NEW YORK CITY—The sale on Monday of the world famous Waldorf-Astoria New York—which became a launching pad for a global brand of hotel properties—to Chinese investors underscores the interest that Asia-based investors have in the US generally, and in New York in particular, according to several analysts.
“This transaction represents the highest price ever paid for a single hotel asset in the United States, and the most paid for a standing building by a Chinese investor," Kevin Mallory, global head of CBRE Hotels, tells GlobeSt.com. "New regulations allow Chinese insurers to invest up to 15% of their assets in non-self-use real estate. With over $1.2 trillion in assets, the recent regulatory change allows for significant allocations of capital to the real estate sector. Most insurance funds allocate approximately 6% of their investment funds to real estate of which 20% could typically be invested off-shore. These rather significant allocations, combined with the opportunity to invest at better risk adjusted yields thank can be achieved domestically will result in an acceleration of off-shore investments like the Waldorf.”
In US commercial real estate overall—investment in 2014 by Asian investors is expected to surpass 2013 levels, according to a CBRE report. In fact, the Waldorf-Astoria sale already puts Asian investment in NYC CRE this year ahead of all investment from the continent for all of last year. Nationwide, hotel transactions by Asian investors thus far in 2014 also have surpassed volumes for all of 2013.
Additionally, the Carlton Group tells GlobeSt.com that during a 10-day tour of China just last month, COO Kevin Swill saw “a significant increase in demand from Chinese investors seeking to invest and own New York City real estate.”
Mark Gordon, managing partner of Tribeca Associates—a local firm that developed the Baccarat Hotel & Residences on West 53rd street—tells GlobeSt.com, "We've seen a very significant increase in demand over the past 18 months from Chinese investors who want to own New York real estate.”
Anbang Insurance Group Co. Ltd purchased the iconic hotel from Hilton for a record-shattering $1.95 billion. The price breaks down to approximately $1.4 million per room key, notes Crain's New York Business. The astronomical price also allows the Blackstone Group to recoup nearly all of its costs when it first purchased Hilton back in 2007, industry sources note.
Hilton signed on with Anbang to continue managing the property for an entire century more, and an extensive renovation of the storied—but arguably tired—hotel is planned.
Hilton Worldwide intends to use the proceeds from the sale to acquire additional hotel assets in the US. in one or more transactions as part of a like-kind exchange under Internal Revenue regulations. The hotelier did not reveal what properties would be acquired or a timeline for such transactions.
“We are very excited to be entering into this long-term relationship with Anbang, which will ensure that the Waldorf Astoria New York represents the brand's world-class standards for generations to come. This relationship represents a unique opportunity for our companies to work together to finally maximize the full value of this iconic asset on a full city block in midtown Manhattan,” says Christopher J. Nassetta, president and CEO, Hilton Worldwide.
The Waldorf Astoria New York was famously called “The Greatest of Them All” by Hilton Worldwide's founder Conrad Hilton. It is an Art Deco masterpiece and has been an internationally recognized symbol of elegance and grace for more than a century. The hotel features several restaurants that are famous in their own right—including Peacock Alley, Bull and Bear Prime Steakhouse and Oscar's—bustling lounges and bars, the Guerlain Spa, more than 60,000 square feet of function space and several boutiques.
The Waldorf Astoria New York is the flagship hotel of Hilton Worldwide's rapidly-expanding luxury brand, Waldorf Astoria Hotels & Resorts. Since 2007, the brand has increased its footprint more than five times to a portfolio of 27 landmark destinations, including Amsterdam, Beijing, Chicago, Dubai, Jerusalem, Ras Al Khaimah and Shanghai. Its pipeline of nine additional hotels includes key destinations such as Bali, Bangkok and Beverly Hills.
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Rayna Katz
Rayna Katz is a seasoned business journalist whose extensive experience includes coverage of the lodging sector, travel and the culinary space. She was most recently content director for a business-to-business publisher, overseeing four publications. While at Meeting News, a travel trade publication, she received a Best Reporting award for a story on meeting cancellations in New Orleans during Hurricane Katrina.
