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

Lawsuit could be a precursor to more aggressive action by TCI

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.

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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.