Photographer: David Paul Morris/Bloomberg

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Chinese Giant's Real Estate Selloff Picks Up Steam in San Francisco

Updated on
  • Chinese group bought 123 Mission in 2016 for $255 million
  • Talks are said to be preliminary with no guarantee of a deal

HNA Group Co. is in discussions to sell a San Francisco office building to private equity firm Gaw Capital Partners, according to a person with knowledge of the talks, as the Chinese conglomerate tries to shed billions of dollars in assets.

Discussions are preliminary and there is no guarantee of any agreement, said the person, who asked not to be identified because the talks are confidential. HNA and Gaw Capital didn’t respond to requests for comment.

HNA bought the property -- a 28-story tower at 123 Mission St. -- for $255 million in August 2016. Any disposal would add to the $6.7 billion in stocks and properties that HNA has sold in the past few months, according to data compiled by Bloomberg. The company has told creditors it will try to sell about 100 billion yuan ($16 billion) in assets in the first half of the year to pay debts and prevent a liquidity crunch.

HNA, which began as regional airline operator, is under pressure to cut a massive debt load it took on in a spectacular buying spree around the world as the Chinese government cracks down on what it has called “irrational” offshore investing by serial dealmakers.

In the U.S., HNA so far has sold its 25 percent stake in timeshare business Hilton Grand Vacations Inc. for $1.1 billion and the bulk of its Park Hotels & Resorts Inc. stake for $1.24 billion, leading observers to question whether its stake in Hilton Worldwide Holdings Inc. will be next. HNA has put about $4 billion of U.S. commercial real estate on the block. The company still has about $9.3 billion in assets to sell to meet a first-half target, according to figures compiled by Bloomberg.

Gaw Properties

Gaw Capital, based in Hong Kong, operates in the U.S. through affiliate Gaw Capital USA and associate Downtown Properties, which together have more than $2.7 billion in assets under management, according to Gaw’s website. Gaw properties in the U.S. include the Standard Hotel in Manhattan’s Meatpacking district and Embarcadero Square in San Francisco.

Read More: How HNA’s Meteoric Rise Switched to Dramatic Downfall

Should Gaw seal a deal, it would be the third consecutive Asian owner of 123 Mission in five years. Hong Kong’s Great Eagle Holdings Ltd. paid $179 million for the property in 2013 before selling it to HNA in 2016, according to company filings. Among reasons for the sale, Great Eagle referred to rapid price gains for downtown San Francisco office buildings.

The building, completed in 1987, is in the tech-heavy South of Market, or SoMA, neighborhood, three blocks from Salesforce.com Inc.’s new namesake skyscraper. Tenants at the tower, which is fully leased, include startup incubator RocketSpace.

— With assistance by Prudence Ho

(Adds previous HNA asset sales in fifth paragraph.)
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