Trump Administration Planning to Seize Stake From Chinese Company in 850 Third Avenue
President Donald Trump’s administration plans to seize the majority stake of Midtown East’s 850 Third Avenue from Chinese company HNA Group under an expanded federal statute to protect U.S. interest, The New York Post reported.
The move—by the Committee of Foreign Investors in the United States (CFIUS) reportedly under instructions from the White House—could strip HNA’s 90 percent share in the building between East 51st and East 52nd Streets and sell it off.
“Unfortunately or fortunately, no government official has written or called us about this, no one has said our management position is in jeopardy,” David Sturner, the president of minority partner MHP Realty Services, told Commercial Observer. “To us, it’s business as usual. We’re not affected.”
Sturner confirmed that his company has been hearing rumors for months about these plans—even though HNA maintained it wasn’t happening—and MHP has been looking for a partner to assume HNA’s share before the government does.
A spokesman for HNA did not immediately respond to a request for comment but told the Post that “it is grossly inaccurate and misleading to suggest” the seizure would happen.
Previously, the federal government could only take property from a foreign-owned entity if they were involved in criminal activity. The move to strip HNA of its stake is the first in the expanded CFIUS powers, according to Y. David Scharf, a partner and the chair of the real estate finance and restructuring at Morrison Cohen.
“We’re seeing this happen for the first time in real estate,” he said. “Real estate is a new add-on under the statute, literally eight days ago.”
The CFIUS committee was founded in the 1970s to block the takeover of American companies by foreign investors with the goal of protecting national interest and security, Scharf said. Congress expanded its powers this month to include intellectual property, technology and real estate.
Under the expanded jurisdiction, CFIUS can strip property from foreign companies if it’s located near a site that could jeopardize national security, according to Scharf. In this case, 850 Third Avenue also houses the New York Police Department‘s 17th Precinct, which is in charge of protecting Trump’s family when they’re in the city.
“The new law is very clear that it involves the purchase or lease of real property close to a U.S. military or sensitive facility,” said Scharf. “It’s not simply any building in the U.S. owned by somebody who’s not on the whitelist of countries.”
Targeting China under CFIUS is not unusual; former President Barack Obama expanded its use against the country. But Trump has also been involved in a trade war with China putting tariffs on tech goods, steel and aluminum, and his administration has used CIFUS more frequently, Scharf said.
This isn’t the first time HNA has come under review from CFIUS. Pressure from the committee caused HNA to back out of a nearly $100 million sale of SkyBright Capital in April, the Post reported at the time.
In the case of the 850 Third Avenue building, the debt-ridden HNA has been looking to sell its stake of the building recently, so manager MHP said the government takeover won’t impact it much.
“It’s not important to us,” said Sturner. “If it starts to affect renting then we’re going to have a problem.”