Anbang taken over by regulator

https://www.google.com/amp/s/www.bloomberg.com/amp/news/articles/2017-06-16/anbang-s-deal-spree-leaves-it-with-these-assets-around-the-globe

Well, this does not look good for the Waldorf reno/conversion or for the market in general if this is a trend. I didn't think that Chinese institutional investors had much discipline and I think smaller Chinese investors will be even more reluctant to invest than before. Very bad news.

Waldorf may actually be good if the new owner - assuming regulators want to sell it - does not covert to condos.

Well, I think for the Waldorf, a lot of value will be destroyed and possibly a lot of air will be let out of the market. Hotel market was in trouble anyway I guess.

Woodbridge buying expensive properties in California from money raised in Ponzi scheme.
https://www.sec.gov/litigation/complaints/2017/comp-pr2017-235.pdf

I think the hotel market in NYC has been overbuilt for some time due to zoning and tax loopholes.

Also, many rich people who used to stay in hotels in their frequent visits to nyc may have purchased a ultra-luxury condo. In the past, coops would not allow out of towners and you could not get the luxury of a hotel in a condo.

Perhaps the larger question here may be will Chinese investors see this as punishment for Anbang taking money out of China to purchase foreign investments, and will that further chill Chinese investment in NYC properties?

Anbang was raising money from short term cd type financing and investing in illiquid assets. Govt has rightly taken them over after ignoring this for a long time. As far as other Chinese investments go, China govt has issued “directives” more than a year back about not wanting foreign investments unless they are within govt policies. Individual investments are not controlled neither are investments by provincial govt managed funds. That said no one wants to be on the bad side of the central govt as an institution. Commerical properties are obviously already impacted but the effect on individual purchases is less clear as some wealthy Chinese want to increasingly get some of their money out and park it outside.

This will certainly affect all Chinese insurance companies who invested heavily head first into real estate in China and throughout world. Chinese investors have a herding mentality and they tend to rely on others due diligence rather than doing their own. But many Chinese investors already have their money offshore so it's just a case of where and when and not if.

Anbang is also being accused by some of corrupt practices. If this becomes a trend, and I think it will, real estate markets throughout the world will be impacted.

I agree that the impact on residential real estate is less certain, in part because we don't really have a good handle on how many homes in NYC are owned by such undisciplined wealthy investors.

Basically Chinese bid financed by other people’s money is out.
Have to watch Extel as well. Wonder what is the source of their equity funding and appx what percentage of project cost (rather than sale price) is equity? Does any one know? Thank you.

Info on Extell's capital stack for Central Park tower:

$900 million construction loan from a consortium led by JPMorgan Chase
$235 million in preferred equity from an unnamed hedge fund
Unknown amount of EB-5 money
$300 million equity investment from SMI USA, a subsidiary of Shanghai Municipal Investment
$400 million+ from Nordstrom for the seven-story flagship store at the tower’s base

Wish I knew the total project cost but if you asume construction loan is 65-70% LTC and preferred equity is 85-90% LTC, Extell does not appear to have much to any of their own money is deal. $400 million from Nordstom's is likely some combination of key money and tenant improvements.

It seems biggest at risk money is Chinese as Nordstrom probably gets a big part back in form of owning or use of first 7 floors. Since the profits are in at least 40-50 percent range $3k cost and average 4500 per square ft, no one is likely to lose money. Is that what you think?

https://therealdeal.com/2018/02/27/the-new-york-renaissance-hotel-isnt-profitable-and-its-owner-cant-wait-to-sell/

300, I sure looks like Chinese have biggest exposure and first loss position. I am guessing Nordstrom has no real equity but they sure look like they are in deep on a leasehold which is a big plus for Extell except that Nordstom won't attract condo buyers and many retailers like them are in dire straits. Wonder who the hedge fund is and where in the capital stack they are.

Yes, 30. The NYC hotel market has been getting soft for a couple of years. Hotels like NY Renaissance are cash cows when market is booming but turn to money pits when times are bad. No question we are entering the bad times once again. Hotel industry is the most undisciplined of all real estate as lenders can't seem to stay away from their "strong" debt coverage ratios. But if you think these properties will suffer, wait another two years and see how all those new hotels in LIC are performing. That will be a bloodbath.

https://therealdeal.com/2018/03/02/everything-must-go-hna-looks-to-sell-shares-in-hilton-spinoff/

I think commercial will certainly get hit. Very few positives in nyc. Lots of supply and low cap rates. Resi resale below $2k per square ft in good areas seems to be fine due to a lack of supply and strong demand with interest rates spike being the main risk.

HNA is just another example of an institutional investor with too much capital and too little market experience. Its always the case that the "smart" money sits on the sidelines when these types of investors enter the market. Soon they will pick up these assets at a deep discount.

I am sure for some assets they will have to take a discount. Economy is strong, so it is not a Lehman bankruptcy type of scenario. In addition, Chinese govt may give them enough time to sell.

https://therealdeal.com/2018/03/19/anbang-files-offering-plan-for-352-condos-at-waldorf-astoria/

Make sense for Anbang to keep the conversion option on the table for a new buyer. I thought it was a great idea when first proposed but now wonder if it makes any economic sense. Comes down to conversion costs I guess and whether condo sales can delever the rest of property.

https://therealdeal.com/2018/05/10/anbangs-ex-chairman-gets-18-years-for-12b-fraud/