Strategic Hotels & Resorts, which owns the InterContinental and Fairmont hotels, was reportedly sold to Chinese company Anbang for $6.5 billion.
Tribune news services
10:53 pm, March 14, 2016
Blackstone Group agreed to sell Strategic Hotels & Resorts to China's Anbang Insurance Group for about $6.5 billion, just three months after it purchased the U.S. luxury-resort company, according to people with knowledge of the matter.
The price is about $450 million more than Blackstone paid for Strategic in December. The New York-based firm had been planning to sell individual properties in the portfolio before Anbang made a preemptive offer for the entire company, said the people, who asked not to be named because the transaction is private.
Christine Anderson, a spokeswoman for Blackstone, declined to comment, as did Philip Yee, a managing director at Anbang's North American unit.
The transaction marks a deeper push into U.S. hotels for Beijing-based Anbang, which last year purchased New York's landmark Waldorf Astoria. Strategic owns 16 properties across the U.S., including the Fairmont and InterContinental in Chicago, Four Seasons resorts in Scottsdale, Arizona, and Jackson Hole, Wyoming; the Ritz-Carltons Half Moon Bay and Laguna Niguel in California; San Diego's Hotel del Coronado; and Manhattan's JW Marriott Essex House.
Luxury and ultra-luxury properties have been among the most sought after lodging types in recent years, partly because their locations and construction costs make them hard to replace. Demand for trophy hotels remains strong even as the U.S. lodging industry faces the latter stages of a six-year recovery, with slowing growth in room rates and occupancy.
Chinese investors have been buying foreign properties amid slowing growth at home and a desire for the perceived safety and value of U.S. real estate. Anbang in February 2015 paid a record $1.95 billion for the Waldorf Astoria on Manhattan's Park Avenue. The seller was Hilton Worldwide Holdings Inc., which was majority owned by Blackstone at the time. Anbang also has purchased or agreed to buy office buildings in New York and Canada.
Also on Monday, Anbang presented a $14 billion buyout offer to the Starwood hotel chain, going toe-to-toe with U.S. hotel giant Marriott International Inc., which said late last year that it would buy Starwood, the owner of Sheraton, Westin and St. Regis hotels, in a deal worth $12.2 billion. That acquisition would create the world's largest hotel chain with 5,500 properties and more than 1.1 million rooms around the world. Such scale would give the combined company pricing power when negotiating commissions with online travel agencies such as Expedia and Priceline, as well as help it land more corporate travel contracts.
The next-largest hotel company is Hilton Worldwide with 4,500 properties and about 735,000 rooms.
Marriott and Starwood — like other hotel chains — own very few individual hotels. Instead they manage or franchise their brands to hundreds of individual owners, often real estate development companies. Those individual hotel owners are responsible for setting nightly room rates. It isn't uncommon for a developer to own a Marriott, Hilton, Hyatt and Sheraton in the same city. That's how Strategic, for instance, owned hotels under the Westin, JW Marriott, Ritz Carlton, Four Seasons and InterContinental brands.
Starwood Hotels & Resorts Worldwide Inc. said Monday that it still favors the Marriott deal, but that it's looking at the latest bid.
Company shares jumped almost 7 percent to a new high for the year.
The offer from the Chinese group includes $76 per Starwood share and Interval Leisure Group stock currently valued at about $5.50 per Starwood share. Starwood said that there are still "a number of matters" that need to be worked out in the group's proposal.
Asian companies have been acquiring U.S. properties because it is a relatively safe place to park money, particularly with signs of slowing economic growth in China.
Marriott, based in Bethesda, Maryland, said Monday that it stands behind its offer. Shareholders of Marriott and Starwood are expected to vote on that deal on March 28. If Starwood ends its agreement with Marriott or changes or withdraws its recommendation for shareholders to vote in favor of the Marriott transaction, Starwood would have to pay a $400 million termination fee.
Starwood essentially put itself up for sale last April. The company has struggled to grow as fast as its rivals, particularly in "limited service hotels," smaller properties which don't have restaurants or banquet halls. They are often located on the side of the highway, near airports or in suburban office parks. The deal with Marriott would help fill in many of those blank spots on the map where Marriott often has its Courtyard and Fairfield Inn brands.
However, outside the U.S. Starwood has been very active in growing its brand, especially in luxury hotels and in untapped markets such as China, India and the Middle East. For instance, after New York, the city with the most Starwood hotels is Dubai.
The deal making comes as the U.S. hotel industry comes off its best year in history. The percent of hotel rooms occupied and the average night room rate were both at all-time highs in 2015. Right after Starwood and Marriott announced plans to merge, French hotel chain Accor announced in December that it was buying the parent company of the Fairmont, Raffles and Swissotel hotel brands for $2.9 billion.
Starwood, based in Stamford, Connecticut, has almost 1,300 properties in about 100 countries. Its shares jumped more than 7 percent in Monday before the opening bell.