HNA-Backed Owner of 245 Park Filed for Bankruptcy, Blaming SL Green

SL Green handles the day-to-day management, maintenance and operations of the Park Avenue skyscraper. It also serves as the exclusive leasing agent and was responsible for replacing MLB, which announced in 2016 it would be leaving the property after 20 years, according to the bankruptcy filing. 

MLB moved out of the building last year to 330,000 square feet in the 48-story former Time & Life Building in Midtown after 20 years on Park Avenue, the New York Business Journal reported. The Rockefeller Foundation temporarily relocated to MLB’s 245 Park space in a short sublease deal through 2022 while its own 420 Fifth Avenue headquarters is being revamped, The Real Deal reported. 

PWN Property Management alleges that SL Green hadn’t secured a new lease at the tower since November 2018 and was motivated to fail so it could foreclose on the property and take it over for itself, according to court records. The landlord plans to replace SL Green during the bankruptcy restructuring. 

Unless the building finds a new tenant for at least 90 percent of the baseball organization’s space, PWN Property Management would have to give its mortgage lenders $19 million in cash, Mohsin Meghji, the property owner’s chief restructuring officer, said in court documents. 

But SL Green says it was HNA’s own mismanagement that led to the building’s bankruptcy, and that it was committed to the building’s success. SL Green advised HNA to renovate the lobby and add amenities to make 245 Park more competitive with other office properties, saying in a statement that those improvements were necessary for the building to succeed. SL Green also invested nearly $150 million of its own capital in the property, a spokesperson said.

“This claim is a desperate attempt by HNA to deflect from its blatant neglect of this prominent office tower,” the SL Green spokesperson said in a statement. “As a result of HNA’s own financial distress in China, HNA has failed to deliver the funds necessary to execute the originally contemplated capital investment plan and has instead defaulted on their own lease obligations at the property, of over $7 million in arrears.”

Chinese financial services giant HNA was placed in bankruptcy administration in February and its creditors approved the company’s restructuring plan — snagging a $5.88 billion investment — in late October, Reuters reported. The firm took on heavy debt to acquire stakes in multiple businesses that Deutsche Bank and hotel chain Hilton Worldwide, but its liquidity worsened during the COVID-19 pandemic, which hampered the company’s flagship business, Hainan Airlines, according to Reuters. 

HNA put its Park Avenue tower up for sale three years ago in an effort to cut down on debt, valuing it at $2.21 billion, Bloomberg reported. SL Green secured part of the asset in 2018, paying less than HNA did when the Chinese company purchased the building in 2017 for $2.2 billion, Commercial Observer reported at the time. SL Green was the mezzanine debt lender to HNA when the last round of financing closed in the deal. 

While it was unclear at the time how much of the building SL Green was buying, PWN Property Management said in court records that SL Green owned a 49 percent equity interest in one debtor company, 245 Park JV LLC, which holds 50 percent of the $568 million in outstanding mezzanine debt and the servicer of the mezzanine loans.

HNA did not immediately respond to a request for comment.

Celia Young can be reached at cyoung@commercialobserver.com.