HNA Is in Talks to Sell New York's 850 Third Ave. to B&L
(Bloomberg) -- Debt-ridden Chinese conglomerate HNA Group Co. is in talks to sell Manhattan’s 850 Third Ave. -- a building under scrutiny by the U.S. government because of its proximity to Trump Tower -- to a New York-based real estate company, according to people with knowledge of the matter.
The transaction with B&L Management Co. values the 21-story building at $452 million and would cause HNA to realize a loss, according to the people, who asked not to be identified because the talks aren’t public. A contract has yet to be signed, and no deposit has been made, the people said. HNA owns 90 percent of the building, with minority partners MHP Real Estate Services and Atco Properties & Management LLC owning the rest. Both partners have waived their rights to match the offer, a move that would’ve required seeking an equity partner to step in for HNA’s stake.
Any sale to a U.S. buyer would likely satisfy concerns from the Committee on Foreign Investment in the U.S. regarding HNA’s ownership of the building, which is just four blocks away from Trump Tower. HNA and its partners paid $463 million for the Third Avenue tower in 2016, before Donald Trump became president, and the Chinese company has been trying to sell it since at least February.
Representatives for B&L didn’t respond to requests for comment. A representative for HNA wasn’t immediately able to comment.
CFIUS reviews the national security implications of foreign investments. There are “unique facts and circumstances” regarding the location, a representative for HNA said earlier this month. One potential issue is that 850 Third houses one of only two police precincts that are within a mile of Trump Tower, the president’s base when he’s in New York. HNA has said it’s taking steps to address CFIUS’s concerns -- issues that didn’t exist when HNA bought the property.
The scrutiny comes amid rising tensions between the U.S. and China’s government, which is said to have decided to help HNA pull itself out of recent liquidity challenges. The Chinese conglomerate, which has sold more than $17 billion in assets to reduce its massive debt load, has sold real estate holdings from San Francisco to Minneapolis.
HNA is also in talks to sell luggage handler Swissport Group to suitors including Cerberus Capital Management, according to people with knowledge of the matter. This month, HNA agreed to sell its Radisson hotel chain to a Chinese company and a $2.21 billion stake in an aircraft lessor to Japan’s Orix Corp.
B&L, which has historically invested in Manhattan residential buildings such as apartments in Chelsea and the Upper East Side, is expanding into the office sector, with any deal for 850 Third being part of the effort. The company invests on behalf of the Caiola family, whose fortune was created by patriarch Benny Caiola, an immigrant from San Fratello, Italy, who arrived in the U.S. as a teenager. He built a real estate business, which fueled an ability to amass an extensive Ferrari collection, after starting out as a plasterer and a general contractor, according to his obituary.
B&L, which maintains a relatively low profile, in 2015 sold a $690 million Manhattan rental-housing portfolio to Fairstead Capital and Blackstone Group LP.
©2018 Bloomberg L.P.