Chinese government efforts to curb gray rhinos could play a big role in Manhattan’s trophy market
The industry news you need to know to start your week, and what's ahead
The best-laid plans of mice and men can be trampled by gray rhinos.
Gray rhinos (h/t Michele Wucker) are major structural problems in an economy that are ignored until they run amok, by which time it might be too late. In China, the term is being used to refer to the likes of HNA Group, Anbang Insurance Group and Fosun International, conglomerates that are now among the most important institutional investors in the New York skyline. They’ve amassed Manhattan trophies such as 245 Park Avenue, the Waldorf Astoria and 28 Liberty Street, pushing prices up and local players out. When they’re in the mix, sellers rejoice, developers salivate at the prospect of scoring well-capitalized partners, and brokers throw comps out the window – HNA, for example, bought 245 Park for over $1,200 a foot.
Over the past five years, Anbang, HNA, Fosun and Dalian Wanda Group have made at least $41 billion of overseas acquisitions, according to Dealogic data cited by the New York Times.
But the Chinese government is now trying to bring these rhinos to heel. Earlier this month, the official paper of the Communist Party called on regulators to act with greater urgency to prevent financial calamity. This could mean greater scrutiny on any deals these investors do, particularly overseas ones. And the increased scrutiny could lead to deals collapsing, or never getting off the ground. (China Investment Corp. was reportedly in talks to buy a 49 percent stake in 1515 Broadway, but SL Green Realty later said no deal had been reached.)
The past few months have already seen Chinese players assume soap opera-worthy roles in the tale of New York’s skyline. Anbang, for one, went from being the celebrated buyer of the Waldorf to being something of a pariah: Its chairman Wu Xiaohui went from giving speeches at Harvard and hobnobbing with Henry Kissinger to being detained by Chinese police. There was an abandoned deal for Starwood Hotels and a failed or fictitious deal for Kushner Companies’ 666 Fifth Avenue. And now, Bloomberg reports, the Chinese government has asked Anbang to sell its offshore assets and repatriate the funds – which means the Waldorf could once again be in play.
At Fosun, there was talk of a second detainment of its chairman Guo Guangchang. And at HNA, the past two weeks have seen a major reshuffling of its ownership structure after pressure from Beijing. Earlier this month, the Times reported that Bank of America decided to no longer do business with the firm.
If these Chinese rhinos retreat or are pulled back from the Manhattan trophy market altogether, there’s plenty of players waiting in the wings to take their place. But will they be willing to invest at the same mouth-watering terms? If not, will sellers adjust quickly enough to prevent a slump?
Here’s what else you need to know to start your week.
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