CHINESE-LED GROUP PAYING $2.2B FOR PARK AVENUE TROPHY OFFICE
Chinese investors continue to snap up Manhattan’s most prized commercial real estate, against all odds, and their biggest flag in the ground has come in the form of an office building on 245 Park Ave., under contract for $2.2B, one of the priciest single-asset transactions in commercial real estate history.
HNA Group, the Chinese mega-conglomerate, and an unnamed partner are under contract to buy the 48-floor, 648-foot-tall, 1.8M SF Midtown skyscraper from its current owners, Brookfield Properties and the New York Teachers’ Retirement System, The Real Deal reports.
The biggest landlords in NYC, RXR Realty, Blackstone Group, L&L Holding Co , SL Green and Vornado, were all among the bidders for the property, according to TRD. If the deal closes at the reported price, the building would sell for $1,227/SF.
The deal follows the sale of the Waldorf Astoria in late 2014 by Hilton Worldwide, for almost $2B, to Chinese insurance giant Anbang, which predated a $30B spending spree by Chinese buyers on real estate in major western markets in 2015.
“The Chinese have become the most dominant foreign investor in Manhattan real estate recently,” said Bob Knakal, the chairman of investment sales for Cushman & Wakefield. “Until 2016, Canada had been the largest foreign investor but China overtook Canada in 2016.”
Few Manhattan skyscrapers have sold for more than $2B. Others have included 11 Madison Ave., 3 Bryant Park and the GM Building at 767 Fifth Ave.
The building houses 68K SF of retail and floor plates ranging from 36K to 76K SF. Tenants include JP Morgan Chase, Heineken, Societe Generale, Rabobank, Angelo Gordon, Ares Capital and, for now, Major League Baseball, which is moving to 1271 Sixth Ave.
Last November, the building was put up for sale with CBRE investment brokers Darcy Stacom and Bill Shanahan representing the sellers.
The building is a legacy asset for Brookfield, which acquired all assets from bankrupt predecessor Olympia & York. The New York State Teachers’ Retirement System bought its 49% stake in the building in 2003. Originally valued at $400M, the tower shot up in value when JP Morgan Chase and Bear Stearns signed two 20-year leases totaling 800K SF. The building received an $800M refinancing from the Bank of China in 2010, which was increased to $1B in 2015.
HNA started in 1993 as Hainan Airlines and successfully took over several other Chinese airlines before diversifying to other businesses buying out companies in finance, insurance, tourism and real estate. The mega-conglomerate employs more than 410,000 people.
The Chinese government has imposed strict restrictions on investment in foreign real estate, so it is unclear the mechanisms by which HNA was able to place this asset under contract. If the sale closes, that information, including who HNA’s partner is and how much each company paid, will hopefully become clear.
“Although the Chinese government has been making it difficult for companies to move capital abroad, a number of Chinese firms already have funds in the U.S.,” Knakal said. “They have found ingenious ways of getting around the capital controls of their government.”