HNA Group has reportedly sold an office tower in San Francisco for $290 million, marking yet another disposal of an overseas asset as the Chinese conglomerate seeks to pay off a debt pile estimated at $100 billion.
The airline-to-property group is understood to have sold the office building 123 Mission Street to New York-based real estate investment firm Northwood Investors at a price equating to $840 per square foot, according to an account by local real estate website The Registry, citing sources with knowledge of the deal. HNA acquired the property for $255 million in August 2016 from the US subsidiary of Hong Kong-based Great Eagle Holdings.
HNA did not respond to Mingtiandi’s enquiries at the time of publication.
The 29-storey tower located in San Francisco’s South of Market (SOMA) neighbourhood provides 339,000 square feet of rentable area. Built in 1987, the fully leased property now houses tenants including US cloud computing company Salesforce.com and healthcare firm McKesson Corporation.
The tower also has approximately 2,577 square feet of retail space for four vendors to provide building amenities, according to the building’s website.
Gaw Capital, JP Morgan Said Among Building’s Suitors
Northwood Investors, which was founded by former Blackstone executive John Z. Kukral and has $7 billion of assets under management, reportedly bagged the tower after two previous investors eyed the San Francisco property. Gaw Capital and JP Morgan Asset Management are said to have held discussions with HNA Group to acquire the office building.
Interest in the office tower might be propelled by the outlook for the office market in the California city. San Francisco’s overall office rents grew by 10.1 percent year-on-year in the first quarter of 2018, according to Colliers International.
Despite a softening of rents quarter-on-quarter in the same period — amounting to a 2.8 percent decline citywide and a 9.7 percent slide in the SOMA area — the real estate firm expects overall citywide rents to grow throughout the year amid healthy leasing activity and tenant demand.
HNA Putting Everything on Sale
The fresh $290 million sale by HNA should help to alleviate the debt-ridden conglomerate’s financial troubles. An annual report for 2017 released in late April showed that HNA’s total liabilities rose to RMB 736.5 billion by December 31, up by 22 percent from the previous year. The company’s debt to asset ratio in the period increased by 0.35 percent to 59.78 percent.
The Hainan-based conglomerate is selling the overseas assets it acquired in the course of a $45 billion shopping spree that kicked off in 2015. HNA was said to be close to selling the Manhattan office tower 245 Park Avenue, which it bought for $2.21 billion last year, to New York’s SL Green Realty in April.
Across the Atlantic, the group sold Amsterdam-based TIP Trailer Services to infrastructure investor I Squared Capital for a reported $1.2 billion last month. HNA Group raised almost $9 billion in cash by selling stakes in Hilton Worldwide and two of its spinoffs earlier this year.
The Chinese airline group is also shedding its mainland assets to raise money. Just last month, HNA Investment Group disposed of a subsidiary that holds the rights to develop a mixed-use project in Pudong’s Qiantan area to Chinese developer Fusheng Group for RMB 2.9 billion ($456 million).