A legal tussle between China Vanke and its partner in a Manhattan real estate project took a dramatic turn this week as their creditor, Chinese banking giant ICBC, moved to foreclose on the joint venture’s midtown high-rise.
ICBC on Tuesday filed a lawsuit in the New York County Supreme Court seeking foreclosure of the 61-storey luxury condominium at 100 East 53rd Street, citing a loan default by Vanke, China’s biggest residential developer, and New York-based real estate firm RFR Holding.
In the lawsuit, ICBC alleges that the two partners defaulted last year on $360 million in mortgage loans and still owe $270 million in principal and interest. The bank says it notified the joint venture in mid-March 2020, and numerous times thereafter, that the loans’ maturity date was 1 May 2020 and that it would not extend the date.
The JV’s repeated failure to make required payments leaves the lender no choice but to appoint a receiver and proceed with foreclosure, ICBC said in a court filing.
Midtown Dreams Frustrated
The foreclosure move is the latest chapter in a seven-year development saga for Vanke’s second-ever investment in the US, which spans a New York luxury condo boom and bust, as well as a since-stoppered wave of Chinese purchases of American homes.
RFR, controlled by Aby Rosen and Michael Fuchs, joined with Vanke and US developer Hines to break ground on the luxury condo development then dubbed 610 Lexington Avenue in February 2014.
Vanke president Yu Liang took part in the ground-breaking, together with officials from RFR and Hines chairman Gerald Hines, who died last year. The Norman Foster-designed tower, which stands adjacent to the landmark Seagram Building, was completed in 2019.
Vanke currently holds a 93 percent stake in the venture in Manhattan’s Midtown area, with the remainder held by RFR. But the two partners have been embroiled in a legal battle of their own since last year.
In late October, RFR filed a lawsuit against Vanke accusing the Chinese group of orchestrating “an irreconcilable and grossly improper conflict of interest” when an affiliate bought a $115 million participation interest in the building’s construction debt and became a controlling party in the loan. In November, Vanke filed a countersuit seeking to remove RFR as a managing member in the partnership.
Then earlier this month, Vanke filed another lawsuit claiming that RFR’s Rosen and Fuchs had missed nearly a dozen capital calls for the 100 East 53rd Street project since 2019 and owed Vanke almost $700,000.
Tough Going in NYC
Vanke’s plunge into the Big Apple was part of a drive to diversify into new markets and came on the heels of the 2013 launch of a $620 million joint project in San Francisco with Tishman Speyer.
“The 610 Lexington Avenue project is our first in New York City, and our second in the United States,” Vanke’s Yu said in 2014. “It truly reflects Vanke’s globalisation objective of forging strategic partnerships with world-class developers and learning through close collaboration.”
But by the time 100 East 53rd Street was topped out, the luxury segment in New York City housing had come to be seen as overbuilt. The development struggled to attract buyers, according to local property news website Commercial Observer, and the subsequent COVID-19 pandemic made matters worse.
Vanke achieved greater success in Manhattan through its partnership with local developer Tribeca Associates on the renovation of the Bush Tower office building, which it acquired in 2015 for $125 million. The company also bought a set of properties in Brooklyn, as well as making a controversial investment with local partners to take over a former Manhattan nursing home in 2016 for $116 million for a luxury condo project.
Reuters reported last June that Vanke planned to sell $1.02 billion worth of shares to raise capital to repay overseas debt financing and for development of domestic residential properties.