Mirae Asset Group’s decision to call off the acquisition of U.S. luxury hotels from China’s Anbang Insurance Group appears to have been welcomed by some domestic institutional investors, as concerns are mounting that the economic fallout from the COVID-19 outbreak will likely cripple the hotel industry for a long time.

Until recently Mirae Asset was continuing its marketing effort to raise funds for the acquisition of Anbang’s U.S. hotels, approaching several institutional investors like mutual aid associations and pension funds for its sell-down plan.

“Mirae Asset offered an opportunity for investing in the hotels, though details on a deal structure were not discussed,” a mutual aid association official said. “Some institutions have committed their investment.”

But a sell-down plan for its prospective hotel portfolio has been canceled after the South Korean financial conglomerate decided to back away from the transaction with Anbang, a decision that could lead to increased reputational risk for Mirae Asset.

However, on the contrary, the market is seeing a positive investor response on the collapse of the Mirae-Anbang deal, with the news seemingly welcomed by institutional investors who pledged their commitment to Mirae Asset.

“We were approached by Mirae Asset but concluded that the risks of the investment are high,” another mutual aid association official said. “Risks are rising that hotels could generate cash flow smaller than expected due to headwinds in the hotel industry.”

Mirae Asset had initially agreed to buy 15 U.S. hotels from Anbang for $5.8 billion (about seven trillion won) last year, while it reportedly planned to raise 500 billion won for the acquisition by reselling its stake in the U.S. hotels to institutional investors in the form of preferred shares paying a five percent dividend per year.

However, with the hotel industry severely hit hard by the COVID-19 outbreak, concerns are rising that hotels around the world could face bigger headwinds in the future, which dented investor sentiment toward this sector.

“Institutional investors who pledged their investment to Mirae Asset seemingly breathe a sigh of relief that the acquisition was canceled,” an industry insider said.

“Unsuccessful sell downs of its shareholdings in Tour Majunga in Paris as well as the combined entity of SK Braodband and Tbroad have been already a blow to reputation of Mirae Asset.,” he noted, adding that calling off the acquisition of U.S. hotels was a positive for the financial conglomerate after all, as the move has eliminated the possibility of the sell-down overhang.

Mirae Asset Daewoo acquired Tour Majunga in Paris last year in a partnership with French asset manager Amundi, with the Korean firm taking over an 85 percent stake in the office building. Mirae Asset Daewoo is continuing its sell down of Tour Majunga, though the pace appears to be much slower than expected. (By reporter Kim Byung-yoon)