Ladle Full of Debt: HNA Property Group, the Chinese conglomerate that owns Midtown trophy 245 Park and is partnering with Tishman Speyer on three major New York projects, is facing a serious cash crunch.
The company first caught local attention with its deal for the Cassa Hotel in 2012 , and dialed it up from there: It partnered with MHP on 850 Third Avenue in 2016, and then pulled an Anbang with its $1,200-plus a foot deal to buy 245 Park . The origin story of HNA’s founder, Chen Feng, began to circulate in Manhattan: the humble Buddhist who pushed refreshment trolleys in the fledgling company’s two-jet enterprise, built it into a global powerhouse and became a major property hunter.
But in recent months, HNA has faced headwinds that have all but frozen its dealmaking. Its byzantine shareholder structure is being scrutinized in many of the countries it operates in, the Chinese government is frowning upon the kinds of headline-grabbing asset deals HNA has made its reputation for here, and the Fed’s rate hikes aren’t helping.
The company needs funds to cope with a reportedly $90 billion debt mountain, and Bloomberg reported last week that HNA told major creditors and government officials late last month that it could be short by at least $2.4 billion in debt payments due this quarter. So even though it’s struck deals to sell assets like 1180 Sixth and others, it’s taking drastic measures:
According to a report in the New York Times, it’s even resorted to soliciting high-interest loans from its own employees. One of the products it asked employees to buy into is called “Ladle Full of Gold.”
“We’re confident we’ll move past these difficulties and maintain sustained, healthy and stable development,” Chen told Reuters in an interview last month. But that’s surely cold comfort for the New York players who planned to do business with the company.
Tishman Speyer brought HNA on board as a partner on three major development projects, the Spiral and another Hudson Yards tower as well as the Wheeler above Downtown Brooklyn’s Macy’s. That’s nearly 5 million square feet of development and billions of dollars at play. Then there’s Norman Sturner’s MHP, which is operating 850 Third.
And then there are the banks. JPMorgan, Deutsche Bank, Barclays and others are lenders on 245 Park. Bank of America has already declared it won’t lend to HNA, citing concerns about its leverage and ownership structure.
If HNA can’t pay its bills back home, where does that leave its stateside partners and lenders? Chen was perhaps seeking to quell fears by speaking to Reuters, but he might have made them even more jittery.
“Our young leadership team, including myself,” Chen said, “hasn’t managed a global enterprise.”
The future of Forest City: HNA is just one of several big-ticket Chinese firms grappling with leverage issues. Another, according to a recent report from Moody’s, is Greenland Group , the lead developer of Pacific Park. Though it upped its stake in the beleaguered Brooklyn megaproject, it looks to be walking away from other sizable U.S. bets: it pulled out of a large North Hollywood project and is shopping around a hotel property in its Metropolis megaproject. Condo plans at Metropolis may also be up in the air, CoStar reported.
While all this is happening, Forest City, Greenland’s partner on Pacific Park, is going through its own identity crisis. The CEO of its New York division decamped for a new venture last month. A supposed investment in Downtown Brooklyn’s 420 Albee Square never materialized. And now the company is reportedly in talks to be acquired by Canadian conglomerate Brookfield.
Rankings revealed: The Real Deal’s long-awaited, much squabbled-over rankings of the city’s top brokerages are out, and there’s lots to chew on. On the commercial side, the Batman-and-Batman duo of Doug Harmon and Adam Spies helped propel Cushman & Wakefield to the top of the investment-sales ranking. Cushman did nearly $6.4 billion in business across 190 deals in 2017, up 38 percent year-over-year. CBRE’s I-sales practice, led by Darcy Stacom and Bill Shanahan, pulled in second with $6.02 billion across 29 deals, down 10 percent year-over-year.
And on the residential side, the pecking order at the top remained the same: Corcoran took home the gold with $6.29 billion in closed Manhattan sales in 2017. Elliman, even with 400 more transactions and a far bigger agent roster, had to settle for silver with $5.23 billion.
Chaser: TRD’s Rich Bockmann has a juicy read on what can unfold when brokers go to the mattresses over commissions.
“Perhaps some brokers will say they’re going to shoot you before they pull out the gun,” GFI’s Michael Weiser said. “But they’re still taking out the gun.”
(Paydirt is a weekly column that riffs on the biggest NYC real estate news of the moment, providing analysis and historical context on the deals and players that make this town tick. Read more from Paydirt here.)