SL Green is entitled to a whole lot of green from an affiliate of HNA Group.
The Chinese conglomerate owes SL Green about $185 million from a dispute over 245 Park Avenue, former judge L. Priscilla Hall said in a ruling reported by the Wall Street Journal. The monetary compensation largely derives from an investment SL Green made at the skyscraper, as well as fees.
SL Green invested $148 million in the building in 2018 when it came on as property manager of the office tower. The REIT, which said it made the investment at HNA’s request, negotiated protections around the investment, including in the case of bankruptcy; PWM Property Management, the HNA affiliate that owns the building, filed for bankruptcy in October.
The arbitrator in the case said SL Green met its burden to show a “cause event” occurred. HNA argued the bankruptcy should have halted the REIT’s efforts to recover its investment, as is often the case.
The arbitrator also noted HNA making its case in bankruptcy court could’ve extended a stay on the arbitration proceeding with SL Green. Instead, the dispute has been litigated in arbitration.
The two sides have been engaged in a long-running dispute. PWM alleged SL Green failed to find a tenant to replace Major League Baseball, whose departure left the building without a new lease since November 2018; the arbitrator said HNA didn’t prove its allegation regarding the MLB.
It also alleged SL Green intentionally tried putting the building into financial duress, claiming the office landlord would benefit because of its equity interest in the building and ability to foreclose if PWM failed to meet its payments.
SL Green has pointed the finger at HNA, saying a lawsuit from the conglomerate was a “desperate attempt by HNA to deflect from its blatant neglect of this prominent office tower.”
PWM pushed SL Green out of its property management after filing for bankruptcy. In December, a judge in bankruptcy court ruled PWM could cancel SL Green’s property management contract, a decision SL Green said was disappointing. PWM was chasing MB Real Estate Services to manage the building.
Despite the drama, business continues at the office building. Hedge fund Verition Fund Management last month took 38,000 square feet at 245 Park, more than quadrupling its footprint as it moved from a building down the block.
HNA paid $2.2 billion to acquire the 44-story building in 2017, financing the acquisition with a $1.2 billion CMBS loan from JPMorgan Chase and others. A year later, it put the office tower on the market, as well as its Chicago skyscraper.
In October, a Chinese judge approved a corporate restructuring allowing creditors of HNA to sell its assets.
[WSJ] — Holden Walter-Warner