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4 Possible Reasons Why Anbang Just Denied Its $400 million Kushner Real Estate Deal

Anbang Insurance Group, the politically connected Chinese investor, is denying reports that it is investing in a Manhattan real estate project owned by the family of Jared Kushner, President Trump’s son-in-law and adviser.

“The information about Anbang investment in 666 Fifth Avenue is not correct, there is no investment from Anbang for this deal,” the company said in a statement to Fortune and other outlets.

The denial comes just a day after a Bloomberg report detailed the deal in which Anbang would invest $400 million into a New York office tower on Fifth Avenue on terms favorable to the Kushner family. A Kushner family company bought the building at the height of the real estate boom in 2007, and afterwards struggled to make mortgage payments.

Like many Chinese companies investing overseas, Anbang has close political connections to the ruling Communist Party. Founder Wu Xiaohui’s wife is the granddaughter of former Chinese leader Deng Xiaoping. The early shareholders that provided Anbang’s capital base when it was founded in 2004 were state-owned companies, including the Shanghai Automotive Industry Group and oil giant Sinopec Group. The potential deal with the Kushners is seen as rife with potential conflicts of interest because of Jared Kushner’s role as White House adviser.

Still, the flat Anbang denial is an odd turn for what looked like a favorable deal for both sides. The Kushners would get out of a deeply troubled investment on very good terms. Anbang, meanwhile, would partner with the First Family and Jared Kushner, who is shaping foreign policy.

There are a few potential reasons for Anbang’s denial:

  1. Anbang is not lying: The Kushner Cos. were shopping around documents naming potential investors that leaked to reporters who ran with the story. The biggest potential investor, Anbang, was simply that: a potential investor. Anbang’s interest in providing a $400 million investment in the Fifth Avenue Manhattan building never got to the final stages.
  2. Anbang is lying. They are still involved in a deal, but don’t want the details released for the sake of negotiation strength on terms that are still being sorted out. Since other investors are reportedly joining Anbang, the insurer may have wanted to deny its interest.
  3. Anbang’s Chinese regulators stepped in. Anbang’s primary business is insurance. As in the U.S., Chinese insurance regulations include stringent rules on how an insurer uses its capital. Last year a respected Chinese financial magazine reported that Anbang’s $14 billion bid for Starwood Hotels wouldn’t be approved by its regulator because it would tip Anbang’s overseas assets above the 15% limit of total assets. Anbang abandoned its unexpected bid for Starwood Hotels a month after it was announced. The reported $400 million Anbang that would contribute to the Kushner building is a smaller figure, but nevertheless may have pushed Anbang’s overseas assets over a threshold.
  4. China’s new outbound investment rules scuttled the deal. The central bank and regulators in China’s government announced restrictions on overseas investments late last year in what was seen as a gambit to reduce the country’s capital outflows and support the weakening yuan currency. As the rules took hold, outbound investments in December and January plunged more than 35%, according to China’s Ministry of Commerce.

The likeliest explanation is the first. The initial Bloomberg report named Anbang as an investor around midnight on Tuesday China time. Chinese press reports immediately picked up the news, and Anbang immediately denied it. They later extended their denials to U.S. outlets, including Fortune, on Wednesday morning.

Anbang is a rising overseas investor—it owns the Waldorf Astoria and another U.S. hotel group—but just as its bid for Starwood Hotels last year was withdrawn, it won’t follow through on every available pitch.

The potential Kushner Cos. Fifth Avenue deal may have been much the same: a good investment for Anbang for a while, until it decided it wasn’t.