News

Chinese firm makes bid for Palo Alto, East Palo Alto hotel brands

Acquisitions would include Four Seasons hotel and brands for Westin and Sheraton hotels

A Chinese insurance company is purchasing the company that owns the Four Seasons Hotel in East Palo Alto and could soon be buying the Starwood Hotels & Resorts, which owns the Westin and Sheraton brands, according to news reports by Bloomberg News.

The purchase would not affect the buildings, employees or services at the Palo Alto Westin and Sheraton on El Camino Real, which are privately owned hotels but which franchise the hotel names.

The estimated $13 billion deal by Beijing-based Anbang Insurance Group for Starwood Hotels & Resorts would top the company's already history-making real estate acquisition of Strategic Hotels & Resorts, Inc., which owns 16 luxury properties including the Four Seasons Hotel Silicon Valley in East Palo Alto and the Ritz-Carlton Half Moon Bay.

The $76-a-share, all-cash deal for Starwood, which Anbang made on Monday, could de-throne a bid made by Marriott International Inc. last November. Anbang reportedly joined with investors, including private equity firm J.C. Flowers and Co., to outbid Marriott. That company's shareholders were scheduled to vote on and were expected to approve the deal in two weeks, according to Bloomberg. Starwood's portfolio includes the Westin, W, Sheraton and St. Regis brands.

The surprise bid came just one day after Anbang reportedly agreed over the weekend to purchase Strategic Hotels & Resorts, Inc., a company that is owned by Blackstone Group LP, a New York-based equity firm. The $6.5 billion deal would be the largest U.S. real estate purchase by a company from China in history, according to Bloomberg, which first reported on the Strategic Hotels acquisition.

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Blackstone purchases high-quality investments at discounts, improves the properties through management and added-value additions, then sells the properties, according to the company's website. The company planned to individually sell off the 16 hotels in the Strategic Hotels portfolio prior to the Anbang offer, Bloomberg reported.

Anbang, Starwood and Blackstone did not return requests for comment.

Allison Tan, spokeswoman for Four Seasons Hotel Silicon Valley, said the hotel could not comment on the reports, but an announcement of any deal could come in the next couple of weeks.

Clement Chen, whose family owns the hotel buildings in Palo Alto for both Westin and Sheraton, said that all management, employees and quality of services would not be affected by the sale. His family leases the franchise from Starwood for the hotel names. Any buyer, whether Marriott or Anbang or another purchaser, would get their franchise fees, but not the buildings.

"Most big hotel companies have shifted away from the overall strategy of owning buildings. They get royalty fees or will manage for other owners," he told the Palo Alto Weekly.

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The potential sale to Marriott came as a surprise when it was announced in November, he said.

"Starwood has stumbled a bit in recent years and their stocks took a beating," Chen said. But a purchase by Marriott was viewed favorably by his family, and he voted in favor of the deal as a stockholder, he said.

The deal is up for a vote on March 28, but Starwood prudently kept its options open.

"Then this Chinese company lobbed in a last-minute deal," he said.

Privately held Anbang is owned by Wu Xiaohui, who is married to the granddaughter of former People's Republic of China leader Deng Xiaoping, according to news reports. The company purchased New York's Waldorf Astoria last year for nearly $2 billion.

The acquisitions are part of a growing trend among Chinese investors to purchase real estate of all kinds.

"A number of mainland Chinese companies have a gigantic amount of cash. It's really hard to comprehend," Chen said.

Since the Chinese economy has slowed, the country's investors have been on a buying spree. From January 2005 to March 2014, Chinese investors made direct acquisitions of $8.5 billion in the U.S. commercial real estate market, according to a report by the Deloitte Center for Financial Services. Of that amount, $5.8 billion was invested in the 15-month period of January 2013 to March 2014.

CORRECTION: This story has been corrected. The initial version said that the Palo Alto Westin and Sheraton were part of the potential Starwood sale. Rather, both local hotels are privately owned; as franchises, they use the hotel names but are not owned by the Starwood corporation. The Palo Alto Weekly apologizes for the error.

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Chinese firm makes bid for Palo Alto, East Palo Alto hotel brands

Acquisitions would include Four Seasons hotel and brands for Westin and Sheraton hotels

by / Palo Alto Weekly

Uploaded: Mon, Mar 14, 2016, 4:36 pm
Updated: Tue, Mar 15, 2016, 4:45 pm

A Chinese insurance company is purchasing the company that owns the Four Seasons Hotel in East Palo Alto and could soon be buying the Starwood Hotels & Resorts, which owns the Westin and Sheraton brands, according to news reports by Bloomberg News.

The purchase would not affect the buildings, employees or services at the Palo Alto Westin and Sheraton on El Camino Real, which are privately owned hotels but which franchise the hotel names.

The estimated $13 billion deal by Beijing-based Anbang Insurance Group for Starwood Hotels & Resorts would top the company's already history-making real estate acquisition of Strategic Hotels & Resorts, Inc., which owns 16 luxury properties including the Four Seasons Hotel Silicon Valley in East Palo Alto and the Ritz-Carlton Half Moon Bay.

The $76-a-share, all-cash deal for Starwood, which Anbang made on Monday, could de-throne a bid made by Marriott International Inc. last November. Anbang reportedly joined with investors, including private equity firm J.C. Flowers and Co., to outbid Marriott. That company's shareholders were scheduled to vote on and were expected to approve the deal in two weeks, according to Bloomberg. Starwood's portfolio includes the Westin, W, Sheraton and St. Regis brands.

The surprise bid came just one day after Anbang reportedly agreed over the weekend to purchase Strategic Hotels & Resorts, Inc., a company that is owned by Blackstone Group LP, a New York-based equity firm. The $6.5 billion deal would be the largest U.S. real estate purchase by a company from China in history, according to Bloomberg, which first reported on the Strategic Hotels acquisition.

Blackstone purchases high-quality investments at discounts, improves the properties through management and added-value additions, then sells the properties, according to the company's website. The company planned to individually sell off the 16 hotels in the Strategic Hotels portfolio prior to the Anbang offer, Bloomberg reported.

Anbang, Starwood and Blackstone did not return requests for comment.

Allison Tan, spokeswoman for Four Seasons Hotel Silicon Valley, said the hotel could not comment on the reports, but an announcement of any deal could come in the next couple of weeks.

Clement Chen, whose family owns the hotel buildings in Palo Alto for both Westin and Sheraton, said that all management, employees and quality of services would not be affected by the sale. His family leases the franchise from Starwood for the hotel names. Any buyer, whether Marriott or Anbang or another purchaser, would get their franchise fees, but not the buildings.

"Most big hotel companies have shifted away from the overall strategy of owning buildings. They get royalty fees or will manage for other owners," he told the Palo Alto Weekly.

The potential sale to Marriott came as a surprise when it was announced in November, he said.

"Starwood has stumbled a bit in recent years and their stocks took a beating," Chen said. But a purchase by Marriott was viewed favorably by his family, and he voted in favor of the deal as a stockholder, he said.

The deal is up for a vote on March 28, but Starwood prudently kept its options open.

"Then this Chinese company lobbed in a last-minute deal," he said.

Privately held Anbang is owned by Wu Xiaohui, who is married to the granddaughter of former People's Republic of China leader Deng Xiaoping, according to news reports. The company purchased New York's Waldorf Astoria last year for nearly $2 billion.

The acquisitions are part of a growing trend among Chinese investors to purchase real estate of all kinds.

"A number of mainland Chinese companies have a gigantic amount of cash. It's really hard to comprehend," Chen said.

Since the Chinese economy has slowed, the country's investors have been on a buying spree. From January 2005 to March 2014, Chinese investors made direct acquisitions of $8.5 billion in the U.S. commercial real estate market, according to a report by the Deloitte Center for Financial Services. Of that amount, $5.8 billion was invested in the 15-month period of January 2013 to March 2014.

CORRECTION: This story has been corrected. The initial version said that the Palo Alto Westin and Sheraton were part of the potential Starwood sale. Rather, both local hotels are privately owned; as franchises, they use the hotel names but are not owned by the Starwood corporation. The Palo Alto Weekly apologizes for the error.

Comments

BP
Barron Park
on Mar 14, 2016 at 11:23 pm
BP , Barron Park
on Mar 14, 2016 at 11:23 pm
39 people like this

just what palo alto needs. might as well as rename the town.


AlexDeLarge
Midtown
on Mar 15, 2016 at 12:03 am
AlexDeLarge, Midtown
on Mar 15, 2016 at 12:03 am
8 people like this

Hahahahahahaha. Priceless...


Resident
South of Midtown
on Mar 15, 2016 at 6:39 am
Resident, South of Midtown
on Mar 15, 2016 at 6:39 am
11 people like this

They are actually doing in response to Trump. I am not kidding. The nation is approaching a conflagration and we're about to feel it in Palo Alto. I suspect the bubble may soon burst... we won't remain a sheltered, silver spoon town for long...


Bronx Cheer
Another Palo Alto neighborhood
on Mar 15, 2016 at 9:45 am
Bronx Cheer, Another Palo Alto neighborhood
on Mar 15, 2016 at 9:45 am
37 people like this

This is awful news. China likes to think it is "conquering" America through economic war and invasion.

Sure looks like they are winning.


Ralph
Registered user
University South
on Mar 15, 2016 at 11:05 am
Ralph, University South
Registered user
on Mar 15, 2016 at 11:05 am
22 people like this

Wrong...wrong...wrong....the Sheraton and Westin hotels in Palo Alto are not owned by Starwood and therefore would not be part of any purchase of Starwood Hotels by anyone. The Sheraton and Westin are owned by Pacific Hotel Management and have franchise agreements with Starwood. As many people in the community know, that company is owned by a local family, the Chen's, who have been very philanthropic in Palo Alto and Stanford University since the mid 70's.


OldPA Resident
Registered user
Old Palo Alto
on Mar 15, 2016 at 11:21 am
OldPA Resident, Old Palo Alto
Registered user
on Mar 15, 2016 at 11:21 am
10 people like this

Does anyone remember when Japan was in its economic ascendancy and Japanese companies purchase Rockefeller Center and Pebble Beach in the 1990's? Those investments didn't work out well. Let's revisit these purchases by Chinese companies a few years hence.


1drin
Registered user
Charleston Meadows
on Mar 15, 2016 at 1:02 pm
1drin, Charleston Meadows
Registered user
on Mar 15, 2016 at 1:02 pm
2 people like this

As much as I detest loons like Trump and Cruz, it's news like this that get voters to their side.


1drin
Registered user
Charleston Meadows
on Mar 15, 2016 at 1:02 pm
1drin, Charleston Meadows
Registered user
on Mar 15, 2016 at 1:02 pm
Like this comment

As much as I detest loons like Trump and Cruz, it's news like this that get voters to their side.


Clement Chen
Registered user
Another Palo Alto neighborhood
on Mar 15, 2016 at 3:29 pm
Clement Chen, Another Palo Alto neighborhood
Registered user
on Mar 15, 2016 at 3:29 pm
13 people like this

Many thanks to Ralph for clarifying the ownership of the Sheraton Palo Alto Hotel and The Westin Palo Alto!

Starwood owns the Sheraton and Westin names/brands, but not these hotels. (Starwood does own some hotels elsewhere.) The Sheraton Palo Alto (which my father built as the Holiday Inn in 1973) and The Westin Palo Alto (which I built in 2000) pay franchise fees (and other fees) to Starwood for the right to use the Sheraton and Westin names and to be members of the brands. This franchise structure is similar to other business such as restaurants (fast food, pizza, frozen yogurt, etc.), printing, cleaning services, The UPS Store, and many others.

In the case of the Sheraton Palo Alto Hotel and The Westin Palo Alto, Marriott and Anbang Insurance are vying for the right to receive the franchise fees. Unlike Anbang's other deal to purchase Strategic Hotels and Resorts, they would not purchase the Sheraton Palo Alto Hotel or The Westin Palo Alto, nor become the employer of the staff - as Ralph noted, my family's hotel management company, Pacific Hotel Management, LLC operates and will continue to operate the hotels and employ the staff, and two other family entities own and will continue to own the actual buildings, furniture, silverware, etc.

That said, it is indeed notable that a mainland Chinese company is making a credible offer to acquire a major hotel company. I would not have foreseen this possibility 20 years ago.

Clement Chen


Jocelyn Dong
Registered user
editor of the Palo Alto Weekly
on Mar 15, 2016 at 5:07 pm
Jocelyn Dong, editor of the Palo Alto Weekly
Registered user
on Mar 15, 2016 at 5:07 pm
2 people like this

The Weekly would like to apologize for the inaccurate information in the initial article about the ownership of the Palo Alto Westin and Sheraton hotels. It has now been corrected.

Thank you, Clement Chen, for speaking with reporter Sue Dremann and explaining the ownership structure. We regret the error.


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