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Chinese Developer Behind Brooklyn Megaproject Placed On Default Watchlist

550 Vanderbilt Ave., the first building of Greenland Forest City's Pacific Park complex

The parent company of the co-developer of Brooklyn megaproject Pacific Park is the latest major Chinese property giant to face concerns about its ability to meet its obligations.

Shanghai-based Greenland Holdings has seen its bond credit rating downgraded by S&P Global Ratings to CCC, two levels below junk status threshold, leaving its investors at risk of nonpayment, The Real Deal reports.

S&P issued the downgrade Monday, referencing Greenland’s $2.4B of debt due over the next year with limited funds available to make payments. The developer has also had complications selling assets in China due to the recent two-month lockdown in Shanghai. Greenland Holdings’ bond price dropped by 50% to 41 cents on the dollar at the news, according to TRD.

The developer has requested extensions on some debt payments, and S&P could rate the company's credit as in “selective default” if approved. 

What impact the credit downgrade could have on Greenland USA, the U.S. arm of Greenland Holdings, and for its existing projects — likes Pacific Park, which has been in the works for more than a decade since prior to the Great Recession — is uncertain.

The Pacific Park development was championed by developer Bruce Ratner, whose Forest City Ratner built the Barclays Center at the heart of the site in Downtown Brooklyn, then set out to develop a massive, largely affordable housing project around the new arena, originally dubbed Atlantic Yards.

Early troubles came from community opposition and construction delays due to the recession, then Greenland acquired a 70% stake in Pacific Park in 2014 and increased its stake to 95% in 2016 as Forest City was first transitioning from private ownership to a publicly traded real estate investment trust to eventually being purchased by Brookfield Asset Management in 2018.

Other developers have since bought their way into the project: TF Cornerstone and the Brodsky Organization acquired the leases for three development sites in Pacific Park the same year Brookfield bought Forest City. Last month, Avanath Capital Management bought two apartment buildings in Pacific Park, totaling 601 units, for $315M.

Some investors believed Greenland would have less difficulty than Evergrande, another Chinese developer that has also been in financial trouble for months, following a move by the Chinese government to limit excessive borrowing for real estate developers. 

In March this year, lenders took control of $2.1B of Evergrande’s deposits, leaving the company unable to publish its year-end results. Greenland has also struggled to make payments but until now was thought to have the Chinese government in its corner, The Real Deal reported.

Other Chinese companies that have seen their investments in New York City commercial real estate sour include Anbang, which acquired the Waldorf Astoria for a record sum, Oceanwide Holdings, which lost control of a supertall development site in the Seaport, and HNA Group, which is working through bankruptcy on a $2.2B Park Avenue purchase.