HNA has already sold more than $17 billion in assets in 2018, but even that hypersonic rate of disposals may not be fast enough for the US government, which is now said to have given the Chinese conglomerate an ultimatum to sell off its 90 percent stake in a Manhattan office tower.
The Wall Street Journal reported on Friday that within recent months the Committee on Foreign Investment in the US (CFIUS) has instructed HNA that it needs to sell off its holding in 850 Third Ave in New York. While no clear indication is said to have been given for the forced sale, the 21-storey office building one-half mile from Trump Tower is home to a police precinct that provides protection for the orange-hued president’s gilded Manhattan headquarters.
The shotgun sell-off of the office tower adds to pressure on HNA which just last week raised around $332 million by selling Radisson Hotels AB as “Buddhist billionaire” Chen Feng’s Hainan-based conglomerate races to raise enough cash to pay down a debt load that earlier this year was estimated at as much as $100 billion.
A $463 Mil Building With Excellent Access to Trump Tower
HNA, together with New York real estate investment firm MHP Real Estate Services, bought the Manhattan commercial building in April 2016 in a deal valued at around $463 million – before Trump had secured the Republican nomination and later the US presidency.
The Journal account emerged after the New York Post had reported that the US government was ready to seize the 617,000 square foot (57,321 square metre) office building on national security grounds. HNA was quick to refute the tabloid’s report, while not denying that the Chinese conglomerate’s ownership of the tower located between East 51st and 52nd streets in Midtown had been the subject of discussions with US authorities.
“There are unique facts and circumstances regarding the location of this particular property that did not exist at the time of purchase which have raised certain concerns”, an HNA spokesperson said in a statement. The company added that it is “working cooperatively with regulatory authorities” to resolve the issue.
Mainland Investor Puts NYC Tower into Blind Trust
Part of that cooperation, according to sources cited in the Journal account, involves HNA having already transferred its ownership in the commercial building into a blind trust, while it attempts to find a buyer for the asset.
CFIUS, which in earlier years focussed its role in reviewing foreign investments in the US on transfers of technology and other sensitive issues, has been expanding its purview to cover a wider range of investments, at the same time that tensions between the US and China having been rising over trade and national security concerns.
An account in New York’s Commercial Observer noted that, should the government actually strip HNA of its ownership of the building, it would mark a significant expansion of CFIUS’ involvement in real estate deals. “We’re seeing this happen for the first time in real estate,” the business publication cited Y. David Scharf, a partner and the chair of the real estate finance and restructuring at Morrison Cohen as saying. “Real estate is a new add-on under the statute, literally eight days ago.”
HNA Sold More Than $3 Bil in Assets in the Last 30 Days
Should HNA succeed in selling the building, it would be the latest in its $17 billion string of 2018 asset sales.
In April of this year the Chinese firm sold its controlling stake in the 245 Park Avenue office tower in Manhattan to real estate investment trust SL Green Realty for an undisclosed sum. That sale came just over one year after HNA bought the 1.7 million square foot tower in March 2017 for $2.21 billion from a joint venture between Brookfield Property Partners LP and the New York State Teachers’ Retirement System.
The 245 Park Avenue along with the Radisson Hotels disposal last week, form part of HNA’s $17 billion in sales of domestic and overseas assets in the last month, which have seen it sell $535 million in Singapore warehouses in July, followed by the company parting with a Wuhan logistics park for $46 million and a commercial project in Haikou that is valued at RMB 9 billion.
Also in July, the mainland group’s real estate division sold a mixed-use complex in Shenzhen for RMB 1.6 billion ($240 million), and besides real estate, HNA last week sold its 30 percent stake in aircraft leasing firm Avolon for $2.2 billion, all during the same week that it announced its disposal of its remaining holdings in Brazilian airline Azul SA for $306 million.