HNA Ordered to Pay $185M to Partner in Bankrupt Park Avenue Skyscraper

A US arbitrator has ordered HNA Group to pay more than $185 million to SL Green, an investor in the Chinese conglomerate’s bankrupt Manhattan skyscraper, after the joint venture partners fell out over their failure to replace a departed anchor tenant.

The arbitrator found that SL Green, a New York-based REIT that had also served as property manager for the former Bear Stearns building, was entitled to $184.6 million for its investment in 245 Park Avenue and reimbursement of $856,000 in fees, according to documents released last Friday, as reported by the Wall Street Journal on Monday.

SL Green had argued that the 48-storey tower’s declaration of bankruptcy last October triggered language in their partnership deal compelling HNA to give back the money invested by the REIT, which styles itself as Manhattan’s largest office landlord.

HNA, which emerged from restructuring earlier this year after its billionaire chairman was detained last September, countered that SL Green had failed to line up a replacement for 245 Park Avenue’s anchor tenant, Major League Baseball, despite the sports organisation announcing its planned relocation five years earlier. The Chinese group has sought to remove SL Green as manager of the 1967-vintage property over the latter’s objections.

Adrift Overseas

HNA serves as landlord to a roster of heavyweights at 245 Park Avenue, with private equity firm Angelo Gordon making its headquarters in 98,095 square feet (9,113 square metres) of the 1.7 million square foot office tower. Other high-finance tenants in the building include Ares Management, JP Morgan Chase and Societe Generale.

Major League Baseball, the world’s biggest association in the sport, vacated its 245 Park Avenue space and moved into a new 315,000 square foot headquarters at 1271 Avenue of the Americas, a 48-storey tower owned by the Rockefeller Group, in early 2020.

The once-highflying HNA bought 245 Park Avenue in 2017 from a joint venture of Brookfield Property Partners and the New York State Teachers’ Retirement System for a reported $2.21 billion. The deal gave the conglomerate its third Manhattan asset after purchasing a 90 percent stake in 1180 Avenue of the Americas from Carlyle Group in 2011 and acquiring 850 Third Avenue for $463 million in 2016.

As HNA came under pressure from a growing debt pile and declining access to credit back home, the group sold 1180 Avenue of the Americas to property firm Northwood Investors for $305 million in 2018 and unloaded 850 Third Avenue at a $41 million loss to local investor Jacob Chetrit and his sons in 2019.

The Chinese conglomerate, best known for establishing Hainan Airlines as the mainland’s first privately held carrier, also owns a skyscraper at 181 West Madison Street in Chicago’s famed Loop business district. HNA purchased the 50-storey office tower for nearly $360 million from CBRE Global Investors in 2017.

Property of the State

Hainan-based HNA Group, which declared bankruptcy in 2021 after struggling to pay off debts that once totalled over $100 billion, has undergone a state-directed restructuring that prefigured similar efforts to straighten out China Evergrande and other cash-strapped mainland developers.

HNA’s profligate spending led to it becoming one of four companies targeted by mainland regulators in 2017, as China became concerned over “systemic risk” posed by outsized overseas investments.

Chinese authorities termed the group and its cohort “grey rhinos” for the slow-moving hazard they posed to the company’s financial system in a country where tight control of the markets practically rules out black swan events.

The bad blood came to a head last September when authorities detained chairman Chen Feng and chief executive Adam Tan for suspected crimes. HNA, which has been controlled by Hainan government officials since early 2020, had announced just a week earlier that it would split into four new business units under a reorganisation plan, effectively wiping out the company’s existing shareholders.