MAR Marriott International Inc

By Esther Fung and Kane Wu 

China's Anbang Insurance Group Co. has had a tough time pulling off splashy U.S. real-estate deals since it scooped up the iconic Waldorf Astoria Hotel in 2015.

On Wednesday, New York real-estate developer Kushner Cos. said it had ceased talks with Anbang for a planned $7.5 billion redevelopment of a mixed-use skyscraper in Manhattan.

That came almost exactly a year after the Chinese insurer made a high-profile retreat from a bidding war to buy Starwood Hotels & Resorts Worldwide Inc. The hotel chain went to Marriott International Inc. for $13 billion.

The Beijing-based insurer, one of China's best-known overseas investors, had shot to fame in the international deal-making circuit with its $1.95 billion purchase of Manhattan's Waldorf Astoria, at the time the steepest price ever paid for a U.S. hotel.

Last year, Anbang made an abortive attempt to steal Starwood from Marriott, sealing its reputation for flashy deal making. It had partnered with New York financier Chris Flowers on the Starwood bid. But Anbang pulled the bid after questions about its ownership and political connections in China -- concerns that kept some Wall Street banks from taking the insurer as a client -- and scrutiny increased over the company at home.

A few weeks before the Starwood pullout, Anbang had inked an agreement to buy Strategic Hotels & Resorts from Blackstone Group LP in a deal valued at $6.5 billion.

Anbang's shareholders include a collection of 39 Chinese companies, some of which at one point shared the same contact address or legal representative and in turn are owned by other companies, according to online corporate registry filings reviewed by The Wall Street Journal. Anbang's chairman and founder, Wu Xiaohui, is married to the granddaughter of former Chinese leader Deng Xiaoping.

Since the aborted Starwood deal, Anbang has made lower-profile property deals in Canada and Japan, according to data from Dealogic.

For more than a year, Chinese regulators have intensified controls over capital outflows and spend more time scrutinizing potential deals that Chinese companies are making abroad.

But Chinese investors are still doing deals overseas. "When you think about investing in China, there isn't so much to buy. Properties aren't cheap," said Theo Cheng, Anbang's head of overseas real-estate investment, at an industry conference in France earlier this month. "There's a whole bunch of capital that for different reasons needs to come out to diversify and seek better returns."

Mr. Wu, who has hobnobbed with former U.S. Secretary of State Henry Kissinger and Stephen Schwarzman, the billionaire chief executive of Blackstone Group, said in a dinner gala earlier this year that friendships built at a personal level between business partners help improve ties between China and the U.S.

This time, Anbang had been in talks to provide as much as half of the $2.5 billion in equity for the planned redevelopment of 666 Fifth Avenue, according to people close to the negotiations. A Kushner Cos. spokesman added that the firm remains in active negotiations with other potential investors for the project.

The disclosure about ending talks with Anbang came after lawmakers and ethics experts last week expressed concerns about the potential for a conflict of interest. Jared Kushner, son of the real-estate company's founder, Charles, is the son-in-law of President Donald Trump and occupies a key advisory position in the administration.

The younger Mr. Kushner has taken steps to protect against potential conflicts. For example, he has sold his personal stake in 666 Fifth Ave. and dozens of other properties to a trust controlled by other family members. But some ethics experts have said the measures have fallen short, and members of Congress expressed concerns over the Anbang talks.

--Phred Dvorak and Peter Grant contributed to this article.

Write to Esther Fung at esther.fung@wsj.com and Kane Wu at Kane.Wu@wsj.com

(END) Dow Jones Newswires

March 29, 2017 13:01 ET (17:01 GMT)

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