Cash-strapped HNA Group is said to be in talks to sell a Manhattan office building for $452 million — taking a haircut on its remaining New York real estate asset — after the US government reportedly ordered the Chinese firm to offload the property located four blocks from Trump Tower.
According to sources cited by Bloomberg, the Chinese group is negotiating to sell its 90 percent interest in the building, 850 Third Ave, to New York-based real estate firm B&L Management Co. The news account follows reports that HNA was ordered by the Committee on Foreign Investment in the US (CFIUS) in recent months to offload its holding in the 21-storey tower.
The building houses the New York Police Department’s 17th precinct, which among other duties provides security for Trump Tower, the president’s Manhattan headquarters on Fifth Avenue. HNA and its partners bought the property in April 2016 in a deal valued at around $463 million — some $11 million over the rumoured selling price this month.
The potential disposal would add to more than $17 billion in asset sales by HNA in 2018 alone, as the troubled mainland conglomerate struggles to raise enough cash to pay down a crippling debt burden that reached $94 billion at the end of last year.
US Demands HNA Shed Midtown Building
The deal for 850 Third Ave is still in the works, according to the Bloomberg account, as a contract has not yet been signed nor has a deposit been paid. The Midtown office tower’s minority owners MHP Real Estate Services and Atco Properties & Management LLC have waived their rights to match the offer, which would have required bringing in an equity partner to take over HNA’s stake.
CFIUS, a federal committee that vets foreign investments in the US, has ordered HNA to divest its stake in the building, without specifying a reason, according to reports earlier this month. HNA is said to have cooperated with the regulators by transferring ownership in the building to a blind trust and seeking a buyer for the asset.
“Out of respect for the confidentiality of the CFIUS process, we will not comment beyond that except to note that 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, and HNA Group is taking measured steps to address them, consistent with our commitment to working cooperatively with regulatory authorities everywhere we operate,” an HNA spokesperson said in a statement at the time. In the same statement, the spokesperson called reports of a seizure or forced sale “grossly inaccurate and misleading.”
The 617,000 square foot (57,321 square metre) commercial property is located between East 51st and 52nd streets, a half mile from Trump Tower, where the US president maintains a residence. HNA acquired the building before Trump had secured the Republican nomination for the presidency.
Chinese Firm Dismantles Global Portfolio
Chaired by tycoon Chen Feng, HNA is unwinding its overseas portfolio at a dizzying pace, after mounting debt and regulatory scrutiny forced the Chinese group to reverse its global spending spree. Earlier this month, HNA agreed to sell off its interest in Minnesota-based hotel group Radisson Hospitality to China’s Jin Jiang International Holdings and unnamed co-investors for a reported $2 billion.
In April of this year, the Hainan-based firm sold its controlling stake in Manhattan’s 245 Park Avenue office tower to real estate investment trust SL Green Realty for an undisclosed sum – just over one year after HNA bought the 1.7 million square foot property for $2.21 billion. The following month, HNA reportedly offloaded the San Francisco office tower 123 Mission Street for $290 million, after acquiring the property for $255 million in August 2016.
HNA and its partners reportedly landed a $342 million loan from French bank Natixis for 850 Third Ave in June, replacing existing financing from Morgan Stanley. The building’s largest occupier Discovery Communications is planning to vacate when its lease expires in May 2020, after which the tower will be one-third vacant.