The buyer of InnVest Real Estate Investment Trust, one of Canada’s largest hotel owners, was unheard of before the US$2.1 billion deal was announced last week. It may have ties to China’s Anbang Insurance Group Co., according to people with knowledge of the matter.
InnVest on May 10 said it agreed to be acquired by Bluesky Hotels & Resorts Inc., described as a privately held real estate investor incorporated in Canada and backed by Hong Kong capital. Bluesky’s president and chief executive officer was named as Li Chen. She has been employed by Anbang and acted on behalf of the Beijing-based insurer in prior deals in Canada, including one that was ongoing while the InnVest negotiations were taking place, according to the people, who asked not to be identified because the details are private.
Chen, who goes by Lydia Chen, said at the outset of the InnVest talks that she was representing Anbang but that it didn’t want to be named as the buyer, according to one person involved in the transaction. When that met with objections, Chen said she was representing a new pool of capital called Bluesky, the person said.
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Bluesky was incorporated in Canada about a month before the InnVest agreement was announced, according to a federal corporate records search. Two other people involved in the deal said that Chen never said she was representing Anbang but that her involvement in the deal and her history of working with Anbang made them suspect the insurer was involved.
Chen wasn’t able to be reached for comment. Anbang referred questions about its connection to Bluesky and the InnVest deal to FTI Consulting, a public relations firm. A spokesman for Anbang at FTI Consulting, who asked not to be identified, said that speculation linking Anbang to Bluesky is incorrect. Representatives for Toronto-based InnVest didn’t respond to requests seeking comment.
Anbang has been one of the most prominent real estate buyers among Chinese companies, with deals including a record– setting purchase of Manhattan’s Waldorf Astoria hotel. Yet it made a surprise move seven weeks ago when it abruptly walked away from a US$14 billion bid for Starwood Hotels & Resorts Worldwide Inc., citing “various market considerations.”
Anbang is facing an examination by China’s insurance regulator, which is seeking more disclosure from insurers buying property assets or unlisted companies, a person familiar with the matter said on May 9. An Anbang press official said at the time that company hasn’t been notified of any inspection.
Negotiations to purchase InnVest started April 1, and Bluesky was incorporated April 18, according to a federal corporate records search. Chen continued to negotiate on behalf of Bluesky once it was incorporated with the backing of an undisclosed commitment sponsor, the people said. One of Anbang’s Canadian deals that she had been working on — the purchase of a controlling stake in Vancouver’s Bentall Centre — was ongoing during the talks, according to the people.
Because of the uncertainty about the backers, InnVest insisted that US$100 million be put in escrow before negotiating a sale, the people said.
The Wall Street Journal reported Anbang’s possible links to the deal earlier Friday.
Anbang has been expanding into North American real estate since its purchase in early 2015 of Manhattan’s Waldorf Astoria hotel for US$1.95 billion. The insurer bought an office tower in Toronto’s financial core for $110 million, agreed to acquire the US$660 million controlling stake in Bentall Centre, and is looking at several other assets in Toronto and Vancouver, people familiar with the company’s plans have said.
Bluesky said it would pay US$7.25 a share for InnVest — a 33 per cent premium to the day’s closing price — in what would be the biggest acquisition of a Canadian REIT in three years, according to data compiled by Bloomberg.
Bluesky hasn’t made deals prior to InnVest. Its headquarters are listed as the address of McCarthy Tetrault LLP, its legal firm, according to a federal corporate records search.
A spokeswoman for McCarthy Tetrault referred requests for comment to Navigator Ltd., Bluesky’s external communications firm. Randi Rahamim, Bluesky’s spokeswoman with Navigator, didn’t comment beyond reiterating the information about the company found in the press release announcing the deal.
“As previously communicated, Bluesky is a privately held Canadian corporation, backed by Hong Kong capital, with an interest in developing a diversified asset portfolio of hotels, hospitality services, real estate and other long-term holdings,” Rahamim said in an e-mailed statement.
InnVest’s hotel portfolio has about 14,500 rooms across 109 properties under brands such as Fairmont, Hyatt, Travelodge and Holiday Inn. A deal would give the buyer stakes in some of Canada’s most storied hotels, including the Fairmont Royal York in Toronto, built in 1929 and host to British royalty. KingSett Capital, one of InnVest’s largest shareholders and a co-investor on projects, will retain its majority ownership in that hotel and Courtyard Marriott properties.
Shareholders are scheduled to vote on the deal at InnVest’s annual meeting on June 28. Investors representing about 29 per cent of outstanding stock, including KingSett and Orange Capital LLC, have already agreed to the purchase.