Xin Development Group Is Facing Its Third Foreclosure In 3 Months
An eight-story, 92-unit luxury condo property spanning a full Hell’s Kitchen block is heading to a foreclosure auction, the latest sign of difficulties for Xin Development Group International.
The property’s retail anchor tenant is big-box retailer Target, but that doesn’t seem to be enough to keep it afloat. Mezzanine lenders have filed to foreclose on Xin Development’s Bloom on Forty Fifth, with an auction set for Oct. 11, according to a public notice.
The property was built in 2020 and refinanced in 2021, scoring $90M in senior debt from Ares Capital and a $30M mezzanine loan from an LLC belonging to real estate investor and developer The Georgetown Co.
The Georgetown Co. has since sold the mezzanine loan.
The loan now belongs to DOF II-Bloom Mezz LLC, which has two addresses on file with the New York Department of State that both go to corporate addresses for shell company specialists. Those lenders are seeking to foreclose on the holding company that controls the luxury condo building — meaning a change of ownership could be imminent.
The winning bidder will acquire both the holding company for the building, Hudson 888 Owner LLC, as well as the senior loan and any other outstanding payments, including mechanics liens.
Xin Development, the U.S. development firm of Chinese company Xinyuan, didn't respond to Bisnow’s request for comment. The Georgetown Co. and Brett Rosenberg, a senior managing director at JLL and the broker handling the auction, both declined to comment for this story.
Xin Development is in trouble elsewhere in New York City. In July, a block of 21 unsold condo units at the developer’s luxury Williamsburg property The Oosten were put on the foreclosure block, according to The Real Deal.
The Oosten faced a similar ownership tussle as Bloom on Forty Fifth is slated for. Its auction was scheduled for July 25 after lender First Realty Capital Holdings bought The Oosten's $45M loan last November. Greg Corbin, the broker in charge of the auction and president of Northgate Real Estate Group, didn't respond to Bisnow’s request for comment.
Later that month, Maverick Real Estate Partners filed to foreclose on a $34M sum belonging to a Xin Development project in Flushing, The Real Deal previously reported.
That property, located at 135-35 Northern Blvd., had been home to a theater, with Xin Development filing plans for a 269-unit condo development on the site. But Maverick alleged that the developer went into default in January and began failing to pay its property taxes in May.
Bloom on Forty Fifth launched its leasing and sales process in early 2020, but it isn't clear how quickly units are being sold or rented. Douglas Elliman brokers in charge of sales and leasing at the building declined to comment to Bisnow.
Still, other brokerages’ numbers may offer some insight.
According to The Corcoran Group listings, around 27 of the units have sold, with one unit under contract to sell, 12 active sale listings and two units rented out.
Meanwhile, StreetEasy has different numbers: 15 active sale listings and two units under contract, but 75 total previous sales and eight previous rentals.
Selling units in the building or refinancing will be almost impossible amid a foreclosure suit, said Adelaide Polsinelli, a broker and vice chair at Compass.
“Those developers developed at the height of the market. If they didn't sell out, chances are they're in trouble,” she said. “Their debt may be coming due. And then what?”
Not helping matters for Xin Development is that New York City’s luxury condo market has been stagnant over the past few months, Compass broker Vickey Barron said.
“The world is nervous in general. So many people have analysis paralysis in a healthy market,” she said. “When you have a market with uncertainties and people nervous about what’s happening globally, in real estate it’s just another reason for them to panic.”
Xin Development’s predicament could just be part of the market’s cycle, or it could be indicative of a developer getting ahead of its skis, Scott Markowitz, co-chair of Tarter Krinsky & Drogin's bankruptcy and restructuring group, told Bisnow.
“We're in a troubled time. Whenever interest rates go off as fast as they did, anybody who's not well-capitalized is in trouble,” he said. “It could be that this developer owner got hot, too highly leveraged.”
It’s hard to tell exactly which bucket Bloom on Forty Fifth falls into, Markowitz said. But market factors are certainly part of the bigger picture, with bankruptcy filings increasing for the commercial real estate sector regardless of asset type, according to Adam Rogoff, a partner in the bankruptcy and restructuring group at Kramer Levin.
“There's been a pickup,” he said. “I think on the real estate side, usually what precipitates the filing is that it's a fundamental dispute between the borrower, the developer, and the lender.”