The Real Deal New York

Andy Zhu “mismanaged” Assi Plaza project in Flushing: lawsuit

Investor claims developer bungled project every step of the way, including $115M sale
By Rich Bockmann | November 06, 2017 02:21PM

Andy Zhu and a rendering of 131-01 39th Avenue

UPDATED, Dec. 5, 10:12 a.m.: Developer Andy Zhu is facing claims that he bungled the huge Assi Plaza development project in Flushing he just sold for $115 million, emptying the “proverbial piggy bank” with poor business decisions such as $44,000 in unauthorized booze purchases.

Hansen Realty Development Corp., which claims to own 75 percent of the partnership that sold the development site at 131-09 39th Avenue, filed a lawsuit in Manhattan Supreme Court seeking more than $60 million in damages, according to documents recorded Monday.

“Unfortunately, Zhu was uniquely unqualified to undertake a development project of that magnitude, and he grossly mismanaged the project form the outset,” Hansen’s lawsuit claims.

Zhu responded with a countersuit, claiming it was his partners’ inexperience developing in the United States that derailed the project.

According to the complaint, Zhu controlled the entity that held a 25 percent managing partner interest in the site, where he planned to build a 15-story, mixed-use building with 265 residential condos, 80 retail-and-office condos and a 250-room hotel.

Hansen claims the project was fraught from the start, with Zhu mismanaging the acquisition of the site in 2015, allowing the purchase price to balloon from $63 million to $79 million as he failed to close in a timely manner.

Hansen also claims Zhu funneled $1.8 million in “bogus commission payments” by failing to disclose he held a financial interest in the companies receiving the payments.

Among other charges Hansen levels at Zhu is that he made more than $150,000 in unauthorized purchases and billed them to the project, including a $44,000 splurge on alcohol.

The final straw, Hansen said, was when Zhu sold the project to investor Yuk Ming Yip for $115 million, a sale first reported by The Real Deal last week.

Hansen claims Zhu agreed to put the down-payment into an agreed-upon escrow account with the Industrial and Commercial Bank of China, but Zhu instead funneled it into a separate account and has ignored requests to meet and discuss the sale.

Zhu’s attorney in December filed an answer to the claims and a counter-suit naming Hansen’s Weiming Yin and Shu Sen Jia as defendants. As the majority stakeholder, major decisions on the project ultimately required the sign-off from Yin, and failure to successfully develop the project should lie with him, Zhu’s attorney claims.

“The suit accuses Andy for failing to develop the project, but as a 25-percent shareholder, these were not Andy’s decisions to make,” attorney Bing Li told The Real Deal.

Zhu’s answer to the complaint acknowledges that he received the commission on the sale, but said he was upfront with his role as a broker from the beginning. Zhu’s representatives also provided a copy of a certified letter stating that the down payment from the property sale is held in an ICBC account controlled by his representative, Yin and Jia.