Chinese conglomerate HNA Group is trying to sell the Midtown office building it bought for a near-record $2.2B last year. But finding a buyer willing to spend that kind of money will be a tall task.
New York City property values have gone down since HNA bought 245 Park Ave., some of its top tenants are leaving and the 1960s-era building is in need of heavy renovations, Bloomberg reports.
“You’d have to put a ton of money into it,” K Property Group Managing Partner Gregory Kraut told Bloomberg.
Kraut, who considered buying the property, estimates it needs around $850M in upgrades, including a new lobby and sprinkler system. It also needs a $230M investment to improve the spaces over time for tenants, according to Kraut.
JPMorgan Chase is its biggest tenant, occupying over 40% of the building, according to Bloomberg. The bank’s lease expires in 2022. Last month, JPMorgan announced it is building a new global headquarters at 270 Park Ave., and it could vacate its space at 245 Park when that building is ready.
Other tenants at 245 Park Ave. include French bank Societe Generale SA, Major League Baseball and alternative investment firm Angelo Gordon & Co. A new owner will be faced with vacancies of around 13%, reports Bloomberg, citing data from CoStar.
HNA, a prolific investor in United States commercial real estate over the last few years, now wants to sell around $4B worth of U.S. assets. The company is under pressure to liquidate amid strengthened capital controls in China. Last week, it was reported it is in talks to sell its stake in Hilton Grand Vacations.
Last month, it sold its 90% stake in 1180 Sixth Ave. to Northwood Investors LLC for $305M.
“When you’re marketing a $2B asset, the list of buyers is shorter,” Savills Studley Vice Chairman and co-head of Capital Markets Woody Heller said. “It’s more difficult to show a profit reselling something you just bought, particularly in a market where pricing hasn’t risen.”
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