Blackstone has stopped the sale of its remaining hotel in the Strategic Hotels & Resorts portfolio that Anbang Insurance Group agreed to buy in March for $6.5 billion.
The alternative asset manager will keep the Hotel del Coronado instead, according to sources familiar with the matter, after the US government raised questions about security issues for the property. Located outside of San Diego near a US Naval base, the hotel was under review by the Committee on Foreign Investment in the United States (CIFIUS), a group within the Treasury Department that screens US acquisitions by foreigners for security risks.
A spokeswoman for Blackstone declined to comment on the deal, and Anbang could not be reached.
The hotel is one of the most valuable of the 16 hotels that comprise Strategic Hotels & Resorts’ portfolio. Beijing-based Anbang completed the acquisition of the other 15 hotels last month, PERE previously reported. The finalized sale included the portfolio’s most expensive property, San Francisco’s Westin St. Francis, which Anbang bought for $1.1 billion, according to data provider Real Capital Analytics (RCA).
Blackstone was set to sell the Hotel del Coronado, a 757-unit hotel set on 28 acres, for $777.5 million, according to RCA. When CIFIUS began asking questions, however, the firm decided to back out.
“It’s a great asset that we have no problem continuing to own,” said a Blackstone source familiar with the deal.
Anbang agreed to buy Strategic Hotels & Resorts only three months after Blackstone acquired it at a total transaction value of $6 billion via its $15.8 billion Blackstone Real Estate Partners VIII fund. That opportunistic vehicle had a 19 percent net internal rate of return as of June 30, according to the company’s second quarter earnings report.
Anbang was also responsible for the then-largest acquisition of a US property asset by a Chinese company back in 2014, when it acquired the iconic Waldorf Astoria hotel from the Hilton Group for around $1.95 billion. US presidents have traditionally stayed at the New York hotel, but after Anbang’s purchase, President Barack Obama lodged elsewhere in his visits to the city, citing security concerns.