Vanke US has opened up a new front in its ongoing battle with RFR Holding over control of a Midtown condo tower project that defaulted on its construction loan last year.
The company, which is the U.S. subsidiary of one of China’s largest real estate developers, is seeking a judgment of nearly $680,000 against RFR co-founders Aby Rosen and Michael Fuchs according to a new lawsuit filed in New York County Supreme Court.
That sum stems from RFR’s failure to meet capital calls beginning in December 2019, for which Rosen and Fuchs “irrevocably, absolutely, and unconditionally guaranteed the payment and performance,” according to an affidavit from Vanke US managing director Kai-yan Lee.
According to the joint venture agreement between Vanke and RFR, Vanke was required to fund 93 percent of each capital call while RFR would fund the remaining 7 percent — reflecting the partners’ respective stakes in the JV behind the 63-story, 94-unit development at 100 East 53rd Street.
While Vanke has continued to fund its share, RFR has refused to do so — with unpaid contributions now totaling more than $590,000, plus over $88,000 in accrued interest, according to the suit. Most of the amount owed comes from the December 2019 capital call, for which RFR was supposed to pay $408,800 per Vanke’s calculations.
Representatives for Vanke and RFR did not respond to requests for comment.
The dispute over the project first entered the public eye in October, when Rosen’s firm filed a lawsuit accusing Vanke of making a “backdoor deal” with Industrial and Commercial Bank of China that gave it an interest in both sides of the $360 million construction loan that defaulted in May.
In response, Vanke claimed that RFR was intentionally sabotaging the project in order to extract an “exorbitant buyout” of its minority stake — a strategy that had already begun before the pandemic, with the refusal to fund the December 2019 capital call.
In filings in the ongoing lawsuit, RFR’s lawyers acknowledge that the company has not made any capital contributions since December 2019, after informing Vanke that “it made no economic sense to contribute such funds without a plan to address the upcoming [May 2020] maturity.” But they note that “the failure to fund a capital call cannot be a ‘For Cause’ event” that would allow Vanke to remove RFR from the partnership, according to the LLC agreement.
Vanke’s lawyers accept that the capital call issue alone is not enough to remove RFR from the project, but argue that it reflects a broader pattern of bad behavior.
“RFR’s abject failure to provide much needed capital to the company in a time of distress (to avoid default) demonstrates that RFR does not have the company’s interests in mind and is committed to starving the project of needed capital in order to force a buyout,” they wrote in a March memorandum.
Both RFR and Vanke have issued capital calls for additional funds to cover expenses at the project over the past year, according to court filings.