Very few can afford to take a $2 billion bite out of Manhattan’s skyline. Chinese conglomerate HNA Group just joined that cadre.
Though HNA may not be a household name here, it is a major player in China with a serious appetite for global real estate. The company and its associates, which control assets of north of $100 billion, did about $34 billion in deals between October 2015 and October 2016, according to Bloomberg. Those transactions included the $6.5 billion acquisition of a 25 percent stake in hotel chain Hilton Worldwide Holdings.
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The company began in 1989 as a private airline in Hainan, the smallest and southernmost province of the People’s Republic of China. As the legend goes, founder Chen Feng, who formerly worked at China’s state civil aviation administration, started his airline with just two jets and even pushed the refreshment trolleys himself. He later persuaded investment titan George Soros to pump $25 million into the airline, eventually floating the company on the Shanghai Stock Exchange.
It now spans dozens of corporate entities with interests in property, logistics and tourism. Only a fifth of HNA’s 2015 revenue came from air transport, according to Bloomberg. It announced a new partnership with Singapore’s AEP Investment Management Tuesday to launch a $1 billion real estate investment trust anchored by several office properties on the eastern seaboard and in Singapore, the Australian reported.
In February, it bought a 3.04 percent stake in Deutsche Bank for about $740 million, making it the fourth-largest shareholder in the German lender. Last year, it paid $6 billion for Ingram Micro, a California-based wholesaler of IT products. And, in 2015, it paid about $2.5 billion for Ireland-based Avalon Holdings, an airline leasing company. It also owns a stake in Virgin Australia.
HNA has also made a mark in New York. Last year, it partnered with Norman Sturner’s MHP Real Estate Services to buy a 614,000-square-foot office tower at 850 Third Avenue from Shorenstein Properties for $463 million. In 2012, it bought the Cassa Hotel, at 70 West 45th Street, for $130 million. The year prior, it ponied up $83 million in Cash to buy a 90 percent stake in 1180 Avenue of the Americas from the Carlyle Group in a deal that valued the stake at $259 million.
But its latest acquisition, of Brookfield Property Partners’ 1.8 million-square-foot office tower, elevates its bet on the city to a different level. HNA has a yet-to-be-identified partner on the purchase, sources told TRD.
The firm’s recent spending spree has led some to speculate that it might be in danger of overleveraging. A senior Chinese banking official recently told the Financial Times that he didn’t understand where all of HNA’s money was coming from, while others said that the speed and lack of coherence with which the company had expanded raised some questions about its risk analysis.
On the flip side, diversification abroad may be understandable given the economic uncertainty faced by Chinese investors at home. The U.S. market may seem far more stable by comparison.
Chen certainly doesn’t shy away from flashy deals. He bought into one of New York’s most ostentatious buildings, Extell Development’s One57, paying $47.37 million for an 86th-floor pad several years ago. (His brother, Guoqing Chen, a co-founder of HNA, bought an 88th-floor unit for $47.4 million, according to city records and news reports.) And last month, the Daily Mail reported that HNA was eyeing an investment in English soccer club Chelsea F.C.
But despite these headline-grabbers, Chen, a 60-something Buddhist whose headquarters is shaped like a sitting Buddha, reportedly likes to keep things low-key in his personal life.
“I’m different from the other entrepreneurs in China,” he told the South China Morning Post in 2014. “I don’t drink, smoke, have banquets, go to karaoke or get massages.”
Correction: In a previous version of this story, The Real Deal misstated HNA’s stake in Hilton