Buyer’s remorse?: How Anbang’s $5.8B hotel deal went sideways

Buyer Mirae is now countersuing to save its $582M deposit

TRD NATIONAL /
May.May 22, 2020 05:00 PM
Anbang’s Andrew Miller, Mirae’s Peter Lee and (from left) JW Marriott Essex House, the Westin St. Francis in San Francisco and the Four Seasons in Jackson Hole (Credit: Marriott, Westin, Four Seasons)

Anbang’s Andrew Miller, Mirae’s Peter Lee and (from left) JW Marriott Essex House, the Westin St. Francis in San Francisco and the Four Seasons in Jackson Hole (Credit: Marriott, Westin, Four Seasons)

The saga of Anbang Insurance Group’s sale of its $5.8 billion U.S. hotel portfolio has yet another wrinkle.

The would-be buyer, South Korea’s Mirae Asset Global Investments, is now countersuing the entity in control of the Chinese insurer’s assets for the return of its $582 million deposit, accusing it of breach of contract and committing fraud.

It comes after Anbang slapped Mirae with a suit last month intended to get the court to enforce the purchase contract. Anbang claimed Mirae’s termination of the deal was “a classic case of buyer’s remorse” in the face of a global pandemic that frustrated its efforts to secure debt financing.

In a court hearing earlier in May, an attorney representing the insurer’s interest said that Mirae “bet that they could get better terms if they waited and waited and negotiated and negotiated. And, lo and behold, they bet big and they lost big.”

Mirae’s attorneys hit back with a complaint on May 20, accusing Anbang of deliberately concealing further ownership claims of the 15 hotels — problems stemming from a bizarre case of deed fraud that came to light in September.

The Korean investment firm claims in February it was ready to pay a $50 million non-refundable fee to lock in acquisition financing from a consortium led by Goldman Sachs, when the lender’s attorneys uncovered a series of trademark disputes between Anbang and several of the same parties named in the deed fraud case. The parties used alleged arbitration awards from these trademark cases to claim ownership of Anbang’s hotels.

Anbang claims it only learned of these actions in December, and by mid-January it obtained a default judgment that prevented any of the parties from making further ownership claims to any properties noted in the fraudulent filings.

But Mirae’s lengthy countersuit questions the authenticity of the ownership claims. It also put forward a theory connecting the entities claiming ownership of the hotels to former Anbang chairman Wu Xiaohui, who was jailed in 2018. Mirae’s claim that a “Chinese power play” could be behind the disputed deeds is based on an agreement that bears Wu’s signature. (Anbang’s attorneys had blamed the deed fraud scheme on an Uber driver in San Francisco, according to Mirae’s complaint.)

Anbang’s suit called the document in question a “fabrication” and, in court, its attorneys accused Mirae of “jumping into bed with a bunch of fraudsters” by suggesting its legitimacy.

Regardless of the validity of the scheme, Mirae claims that because it wasn’t informed of full scope of the disputed ownership issues the asset manager suffered “shock (and embarrassment)” and its lenders and title insurance companies “immediately pulled their commitment letter and demanded a full explanation.”

“[Mirae] had no indication that the issues plaguing [Anbang]’s ability to convey ownership of the properties ran much deeper than a lone Uber driver,” the complaint states. “[Anbang] gambled that it could conceal the [litigation] targeting the properties from the [Mirae], and force a quick closing on the transaction before [the litigation] would come to light and before the coronavirus pandemic decimated the hotel industry for years.”

There is also a significant part of Mirae’s claims of breach of contract that takes issue with recent management of the properties by Dajia Insurance Group, the company formed to manage Anbang’s assets after Chinese regulators took control of the insurer in 2018.

Mirae claims that Dajia’s halting operations at the15 hotels due to coronavirus constitutes a violation of the sales contract’s requirement for the properties.

Forced closures due to the virus have shuttered hotels across the country, and as a result occupancy has fallen off a cliff, while billions in loans have been sent to special servicing. Earlier this month, the $800 million sale of one of South Florida’s largest hotels was called off.

On May 8, Vice Chancellor J. Travis Laster granted Anbang’s motion to expedite the case, setting a trial date for later August.

Laster, who was also the judicial officer who issued the January default judgement against the entities claiming ownership of Anbang’s hotels, expressed skepticism during a hearing that Mirae could prove its allegations about the ownership claims.

“Those folks have vanished into the ether,” he said of Anbang.

“It may be because they never existed in the first place. It may be because they are fraudsters. It may be because they are somewhere in China. I don’t know. But it doesn’t seem to me that that’s going to be a wide-ranging source of discovery,” he said, noting that the case will likely rest on Mirae’s allegations of business interruption related to Covid-19.

It makes the disputed sale of Anbang’s hotels one of the most high profile court cases where the effect of the pandemic is a central issue. The three-day trial will start on Aug. 24.

Write to Erin Hudson at ekh@therealdeal.com


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