Xin Development Group Places Luxury Condo Building Into Bankruptcy
A Chinese developer has placed its struggling luxury condo building in Hell’s Kitchen into bankruptcy protection months after its lender began pursuing foreclosure on the property.
The U.S. division of China–based Xinyuan Real Estate filed to place its affiliate that owns the 92-unit Bloom on 45th condo building at 500 W. 45th St. into Chapter 11 bankruptcy protection on Sunday.
Xin owes Fort Lauderdale, Florida-based investor BH3 Management $79.7M in senior and mezzanine debt on the property, which was built in 2020 and refinanced in 2021, according to an affidavit filed with the bankruptcy and signed by Xin Development CEO Sheng Zang.
BH3 acquired the loans from former senior lender Ares Capital and mezzanine lender The Georgetown Co., Bisnow previously reported. PincusCo first reported the bankruptcy filing.
Bloom on 45th has an estimated value of $123M, according to Xin. The property has five retail condos at its base, including big-box retailer Target as an anchor tenant.
The retail condo space is 98% leased and generating $3.4M in annual rent, Zang wrote in the affidavit, but 60 of the property’s 92 residential condo units remain unsold. Xin places a $53M value on the commercial condo units and a $70M value on the unsold residential condos in the building.
The bankruptcy petition says the pandemic and interest rate hikes negatively impacted the developer's ability to sell the condo units and restrictions on “cross-border transfers of funds outside of China” impacted its ability to make timely payments on the loan.
“While the cash flow from the retail leases and the condominium sales to date is adequate to fund all necessary operating expenses of the Project, it is not sufficient to also cover debt service in full as it comes due,” the petition says.
Restructuring conversations started in April when Ares and Georgetown sold their loans on the building to affiliates of BH3 Management, Zang wrote.
“BH3 began taking aggressive action,” he wrote, “pursuing every opportunity to foreclose upon their liens securing the Loans and showing little willingness to work with” Xin.
Less than a month after the loans sold, BH3 Management delivered Xin a notice of default on the property. By August, BH3 Management delivered a notice of foreclosure and scheduled an auction for Oct. 11.
Before the auction took place, Xin and BH3 agreed to a forbearance deal, granting Xin more time to get current on its loans after missing mortgage payments every month between November 2022 and September 2023.
But after Xin couldn't come up with $1.9M in time for an early November forbearance payment because of restrictions of capital coming out of China, Zang wrote, BH3 initiated another foreclosure proceeding.
Xin sued BH3 in November, arguing that BH3 hadn't negotiated the forbearance agreement in good faith, PincusCo reported. A state judge temporarily halted the auction, and the next hearing in the case is scheduled for Monday. Xin's Chapter 11 petition was filed the day before.
BH3 Management and Xinyuan Real Estate didn't immediately respond to Bisnow's request for comment.
BH3 Management was formed in the aftermath of the Global Financial Crisis and is anticipating significant opportunities in the current crisis to take assets, co-founder and co-CEO Greg Freedman told Bisnow in October.
Bloom on 45th is the third of of Xin Development's projects in trouble in New York City.
In July, lender First Realty Capital Holdings sought to foreclose on Xin’s unsold units at luxury Williamsburg property The Oosten. In the same month, Maverick Real Estate Partners filed to foreclose on a Flushing development owned by Xin where the developer had allegedly failed to pay property taxes.
