Hilton Worldwide Holdings Inc., the world’s largest publicly traded hotel operator, agreed to sell the landmark Waldorf Astoria hotel in Manhattan to China’s Anbang Insurance Group Co. for $1.95 billion.
Hilton will continue to manage the 1,232-room luxury hotel, which will undergo a major renovation, the McLean, Virginia- based company said in a statement today. It plans to use the proceeds from the sale to buy other U.S. properties.
The sale of the 83-year-old Art Deco building, which occupies an entire block on Park Avenue in midtown Manhattan, ends more than four decades of ownership by the company and expands a surge of Chinese investment in New York real estate. The transaction is the largest ever for a U.S. hotel, according to research firm Lodging Econometrics.
“There really are no other sales to compare it to,” said Bruce Ford, senior vice president and director of global business development at Lodging Econometrics, based in Portsmouth, New Hampshire. “It is the most unique asset with the most unique location in the world.”
Hilton Chief Executive Officer Christopher Nassetta said in a February interview that the company may sell all or a part of the property as it considers other uses for the building. The company, majority owned by Blackstone Group LP, in December raised $2.35 billion in a record initial public offering for the hotel industry.
Hotel History
The Waldorf Astoria opened in 1931 as the tallest and largest hotel in the world, according to its website. Hilton founder Conrad Hilton gained the management rights in 1949, while Hilton Hotel Corp. purchased the property in 1972.
The hotel’s redevelopment potential makes it an attractive investment, Ford said. The property is in need of an upgrade, said Nikhil Bhalla, an analyst at FBR & Co. in Arlington, Virginia.
“This is a hotel that would have required a phenomenal amount of capital expenditure to restore it to its luxury roots,” he said. “It’s not clear that would have yielded good results in terms of rate growth at this hotel.”
Hilton shares were unchanged at $24.32 at 12:03 p.m. New York time. They have gained 22 percent since the IPO.
Foreign Demand
Manhattan real estate values have jumped as investors from around the world seek yield and relatively safe investments. Beijing-based Anbang, founded in 2004, provides financial and insurance services to more than 20 million customers, according to the statement.
Other prominent real estate deals by Chinese buyers include the purchase last year of a stake in midtown Manhattan’s General Motors Building by Zhang Xin, the billionaire co-founder of Soho China Ltd, and Fosun International Ltd.’s purchase of 1 Chase Manhattan Plaza from JPMorgan Chase & Co. Greenland Holding Group Co., a Shanghai-based, state-owned developer, acquired a 70 percent share of the Atlantic Yards project in Brooklyn.
The China Insurance Regulatory Commission in 2012 issued rules allowing the nation’s insurers to invest more in commercial real estate in the main cities of developed nations. In February of this year, it capped “real estate category assets” at 30 percent of investments.
Anbang in 2013 passed on buying Hong Kong’s Wing Hang Bank Ltd., which was eventually purchased by Singapore’s Oversea- Chinese Banking Corp., and instead has accumulated a 9 percent stake in China Merchants Bank Co.’s Shanghai-listed shares, according to data compiled by Bloomberg.
Hotel Sales
The Waldorf Astoria sale adds to at least 12 other luxury hotel transactions in Manhattan since 2006, according to STR Inc., a Hendersonville, Tennessee-based research firm. They include Hyatt Hotels Corp.’s $390 million purchase of the 210- room Park Hyatt New York in August and the sale last year of the Helmsley Park Lane Hotel on Central Park South to investors led by the Witkoff Group for about $660 million.
U.S. insurers also have been looking to buy hotels. Allstate Corp. Chief Executive Officer Tom Wilson said in 2012 that his company was searching for investments in the industry as a way to diversify from bonds and protect his company as interest rates rise.
MetLife Inc. joined with Thayer Lodging Group to purchase the Ritz-Carlton San Francisco for about $161 million last year. The largest U.S. life insurer also has teamed with Loews Corp. to invest in its namesake brand of hotels.
–With assistance from Noah Buhayar, David M. Levitt and Joshua Fellman in New Yor