HFZ loses control of 4 Manhattan condo projects
CIM Group takes over after UCC foreclosure auction
HFZ Capital Group has lost control of four Manhattan condo conversion projects as the developer fights for survival amid a blizzard of legal and financial problems.
Los Angeles-based CIM Group, one of HFZ’s lenders, last month foreclosed on the junior mezzanine positions tied to four properties: 88 and 90 Lexington Avenue; The Astor at 235 West 75th Street; and Fifty Third and Eighth at 301 West 53rd Street. Property records filed with the city Thursday show the transfer took place Jan. 7.
The handover puts an end to the back-and-forth between HFZ and CIM over control of the properties.
CIM first planned a UCC foreclosure sale in November, but it was halted by a New York State Supreme Court judge who ruled the process “created confusion in the marketplace” and required an “unreasonably high deposit to qualify to bid.”
But the ruling only stopped the sale temporarily. CIM initiated another UCC foreclosure auction for Jan. 7 and then made a credit bid — a bid using its existing debt — on the positions.
The positions had pledges of equity interest, which allowed the lender to take control of the properties. CIM will still be responsible for making the senior loan payments.
Marketing materials for the foreclosure sale showed that CIM’s junior mezzanine loans held a balance of $90.5 million. The properties’ total debt, including senior loans and senior mezzanine loans, amounted to $249 million.
The attempted conversion of the four pre-war rental buildings into condos was one of HFZ’s most ambitious undertakings.
The development firm, led by Ziel Feldman, initially paid Westbrook Partners $610 million for the four properties in 2013, teaming up with Fortress Investment Group on the buy. The portfolio consisted of 743 rental units, and the partners subsequently began the process of converting the buildings into residential condos.
The Manhattan condos are among several properties HFZ has relinquished in recent months. In December, Monroe Capital, one of the firm’s lenders, foreclosed on HFZ’s stake in a national industrial portfolio. And last month, Westbrook, its partner on the Belnord condo conversion in Manhattan, told The Real Deal that the developer’s “only remaining connection to the project is that it holds a minority non-controlling residual economic interest.”
Newmark’s Brock Cannon, Evan Layne and Brett Siegel led the foreclosure sale along with Dustin Stolly and Jordan Roeschlaub. CIM Group declined to comment. HFZ did not respond to a request for comment.
At HFZ’s marquee project, the $2 billion XI condo-hotel development in West Chelsea, lender Children’s Investment Fund filed a lawsuit last month seeking $160 million in summary judgment from the developer, which may be forced out of the project. The Zeckendorfs are reportedly in talks to take over the struggling development.
Elsewhere, HFZ is facing another UCC foreclosure action on the development site for its planned 600,000-square-foot office tower in NoMad. That site consists of eight parcels on the block between Fifth Avenue and Broadway and between West 29th and West 30th streets, with another under contract. With additional air rights and a bonus for a public plaza, the assemblage has 617,167 square feet of development rights.
The turmoil across the portfolio has rippled through HFZ’s offices. Last year, the developer laid off some 30 employees from the construction management side of its business.
And before the new year, Feldman split with his longtime partner, Nir Meir.
HFZ announced in January that it had brought on William Henrich — an adviser at the firm Getzler Henrich & Associates — as interim chief operating officer to oversee the development firm’s financial restructuring.
Henrich did not immediately respond to a request for comment on the transfer to CIM.