credibility as a global buyer after its abrupt withdrawal from the bidding war for Starwood Hotels & Resorts Worldwide Inc. earlier this year.
The insurer bought 15 of Strategic's 16 properties, according to people with knowledge of the deal. It's the second- largest US acquisition by a Chinese buyer, after the $7bn sale of Smithfield Foods Inc. to Shuanghui International Holdings Ltd. - now known as WH Group Ltd - in 2013, according to data compiled by Bloomberg and New York-based research firm Rhodium Group.
Strategic's properties include the JW Marriott Essex House in New York and the Four Seasons in Washington. Its oceanside Hotel del Coronado in San Diego was the setting for the 1959 film 'Some Like it Hot', which starred Marilyn Monroe, Tony Curtis and Jack Lemmon.
Beijing-based Anbang bought Strategic from Blackstone Group LP, which had taken the company private last December for about $6bn.
"It's only a positive" for Anbang, David Loeb, senior lodging analyst at Robert W. Baird & Co., said in an interview before the closing.
"It helps restore their credibility, which is important for them in their own market, particularly as they look at a public offering. That's going to require investor confidence in the group," he said.
The inter-agency Committee on Foreign Investment in the United States is still reviewing the purchase of the Hotel del Coronado near San Diego, said a source, who asked not to be identified because the process is private. The hotel is located close to a large naval base. The committee reviews acquisitions of US businesses by foreign investors for national security risks.
Representatives for Anbang and Blackstone declined to comment. Whitney Smith, a spokeswoman for the Treasury Department, which leads the committee, also declined to comment. The committee's reviews are confidential.
Arne Sorenson, chief executive officer of Marriott International Inc., which manages some of the Strategic properties, said during a Bloomberg Television interview that Anbang had closed its purchase of Strategic.
Marriott didn't immediately respond to requests for comment.
Anbang, with assets of more than 800bn yuan ($120bn), has been on a two-year shopping spree for investments outside China, buying New York's Waldorf Astoria hotel, a Belgian bank, a Dutch insurer and office buildings in New York and Canada.
Within days of reaching a deal to buy Strategic in early March, Anbang and two partners launched a surprise $12.9bn offer for Starwood Hotels, which already had agreed to be taken over by Marriott.
After forcing Marriott to increase its bid, then escalating its own offer to $14bn, Anbang suddenly bowed out on March 31, citing only "various market considerations."
Marriott ended up buying Starwood in a deal that was completed last week.
Anbang, led by Chairman Wu Xiaohui, entered the US market with its February 2015 purchase of the Waldorf Astoria for $1.95bn, the most ever paid for an American hotel. The company is expected to convert most of the roughly 1,400 hotel rooms into high-end condominiums starting next year,
Anbang has said it will work with New York City officials to maintain the hotel interior's distinctive Art Deco details after preservationists raised concerns that a condominium conversion may threaten them.
The company disputed assertions by the New York Landmarks Conservancy preservation group that it had refused to support landmark protection for the hotel's interiors during a meeting of representatives of both organisations.
"Anbang has never said it is opposed to landmark designation," spokesman Jeremy Soffin said in an email.
"We are committed to working cooperatively and collaboratively with the Landmarks Preservation Commission to achieve an outcome that respects and reinvigorates the Waldorf Astoria for the next 100 years."
The commission is the city agency responsible for protecting architecturally, culturally and historically significant buildings.
The Waldorf Astoria's Park Avenue property is scheduled to close in the spring for a multi-year retrofit that will probably see most of its rooms converted to luxury condos.
Those plans sparked concern among the city's preservationist groups. The Art Deco Society of New York posted a notice on its website headlined "Deco in Danger", warning that the hotel "would be gutted and turned into condos". The group invites readers to fill out a form to go directly to Meenakshi Srinivasan, chairwoman of the New York City Landmarks Commission, to demand that the panel quickly designate the areas for protection. The hotel's exterior is already designated a landmark, while its interiors aren't.
The Landmarks Conservancy and the Historic Districts Council also joined the fight. The conservancy wants to protect the hotel's famed Peacock Alley, a Louis Rigal mosaic in the foyer, the grand ballroom where Guy Lombardo's band used to play each New Year's Eve and the 18th floor Starlight Roof, where guests once danced under the stars.
Completed in October 1931, the 625-foot (191-metre) building was a pioneer in adapting the skyscraper form to hotel use, according to its 1993 landmark designation. The hotel welcomed every president since Herbert Hoover, who broadcast a welcoming message from the White House that was amplified throughout the building.
The US State Department, after decades of using the hotel as a home base for US diplomats during the United Nations General Assembly, last year shifted its operations to the nearby New York Palace Hotel following the Waldorf's acquisition by Anbang.