Montage, Ritz-Carlton Sale Scrapped
DELAYED PORTFOLIO DEAL CANCELED
Monday, May 11, 2020
The blockbuster sale of two Orange County’s poshest resorts has been nixed, following months of delays and discord from both the buyer and seller.
Korea’s Mirae Asset Financial Group said last week it is terminating its deal to buy a collection of 15 upscale hotels in the U.S. from Chinese insurer Anbang Insurance Group, claiming the seller had breached contract obligations.
The portfolio includes the Montage Laguna Beach and Ritz-Carlton Laguna Niguel.
Mirae accused Anbang of failing to “timely disclose and discharge various material encumbrances and liabilities impairing the hotels and failed to continue the operation of the hotels in accordance with contractual requirements,” said Mirae Asset, which said it is also seeking to recover its 10% deposit.
The two OC resorts were initially expected to trade for at least a combined $900 million in a deal originally slated to close last month. A string of issues had put the deal in jeopardy over the course of 2020; local industry execs had been expecting the deal to fall apart.
The portfolio sale, expected to have a total price tag in the $5.8 billion range, was, like other commercial transactions, threatened reportedly by market uncertainties caused by the COVID-19 outbreak—although it was said to be in flux before then.
The scrapped deal comes a week after news of a reported lawsuit against Mirae from Anbang, in an effort to close the transaction.
Anbang officials filed a lawsuit under seal in Delaware Chancery Court at the end of last month, according to Bloomberg.
The company said it was seeking “an order compelling defendants to specifically perform their obligations under a sale and purchase agreement and certain equity commitment letters,” according to a summary.
The 260-room Montage was pegged to sell between $1.5 million and $1.7 million per room—equating to a price in the $420 million neighborhood.
The 393-room Ritz was said to be worth about $535 million based on $1.35 million to $1.45 million per key.
According to news reports, Goldman Sachs and other lenders were struggling earlier this year to secure nearly $4 billion in commercial mortgage-backed securities for the transaction, and were attempting to line up bridge financing to keep the sale alive.
Market turmoil of late had made the shaky deal even more unstable, as the virus’ effect on property values remains to be seen.
“The sale was under contract prior to all of this, and I seriously doubt it will close now,” Alan Reay, founder of Irvine hotel brokerage and research firm Atlas Hospitality Group, told the Business Journal in late March.
“Transaction volume has completely plummeted. No one is going to want to buy hotels right now, mainly because it will be impossible to tell what the values of these hotels are, and lenders aren’t going to want to finance deals.”