Possible Chinese Purchase of Long Beach Hyatt Locations Triggers Request for Federal Review

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The Hyatt Regency is one of two Hyatt hotels in Long Beach that could be purchased by a Chinese construction company. Photos: Jason Ruiz

The possible acquisition of two Long Beach hotels by a state-owned Chinese construction group has prompted a Long Beach elected official to request a national security review of the deal, specifically if the purchase could potentially lead to a threat to national security.

Second District Councilwoman Jeannine Pearce wrote a letter to recently confirmed United States Treasury Secretary Steve Mnuchin asking for a national security review from the Committee on Foreign Investment in the United States (CFIUS), an interagency committee headed by the treasury that reviews international deals that would result in control of a US business being transferred to a foreign person.

“This matter is time sensitive,” Pearce wrote. “CFIUS should take the opportunity to ensure any potential national security questions are addressed before the transaction has been finalized.”

The two hotels, the Hyatt Regency and the Hyatt Centric, serve as bookends to the Outlets at the Pike shopping center with the Hyatt Regency resting in the same footprint as the Long Beach Convention Center.

The company in question is the Shanghai Construction Group (SCG) which was founded in 1998 and was valued at $4.7 billion in 2016. It is one of the top 20 largest construction companies in the world.

Pearce’s request comes just months after Congressman Alan Lowenthal made a similar query when the sale of Westin Long Beach was reportedly being shopped to Chinese investors. That sale has not gone through.

Chinese money has been pouring into the United States since the recession with investors buying up properties, hotels or otherwise, from Seattle to New York. Locally, Chinese companies have closed deals for properties in Hollywood, San Diego and Downtown Los Angeles.

According to a 2016 survey by the National Association of Realtors, Chinese nationals purchased over $27.3 billion worth of homes in the United States last year, a figure that’s expected to rise to $50 billion by 2025.

Some of those deals, like Anbang’s purchase of the Waldorf-Astoria Hotel in New York City in 2014, were approved but led to some customers—President Barack Obama—to stop staying at the hotel when visiting the state out of fears of espionage, a tactic widely believed to be employed in hotels on mainland China.


 

China’s influx of money has come with a spike in reviews. The Los Angeles Times reported last year that according to the CFIUS 2012-2014 annual report, China made up nearly 20 percent (68) of the committee’s reviewed transactions with England finishing second with 45 out of the 358 cases reviewed.

CFIUS cannot veto deals on its own but can refer them to the Oval Office for a final decision. It’s unclear if President Donald Trump would block such an acquisition if it were referred to his desk. If he did it would be the first rejection of a sale since Obama’s veto of a proposed sale that would’ve seen China take over a wind farm in Oregon. The former president rejected the sale due to the wind farm’s proximity to a Naval weapons station.

The proposed sale of the Long Beach Hyatt locations could put a Chinese national firm smack dab in the middle of several federal agency offices including the United States Customs and Border Protection and in close proximity to Immigration and Customs Enforcement, the Department of Homeland Security and the Department of Defense. The hotels would also be within eyesight of the Port of Long Beach, arguably the city’s largest target in terms of potential threats.

HyattCentricPearce said she became aware of the sale over the weekend and immediately began making phone calls to city departments to explore options. The Hyatt does stand on city ground, but because the deal would technically be a change in ownership, it wouldn’t amend the current lease. Pearce said if the lease was altered, the city would be able to insert itself.

She has yet to receive an answer to her request for a review, but like Lowenthal’s request last year, she pointed to a similar case with the Hotel del Coronado in San Diego where Chinese investors were allowed to purchase a group of hotels that originally included the Coronado, but that sale was blocked due to its proximity to a Naval base.

Pearce added that even if the Westin were located in another area of the city, one that wasn’t so close to sensitive government offices and infrastructure, the city would still want to take a long look at who was buying property in Long Beach.

“We’re at a unique time in our development right now where we’re getting national recognition for the type of city that we are, for the changes that have happened and so you are going to see international interest in our assets here,” Pearce said in an interview. “I think we do have to be careful and mindful of whether it’s in downtown or in the Ninth District or the East Side of the city that we have good operators that are here, but I think we would still have some concerns.”

 



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