In wake of Anbang acquisition, Santa Monica wants to force hotels to disclose ownership
As Los Angeles officials focused on legislation that could ease the region’s housing shortage Wednesday, council members in beachy Santa Monica focused on protecting the city’s profitable stock of hotel rooms.
The Santa Monica City Council voted unanimously to have its lawyers draft legislation that would force hotels in the city to disclose their ownership, as concerns rise over foreign money entering the hospitality business. The lawyers will also investigate ways to keep hotels from being converted to other uses, the Los Angeles Times reported.
The vote followed complaints voiced by hospitality labor union leaders when China’s Anbang Insurance Group purchased the Loews Santa Monica Beach Hotel last year, as part of its $6.5 billion purchase of Strategic Hotels and Resorts Inc. from Blackstone.
The Chinese insurance giant is converting most of the Waldorf Astoria in New York, which it bought for almost $2 billion in 2014, into condos. Santa Monica’s powerful Unite Here Local 11 union — which is in the midst of contract negotiations with 250 workers at the Loews hotel — hopes to prevent the beachside resort from undergoing a similar conversion.
“Anbang’s willingness to pay much more than the previous owner for the properties heightens our concern that Anbang may be seeking an alternative use for some or all of the hotels,” Unite here said in a letter to Anbang’s managing director Philip Yee, which was obtained by the Santa Monica Daily Press. “Any conversion – either partial or full – would have a significant impact on the number and quality of jobs at the hotel.”
Council member Kevin McKeown proposed the disclosure motion with the support of Unite Here, claiming the city would lose jobs and revenue from its 14 percent occupancy tax to the conversion.
Consultant Alan Reay of Atlas Hospitality Group told the L.A. Times that a conversion would make financial sense in theory, but an attempt to jump through regulatory hoops and win over local opposition could be a losing battle.
“I just don’t see it going through,” he said.
Anbang has faced a series of setbacks that have stalled its rapid-fire investments. Anbang chairman Wu Xiaohui turned over his duties earlier this month for “personal reasons” amid claims that he had been detained by Chinese authorities. Chinese banks were then told to stop doing business with the company.
Earlier this year, Anbang backed out of negotiations to redevelop Kushner Companies’ 666 Fifth Avenue in New York due to conflict of interest concerns. It also dropped its $13 billion-plus bid last year to acquire Starwood Hotels and Resorts following scrutiny from regulators over its operating and ownership structure, and a bidding war with Marriott International.
Supporters of the disclosure legislation have cited some of these events as proof of the need for transparency.
“Anbang is a local example of the murky ownership and the sources of capital,” Danielle Wilson, a representative of Unite Here, told the council during the Tuesday night meeting, which stretched into the wee hours of Wednesday morning, according to the Times.
This is not the first time Unite Here has come out against a Chinese company’s plans for an L.A. property. In Sept. 2016, a Sacramento attorney alleged, on behalf of Unite Here, that China’s Wanda Group was illegally “funneling” foreign money into a campaign committee formed to oppose developer Beny Alagem’s Beverly Hills condo tower.
A U.S. subsidiary of Wanda was, at the time, awaiting approvals on its adjacent One Beverly Hills project, a competitor to Alagem’s nearby Hilton Hotel, which employs Unite Here workers. One Beverly Hills has since been approved, and the attorney’s claims were dismissed by California’s Fair Political Practices Commission, which claimed there was not enough evidence to support an investigation into foreign funds. [LAT] — Hannah Miet