The Real Deal New York

HFZ in talks for $1.2B construction loan from TCI

UK hedge fund among potential lenders for Chelsea megaproject

October 25, 2016 06:00PM
By Mark Maurer and Hiten Samtani

HFZ Chelsea

Ziel Feldman and a rendering of 76 11th Avenue in Chelsea (credit: Bjarke Ingels Group)

Ziel Feldman’s HFZ Capital Group is in advanced discussions to line up about $1.2 billion in construction financing for its Chelsea mixed-use megaproject known as the Eleventh, The Real Deal has learned. The loan, if it closes, would be one of the largest construction loans of this cycle.

The Children’s Investment Fund (TCI) is among the prospective lenders actively negotiating to provide the financing, according to sources familiar with negotiations. One source said the U.K.-based hedge fund signed a term sheet earlier this month to provide HFZ the funds.

Representatives for HFZ and TCI declined to comment.

The project is slated to cost $1.9 billion and will span a total of 950,000 square feet across two Bjarke Ingels-designed towers located at 76 11th Avenue, between West 17th and 18th streets. One will rise 400 feet; the other, 300 feet. There will be 240 condominium units, a 137-key five-star hotel operated by Six Senses Hotels Resorts Spas; and a 90,000-square-foot retail component. Feldman has said the apartments will likely ask between $4 million and $8 million, with price per square foot falling in the range of $3,750 to $4,000.

HFZ has been on the hunt for more financing for the project for much of the year. In February, the development firm was seeking to raise $250 million in EB-5 funds.

In May 2015, HFZ closed on the purchase of the trapezoid-shaped site for $870 million, or $1,100 per buildable square foot. The firm got $1 billion from a consortium of lenders including JPMorgan, BlackRock and SL Green Realty to cover acquisition and predevelopment costs.

Howard Michaels’ Carlton Group, which brokered the acquisition loan, is also advising HFZ on the construction financing, sources said. Michaels couldn’t be reached for comment.

The Children’s Investment Fund, founded by activist investor Christopher Hohn in 2002, has been one of the most aggressive lenders in New York City’s luxury condo market. It provided an $850 million loan to the Related Companies and Oxford Properties Group for 15 Hudson Yards, and was the lender on Macklowe Properties and CIM Group’s 432 Park Avenue, Silverstein Properties’ 30 Park Place, and Zeckendorf Development’s 520 Park Avenue.

HFZ is trying to lock in the funds at a time when condo construction loans are hard to come by, even for the biggest developers. Gary Barnett’s Extell Development is looking for a $900 million loan for Central Park Tower, and Macklowe is seeking $1 billion for his conversion of One Wall Street.

Extell did secure a $500 million construction loan for One Manhattan Square, and Related’s total loan for 15 Hudson Yards came to about $1.3 billion.

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