The Real Deal New York

HNA Group’s management style is causing real problems in the US

New owner of 245 Park Ave. accused of micromanaging, mishandling acquisitions
July 05, 2017 08:30AM

From left: Jason Chen and Adam Tan

The board and former CEO of a bankrupt travel company petitioned a California court to investigate Chinese conglomerate HNA Group, which invested $27.5 million in the U.S.-based firm but then allegedly engaged in “self-dealing, corruption, wrongdoing and bad faith.”

The petition highlights the challenges HNA faces as it embarks on an incredible overseas spending spree but in some cases insists on micromanaging its assets, the Wall Street Journal reported. HNA recently paid $2.21 billion for office tower 245 Park Avenue.

“It’s stretching their management bandwidth,” Edward Tse of consulting firm Gao Feng Advisory told the Journal. “They are dabbling in financials and logistics. It’s getting farther from what they are familiar with.”

HNA TRData LogoTINY first became involved in the travel firm, Travana, in 2015 and in May 2017 it agreed to buy a 90 percent stake. But shortly after, HNA’s CEO Adam Tan fired Travana’s CEO Jason Chen and called for a restructuring of the firm, which faced allegations of stealing a competitor’s technology. The company’s board later filed for bankruptcy. Chen accuses HNA of sabotaging Travana.

In another incident, HNA bought the California golf course Nicklaus Club in 2015 and insisted on approving all expenses. But it took seven months to approve fixing a well, causing the grass to dry up and members to leave, according to a former employee. HNA also failed to pay dues to the local homeowners’ association.

In March, The Real Deal took a closer look at HNA, which controls assets north of $100 billion and is now Deutsche Bank’s largest shareholder. HNA also has stakes in 850 Third Avenue, the Cassa Hotel and 1180 Avenue of the Americas. It’s trying to sell its 90 percent stake in 1180 Avenue of the Americas, which it bought in 2011 for $265 million.

Chinese regulators are reportedly looking into the high debt levels of HNA, which tallied $104 billion at the close of 2016, the Journal reported. [WSJ] — Konrad Putzier