(Pictured: Ritz-Carlton Laguna Niguel)
The Chinese government is trying to unload 15 U.S. properties, including the Ritz-Carlton Half Moon Bay and the Four Seasons Resort Jackson Hole, that it took ownership of after seizing a failed insurance company. It thought it had a buyer, for $5.8 billion, but now a dispute over the properties’ titles and current operating conditions has ended up in court, and the buyer may be prepared to walk away from its reported $500 million deposit.
The Chinese government is trying to unload 15 U.S. luxury resorts, including six in California, that it took ownership of after seizing a failed insurance company, Anbang Insurance Group Co., two years ago, the Orange County Register reported.
In September 2019, Mirae Asset Global Investments, part of a South Korean financial services company, was willing to pay more than $5.8 billion for the resort collection, which includes the Ritz-Carlton Half Moon Bay (Calif.) and the Four Seasons Resort Jackson Hole in Wyoming, in addition to several other properties under those brands as well as Loews, Montage, Westin and InterContinental locations.
The deal was supposed to close in mid-April, even after questions swirled about ownership technicalities for some of the properties, amid reports that fake deeds had been created for them. But Mirae Asset Global Investments then said it was walking away from the deal, claiming the sellers didn’t execute as promised.
That led Dajia Insurance Co.—the new holding created by the Chinese to take over Anbang’s operations—to insist that a deal is a deal, the Register reported. Dajia went to federal court in Delaware to force the Koreans to buy, and on May 10th, according to Law360, a judge ruled the seller’s case is good enough that there should be a trial starting in late August, rejecting arguments from Mirae’s attorneys that it would need until early 2021 to prepare for a trial.
Mirae now contends that Dajia failed to produce clear titles for some of the properties it agreed to buy, Law360 reported, and also that it violated a purchase agreement requiring that all of the properties by operating in the “ordinary course” at the closing, which was originally set for April 17.
Dajia countered those charged by accusing Mirae of “getting into bed with fraudsters,” Law360 reported, in an attempt to avoid closing after the global pandemic disrupted the travel and hospitality market, as well as to take advantage of opportunities for lower-cost financing of the deal. Dajai also claimed that, despite hotel closings and employee layoffs caused by the pandemic, the properties still comply with sale terms and have clear titles.
This latest case of owners and buyers playing “hot potato” with a luxury resort property during economic difficulties is reminiscent, the Register reported, of a situation during the Great Recession of 2008-09, when nobody seemed to want to own what was then the St. Regis-branded resort in Dana Point, Calif. In that period, the tourism business went dead as the global economy crashed after a scary financial market meltdown.
The blufftop resort, across the Pacific Coast Highway from the ocean, was built for upwards of $240 million in 2001, the Register reported. But by 2009, the owners could no longer afford $300 million in mortgages.
A foreclosure was in the works, but the main lenders didn’t want to repossess the practically empty hotel, the Register reported. In 2010, control of the resort was acquired by one of its secondary debt holders, Washington Holdings of Seattle, Wash.. At the time, the hotel’s value was seen as low as $100 million.
Washington Holdings sold what today is known as the Monarch Beach Resort to Denver-based KSL Capital Partners for $317 million in 2014, the Register reported. And last October, KSL resold it to Ohana Real Estate Investors for $497 million.
Now again, the Register reported, not wanting anything to do with luxury resorts has become the case in 2020.
The 15-property tussle involving Dajai and Mirae “is just one of many deals that buyers have walked away from [since the coronavirus outbreak],” analyst Alan Reay at Atlas Hospitality told the Register. The legal battle is now over the buyer’s huge deposit, reportedly in the $500 million ballpark, Reay added, and it may come down to the suitor deciding it’s better to lose that kind of money rather than go through with the deal.