Chinese authorities unwinding Anbang Insurance have received offers of up to $5.8bn for the conglomerate’s US luxury hotels business from potential bidders including Blackstone and Brookfield, according to people familiar with the sales process.
Seventeen potential buyers, which also include South Korea’s Mirae Asset Management, SoftBank-owned Fortress, and GIC, Singapore’s sovereign wealth fund, have made it to a final round, these people said.
The sale of Chicago-based Strategic Hotels, one of Anbang’s most valuable assets in the US, comes after the insurer was placed under the control of Chinese regulators last year when its founder Wu Xiaohui was jailed for 18 years on fraud and embezzlement charges.
If Blackstone prevailed, it would cap a remarkable series of deals involving the US private equity firm, which bought Strategic Hotels in December 2015 for $6bn before selling it three months later to Anbang, initially for $6.5bn.
The 15 luxury hotels in the portfolio include the Fairmont Scottsdale, several Ritz-Carlton properties including those in Half Moon Bay near Silicon Valley, several Four Seasons hotels, the JW Marriott Essex House on Central Park South in NYC, the Intercontinental in Chicago and the Westin in San Francisco.
The offer range, with a gap of more than $1bn between the highest and lowest bids, suggests a wide range of opinion about the value of the properties and the complexity of the transaction. Some typical buyers of trophy assets, such as Middle Eastern sovereign wealth funds, did not participate. Bank of America is advising Anbang on the sale, which is now scheduled for this summer.
Uncertainty over the US economy is depressing the bids, as is the fact that assets that require heavy capital expenditure are out of favour, according to investors who decided not to bid. People familiar with the bidding said the earnings multiples were higher than that of comparable hotel groups.
Since last year, after Anbang was taken over by what is now the Chinese Banking and Insurance Regulatory Commission, management of Strategic has been in disarray.
In March of last year, David Hogin, the chief operating officer of Strategic, wrote to Anbang requesting approval for the 2018 budget, according to a letter seen by the Financial Times. “Given all the recent turmoil within our parent company, it is critically important that we communicate with [employees] that their salaries and benefits are proceeding in accordance with prior practice,” he wrote.
The price Anbang originally paid to Blackstone was reduced by just over $1bn to about $5.5bn after US regulators barred the Chinese group from purchasing Hotel del Coronado in San Diego as part of the original deal, on the grounds that the hotel was close to a US naval base.
Meanwhile, Anbang-owned Waldorf Astoria Hotel in New York, which is not part of Strategic, remains shuttered while part of it is converted to apartments, even as that part of the real estate market in the city has softened dramatically.
Bankers that lent to another Anbang property, high-end condominiums at 100 East 53rd Street, just a few blocks from the Waldorf, recently classified the loan as non-performing.
Before Mr Wu’s arrest, Anbang controlled 58 companies directly or indirectly with Rmb2tn ($290bn) in assets, according to estimates from UBS.