If History rhymes, China-bulls should be worried

Fascinating:  FT-Alphaville puts an interesting historic perspective on the recently completed purchase of the famous Waldorf Astoria by a Chinese buyer.

As it is a short post, I will quote in full:

Compare (2014):

Hilton Worldwide Holdings Inc. (“Hilton Worldwide”) today announced it has entered into an agreement with Anbang Insurance Group Co. Ltd. (“Anbang”), under which Anbang has agreed to purchase the Waldorf Astoria New York for $1.95 billion. As part of this long-term strategic partnership, Anbang will grant Hilton Worldwide a management agreement to continue to operate the property for the next 100 years, and the hotel will undergo a major renovation to restore the property to its historic grandeur…

Contrast (1989 — 25 years ago this month):

The Rockefeller Group, the owner of Rockefeller Center, Radio City Music Hall and other mid-Manhattan office buildings, said yesterday that it had sold control of the company to the Mitsubishi Estate Company of Tokyo, one of the world’s biggest real estate developers.

Richard A. Voell, Rockefeller’s president and chief executive, said Mitsubishi would pay $846 million in cash for a 51 percent interest…

China’s Anbang — which according to its website has $114bn in assets — is paying $1.3m per room, or $356 per day for 10 years, on FT Alphaville’s calculations.

A basic room at the Waldorf Astoria costs $329 a night, plus tax.

It looks as if the buyer is paying approximately 10x  annual sales per room (I say approximately because I assume that executive rooms and suites will fetch a higher price). This buyer must really have a very, very long-term horizon, or he is misallocating capital at a large-scale. And look, what a coincidence:even the transaction amounts are similar. Like China now, Japan looked like the country of the future in 1989. Does this simple comparison have predictive value? I think the answer is yes…


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