I might be answering my own question.
"HCX requires an NSX configured with an Overlay Transport Zone"
Source: https://docs.vmware.com/en/VMware-HCX/4.7/hcx-user-guide/GUID-30D954B5-C5CD-474A-B964-5A9DBDF1DA9E.html
NSX version and configurations:
Source environment:
Destination Environment:
Source: https://docs.vmware.com/en/VMware-HCX/4.9/hcx-getting-started/GUID-7C79D1AF-B213-4767-9DAB-D96B9D97A2BB.html
My initial understanding was that you did not need NSX if you did a simple VM migration. But for whatever reason, it looks like HCX needs an NSX overlay network at the destination. Could it simply be an HCX "limitation"?