RFR accuses Vanke of “power grab” after condominium loan failure
UPDATED October 27, 3:45 PM: First came the housing market slower. Then came the pandemic. And now, Aby Rosen’s luxury development at 100 East 53rd Street is in a crisis because of an improper “backdoor deal”.
Partner Vanke US has “staged an irreconcilable and grossly inappropriate conflict of interest” that brought it “on both sides of the borrower-lender relationship without the consent of RFR,” claims Rosen’s firm in a lawsuit Filed in the New York County Supreme Court last Friday, Crain reported.
Vanke now has a $ 115 million stake in a defaulted $ 360 million loan for the project that the Industrial and Commercial Bank of China originally had deployed in 2015. The Chinese property developer now has the right to foreclose the property’s fate or make other decisions about the property’s fate, while at the same time having insider access to RFR’s plans – what makes it a “mole for the lenders” is called it in the lawsuit.
Dan Perry of Milbank, the law firm representing Vanke US in the lawsuit, said in a statement that his client believes “the lawsuit is unfounded”.
“Vanke believes the facts will show that it has consistently taken steps to protect the value of the project, while RFR has chosen to put its own interests above the interests of the partnership,” the statement said . “The purchase of a junior position in the bond was a last resort option that it deemed necessary to protect its significant stake in the project, remove the risk of short-term foreclosure, and stabilize the partnership.”
Perry added that Vanke gave RFR the option to purchase a proportion of the debt as well.
RFR selected Vanke as a partner in the development of 63 floors and 94 units in 2014, “mainly” because of the “overseas sales and marketing channels” that would help attract buyers from China, the lawsuit said.
The high hopes of the group to open up the Chinese market have not been fulfilled since Capital controls soon dampen the demand for luxury real estate. The loan defaulted on payment due in May this year.
A few months before the default, Vanke offered to buy 25 of the cheapest condos for about $ 75 million, according to the lawsuit, to repay the loan and allow for an extension. RFR rejected this as a “selfish” move that “made no economic sense” as it would “only be saddled with the most expensive and hardest to sell units” in the middle of the pandemic.
RFR states in the lawsuit that ICBC and Vanke, as China’s largest bank and one of the largest residential property developers, had a longstanding relationship that enabled them to carry out this “power robbery” – in violation of the terms of the contract that gave RFR exclusive rights Deal lender.
RFR’s other partners in development include Hines and China Cinda Asset Management, according to previous reports. These partners are not mentioned in the present lawsuit and their involvement is unclear. [Crain’s] – Kevin Sun
This story has been updated to include Vanke’s response.