Saturday 17 March 2018

Iconic Waldorf Astoria in Blackstone's sights again

Blackstone could take advantage of Anbang’s distress to secure ownership of the Waldorf Astoria for a second time
Blackstone could take advantage of Anbang’s distress to secure ownership of the Waldorf Astoria for a second time

Bloomberg News

Blackstone Group LP, which scored big four years ago when a company it owned sold New York's Waldorf Astoria hotel for a record-setting price to a little-known Chinese insurer, may soon get a chance to own the iconic landmark again.

The US private equity firm has held initial discussions about bidding for Anbang Insurance Group Co assets in a sale overseen by the Chinese government, people with knowledge of the matter said. The assets include the Waldorf as well as Strategic Hotels & Resorts Inc, which Blackstone sold to Anbang in 2016, said the people.

Blackstone's deliberations are at an early stage and the firm could refrain from bidding for any assets, one person said.

Anbang is among a crop of Chinese serial acquirers that spent tens of billions of dollars snapping up trophy assets over the past few years, only to lurch into turmoil once their strategies backfired. Blackstone was one of the biggest beneficiaries of Anbang's largesse, selling at least a combined $9.5bn of assets to the insurer, data compiled by Bloomberg show.

China's government has cracked down on its most prolific dealmakers, bringing their overseas acquisitions to a screeching halt. Anbang's chairman Wu Xiaohui was detained by authorities in June and a working team that included China's insurance regulator was subsequently dispatched to Anbang to oversee the company's operations and ensure its stability, people familiar with the matter said in January.

In addition, the government is seeking to broker the sale of a stake in the insurer.

Last year, China asked the insurer to sell its overseas assets, people with knowledge of the matter said, an account that Anbang and regulators disputed at the time. An Anbang representative reiterated on Monday that the company doesn't have plans to sell its overseas assets.

Charlotte Bilney, a Hong Kong-based spokeswoman for Blackstone, declined to comment.

The China Insurance Regulatory Commission didn't immediately return a request seeking comment.

Record deal

Anbang acquired the Waldorf for $1.95bn from Hilton Worldwide Holdings Inc, the highest price for a single existing US hotel, translating into a huge windfall for Blackstone - then the majority owner of Hilton.

The hotel company was approached by Anbang and two other potential buyers before the property was officially up for sale, a person with knowledge of the process said at the time. Blackstone executive Tyler Henritze worked on the transaction, Bloomberg News reported in 2015.

Less than two years later, Blackstone sold its stake in Hilton to HNA Group Co, another Chinese mega-acquirer which is now trying to offload assets to alleviate financial pressures.

In 2016, Blackstone agreed to sell Strategic Hotels to Anbang for about $6.5bn, about $450m more than what it paid for the US luxury-resort company just a few months earlier.

Blackstone can point to other China connections too: China's sovereign wealth fund invested in the private equity firm's 2007 initial public offering, and last year purchased Blackstone's European logistics property business Logicor for $13.8bn.

Anbang also acquired the office portion of 717 Fifth Avenue in New York from Blackstone in 2015, months after its Waldorf purchase. That building, located at the corner of 56th Street in Midtown's Plaza district, serves as Anbang's US headquarters.

Blackstone's winning formula in Europe

Even as many property investors were shunning Portugal during its bailout years, the Blackstone Group LP was buying.

The New York-based private equity firm began shopping for malls in 2013 and that bet is now paying off: it agreed last month to sell three shopping centres around Lisbon to Groupe Auchan SA. It's currently completing the sale of a fourth mall to Spain's Merlin Properties Socimi SA for as much as €450m, about twice the amount it paid, according to people with knowledge of the matter.

"Some funds that bought shopping centres during the crisis at a discount are now selling these assets to other foreign funds as the economy recovers," said Pedro Coelho, chief executive officer of Lisbon-based Square Asset Management, which has about €1bn in real estate investments.

"It was a calculated risk, but it was still a risk. Now it's a more core investment with less risk and less return."

After Portugal sought a bailout in 2011, several mall operators struggled with sales amid a recession and an unemployment rate that peaked at 17.5pc in 2013.

It was then that Blackstone began acquiring the first of four malls on the outskirts of Lisbon. A few years later, when the economy started to show signs of a solid recovery, other funds followed suit.

Portugal's economy expanded an estimated 2.6pc in 2017, the fastest growth since 2000. Unemployment dropped to 7.8pc in December, the lowest since 2004, according to Eurostat.

The year has barely begun and deals or possible transactions involving malls have already surpassed €1bn, more than the total invested in 2017, according to Cushman & Wakefield. Broker Jones Lang LaSalle forecasts investment in commercial real estate in Portugal will reach a record €2.5bn this year, up from €1.9bn in 2017.

In January, Paris-based AXA Investment Managers-Real Assets acquired the Dolce Vita Tejo mall for €230m from Baupost and the Eurofund Group. They'd paid €170m for the property two years earlier.

With additional reporting by Henrique Almeida

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