SL Green gets restraining order against HNA at 245 Park Ave

Chinese conglomerate can’t sell assets to avoid paying $185M arbitration award

SL Green’s Harrison Sitomer with 245 Park Avenue
SL Green’s Harrison Sitomer with 245 Park Avenue (Wikipedia, SL Green, iStock)

A federal judge has granted SL Green’s request to prohibit an affiliate of HNA Group from dumping assets to avoid paying it $185 million in their long-running legal dispute over 245 Park Avenue.

The REIT obtained a temporary restraining order against the Chinese conglomerate that prevents its entity from selling assets until SL Green receives the $185 million, which was awarded in arbitration.

The order was issued last week by Judge John Koeltl of the Southern District of New York. HNA can’t sell any assets, or interests in assets, with an aggregate value of $1 million without providing 14 days’ advance notice to SL Green, according to the ruling.

The temporary restraining order is pending a judge’s ruling on SL Green’s motion to seize HNA’s assets until the former is paid. Koeltl said that SL Green is likely to succeed in its motion. The next hearing is scheduled for July 13, when the judge said HNA can argue why such an order should not be entered.

“SLG intends to vigorously enforce and collect on its significant arbitration award, including taking all necessary steps to stop HNA from improperly transferring assets pending a judgment on the award,” said the office REIT’s lawyer in the case, Kasowitz Benson Torres partner Paul M. O’Connor III, in a statement.

Attorneys representing HNA Group had yet to respond for comment.

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SL Green’s chief investment officer, Harrison Sitomer, sought the temporary restraining order last month, citing concern that HNA would move assets out of the court’s reach.

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The New York-based firm acted in response to an affiliate of HNA allegedly attempting to sell the Palisades Premier Conference Center in Rockland County. The Chinese conglomerate tried to sell the conference center last September and agreed to terms with a buyer in May, according to SL Green.

The $185 million award in May represented SL Green’s investment in 245 Park Avenue and other fees. It stemmed from HNA allegedly breaching agreements regarding SL Green’s initial investment and terms of guarantee, according to the REIT’s legal team.

The arbitrator, former judge Priscilla Hall, said that SL Green met its burden to show a “cause event” occurred. HNA argued that a bankruptcy filing by its affiliate PWM Property Management in October should have stopped the REIT’s efforts to recover its investment. PWM owned the tower on behalf of HNA.

The court battle over 245 Park Avenue goes back several years. PWM accused SL Green of failing to find a tenant to replace the departed Major League Baseball and said the building has not had a new lease since November 2018. The arbitrator said in May that HNA didn’t prove its allegation regarding MLB.

PWM also accused SL Green of intentionally trying to put the skyscraper into financial duress, claiming the REIT would benefit because of its interest in the building and ability to foreclose if PWM failed to make its payments.

SL Green invested $148 million in the building in 2018 when it came on as property manager. The REIT, which said it made the investment at HNA’s request, negotiated protections around the investment, including in the case of bankruptcy.

PWM pushed SL Green out as property manager after filing for bankruptcy last October. In December, a judge in bankruptcy court ruled PWM could cancel SL Green’s property management contract. SL Green has said it was unaware of PWM’s plans to file for bankruptcy.

HNA paid $2.2 billion to buy the 44-story building in 2017, before putting the tower on the market one year later. Last October, a Chinese judge approved a corporate restructuring allowing creditors of HNA to sell its assets.