HNA Is Said to Sell San Francisco Tower to Northwood Investors

(Bloomberg) -- China’s beleaguered HNA Group Co. is continuing to whittle down its real estate holdings as it seeks to reduce its massive debt load.

The company sold a San Francisco office tower, 123 Mission St., for about $300 million to Northwood Investors LLC, according to people with knowledge of the matter. HNA made a small profit, having paid $255 million for the property in August 2016.

Representatives for HNA and Northwood, a firm led by former Blackstone Group LP executive John Kukral, declined to comment. Industry publication the Real Deal reported the transaction over the weekend.

The 28-story tower, in the SoMa neighborhood, is on a block adjacent to the newly constructed Park Tower, leased by Facebook Inc. as its newest office in San Francisco. The building HNA is selling was developed by Shorenstein Properties LLC in 1986 and designed by Skidmore, Owings & Merrill LLP, an architecture and engineering firm responsible for properties such as the Burj Khalifa in Dubai. It’s fully leased, according to the building’s website.

Buyers have been encouraged by rent growth for such top-quality properties. Rates for Class A offices have climbed steadily to almost $75 a square foot from less than $50 a square foot in 2012, according to data from Cushman & Wakefield. San Francisco’s Proposition M, which limits the amount of new office space that can be added every year, has been another positive driver.

Real estate has been a saving grace for HNA, which has been able to make gains on its recent sales. That’s been critical for the company, which is under pressure to repay borrowings amassed through its $40 billion-plus acquisition spree.

Earlier Deals

Northwood, which manages some $7 billion, has bought from HNA before. The firm purchased 1180 Avenue of the Americas, a New York office tower that was majority-owned by HNA, earlier this year for roughly $300 million. That was at least $26 million more than the property’s value in 2011 when HNA bought its share.

HNA has also sold stakes in Hilton Worldwide Holdings Inc. as well as the hotel company’s spinoffs, Park Hotels & Resorts Inc. and Hilton Grand Vacations Inc. Earlier Monday, Bloomberg reported that HNA’s stake in Spain’s NH Hotel Group SA has attracted interest from potential buyers including Elliott Management Corp. and Apollo Global Management LLC.

Unusually, 123 Mission St. was owned by HNA Technology Investments Holdings Ltd., a unit of the Chinese company that focuses on technology transactions, according to two people with knowledge of the matter. Its real estate investments have traditionally been held by other affiliates.

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