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Pandemic Might Put The Kibosh On Anbang's $5.8B Hotel Portfolio Sale

The perilous state of the hospitality industry might doom plans by Anbang Insurance Group to sell 15 U.S. luxury hotels to Mirae Asset Global Investments Co., a South Korean investor. Anbang, now formally known as Dajia Insurance, had anticipated selling the properties for $5.8B.

Loews Santa Monica, one of the hotels Anbang is trying to sell.

Lenders are getting cold feet, however. A group led by Goldman Sachs Group hasn't seen enough investor demand for $4B in CMBS that would finance the deal, Bloomberg reports, citing sources close to the transaction, who gave the impact of the novel coronavirus on hospitality as the reason.

Negotiations are underway to secure bridge financing to save the deal at least temporarily, but it isn't clear whether that is going to work either, the same sources said, leaving the possibility open that the entire deal will the scrapped.

The sale has been in the works since September. Anbang acquired the hotels when it bought Strategic Hotels & Resorts for $6.5B in 2016. That was part of a wave of Chinese investment in U.S. commercial real estate during the mid-2010s that later reversed.

The deal might have closed sooner, but for an unusual snag: Anbang reportedly discovered that ownership of some of the hotels was fraudulently transferred to an anonymous LLC, a situation that took some time to rectify.

In 2018, the Chinese government seized Anbang after its chairman was arrested and charged with corruption, and put the portfolio and other assets up for sale. By early this year, Anbang had become Dijia, and had been transferred to private ownership.

The portfolio includes the JW Marriott Essex House in New York, Loews Santa Monica Beach Hotel, Four Seasons Silicon Valley and the Four Seasons in Jackson Hole, Wyoming.

The U.S. hotel industry has seen steep slides in its most important metrics just since the beginning of March. Occupancy nationwide during the first week of March 2020 was down 7.3 percentage points compared with the same week in 2019, to 61.8%, hotel data specialist STR reported on March 11.

Average daily rate for the week likewise dropped compared with last year, down 4.6% to $126.01. Revenue per available room was off year-over-year by 11.6%, down to $77.82.

Hotels in large convention markets are being pummeled, as conventions large and small cancel because of the pandemic. On Friday, for example, the International Council of Shopping Centers postponed its annual RECon event, one of the largest shows in Las Vegas, at least through June 30.

That is on top of the previous cancellation of 17 Las Vegas conferences that would have brought as many as 290,000 people to town, the Las Vegas Review Journal reports. Other events that bring people to town, and fill hotel rooms, are being canceled as well, including concerts, sporting events and shows.

Similarly large events are being canceled in New York, Chicago, Los Angeles and other markets. Air travel is likewise down, further taking a bite out of the demand for hotel rooms.