HFZ is behind on $160M in payments at the XI: lender

Lawsuit could be a precursor to more aggressive action by TCI

New York /
Jan.January 05, 2021 05:22 PM
Ziel Feldman and renderings of the West Chelsea property. (The Xi)

Ziel Feldman and renderings of the West Chelsea property. (The Xi)

 

In the ever-escalating drama engulfing one of New York’s most prominent condo developers, HFZ Capital Group is now facing a lawsuit from the lender on its biggest project.

The Children’s Investment Fund, a hedge fund that provided a $1.25 billion loan for the XI hotel and condo development at 518 West 18th Street in 2017, filed a motion in New York’s state Supreme Court Tuesday seeking a summary judgment and payment of $160 million.

According to the lawsuit, HFZ and its chairman, Ziel Feldman, guaranteed two mezzanine loans of $655 million and $100 million on the Chelsea development but failed to pay the required monthly interest payments between April and November last year, which TCI said triggered a default.

The lender claims HFZ and Feldman are now on the hook for the outstanding interest payments — about $160 million — along with other costs. TCI said in the suit that it does not expect HFZ and Feldman to meet their monthly interest obligations.

A spokesperson for HFZ said in a statement that the firm was “aware of the recent filing and takes Talos’s concerns seriously,” referring to a subsidiary of TCI, Talos Capital.

HFZ recently hired William Henrich, a turnaround specialist from Getzler Henrich, to restructure the company’s debts . Henrich, who is co-chair of Getzler Henrich, is now serving as HFZ’s interim chief operating officer, the HFZ spokesperson said. A representative for Henrich declined to comment on the XI loan.

The lawsuit could be a precursor to more aggressive action on TCI’s part. As a mezzanine lender, it could initiate a UCC foreclosure action if HFZ is in default, which would allow it to take over HFZ’s ownership stake in the $2 billion development.

In December, HFZ lost its equity stake in an industrial portfolio through a UCC foreclosure auction. That same month, it successfully stopped a UCC foreclosure sale on four mezzanine positions tied to its condo projects in Manhattan.

The company has been hit with a number of lawsuits from contractors and lenders over nonpayment this year. In October, Starwood Property Trust filed a lawsuit claiming HFZ owed the company $157 million on past-due loans.

HFZ is dealing with internal tumult as well. Nir Meir, a managing principal of the firm, left the company in December, prompting Feldman to take over day-to-day operations. The month prior, HFZ laid off and furloughed a number of staff, mainly from the construction side of its business.


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