Anbang Insurance Group Co’s (安邦保險集團) US$6.5 billion agreement to buy 16 US luxury resorts and hotels from the Blackstone Group LP marks a record transaction for Chinese buyers of US real estate, showing the strong appetite for high-profile properties viewed as stable investments.
The pending acquisition of Strategic Hotels & Resorts Inc is to give Anbang ownership of trophy properties across the country, including urban hotels and mountain, desert and ocean resorts.
It tops the Beijing-based insurer’s US$1.95 billion purchase last year of landmark hotel Waldorf Astoria New York as the biggest US real-estate deal by a Chinese buyer, according to data from Real Capital Analytics Inc.
Blackstone, which completed its acquisition of Strategic Hotels just three months ago, had been seeking buyers for individual properties in the portfolio when Anbang offered to purchase the entire company, people with knowledge of the matter said.
The Chinese company agreed to pay US$450 million more than the roughly US$6 billion that Blackstone paid, including debt, said the people, who asked not to be identified, because the deal is private.
“It’s a great long-term play for Anbang and a good short-term move by Blackstone,” said Sonny Kalsi, a founder and partner of GreenOak Real Estate, a private equity firm that manages more than US$6 billion. “A true win-win.”
Blackstone spokeswoman Christine Anderson declined to comment on the deal, as did Philip Yee, a managing director at Anbang’s North American unit.
The Strategic Hotels properties include Ritz-Carlton Hotel Co LLC’s Half-Moon Bay and Laguna Niguel in California; the Montage Hotel Resort in Laguna Beach, California; Four Seasons hotels in Austin, Texas, Silicon Valley and Washington; and InterContinental hotels in Chicago and Miami.
It also includes the Hotel del Coronado, an oceanfront resort near San Diego that was featured in the 1959 movie Some Like It Hot with Marilyn Monroe, Jack Lemmon and Tony Curtis. Blackstone had invested in the property in 2011 before selling its shareholding to Strategic about three years later.
Another property is JW Marriott Hotels & Resorts’ New York Essex House, the Manhattan hotel near Central Park known for the red-lettered sign on its roof. Strategic’s predecessor company bought the hotel in 1999 from Japan Airlines Co amid a wave of Asian investors unloading trophy hotels they had bought during stronger economic times back home.
Strategic later sold the hotel in 2005 to Dubai Group, which then resold it to a group including Strategic in 2012.
The purchase shows lodging deals are picking up from a sluggish start this year.
Hotel transactions “could surprise to the high side” this year, real-estate investment bank Eastdil Secured managing director Louis Stervinou said during a January panel discussion at the Americas Lodging Investment Summit in Los Angeles.
Hotel revenue per available room in the US is projected to slow to about 5 percent growth this year, from 6.3 percent last year and 8.1 percent in 2014, according to STR, an industry research company.
Rising construction in some cities, including New York, the third-largest US hotel market after Las Vegas and Orlando, Florida, has caused revenue per available room to decline in recent months.
Beyond acquiring the Waldorf Astoria, Anbang has also struck deals to buy office properties in New York and Canada, and to acquire Delta Lloyd Bank NV’s Belgian banking unit, while also investing in insurers in South Korea and Belgium.
In November last year, it agreed to buy Fidelity & Guaranty Life in the US.
Foreign investors have been betting on US real estate as a safe place to park money while earning higher yields than they might in alternative investments with a similar amount of risk.
They are attracted to the steady gains in the US economy as growth in China is slowing, and prestige buildings in major North American markets have been a big draw.
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