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.