ICBC contributes to $360 million USD syndicated debt package for the 100 East 53rd Street Project

Project narrative

On April 20, 2015, a syndicate of four banks — the New York Branch of the Industrial and Commercial Bank of China (ICBC), Malayan Banking Berhad (Maybank), the Bank of East Asia Limited (BEA), and First Commercial Bank Limited — entered into a $42,578,672 USD project loan, $247,421,328 USD building loan, and a $70,000,000 USD term loan agreement with 610 Lexington Property LLC — a Delaware-incorporated special purpose vehicle (SPV) and wholly-owned subsidiary of Delaware-incorporated SPV 610 Lexington Holdings LLC, a wholly-owned subsidiary of Delaware-incorporated SPV 610 Lexington Development LLC, a joint venture between of RFR 610 Lex Holdings LLC, a Delaware-incorporated wholly-owned subsidiary of Manhattan-based, privately-owned real estate investment, development and management company RFR Holding LLC (7% equity stake) and Delaware-incorporated 610 Lexington Venture LP (93% equity stake), which is a joint venture of Vanke 610 Lexington LP LLC (29.5% stake in 93% equity stake), a Delaware-incorporated wholly-owned subsidiary of Vanke Holdings USA LLC, the Delaware-incorporated U.S. subsidiary of Hong Kong-incorporated Vanke Property (Hong Kong) Company Limited, a wholly-owned subsidiary of Chinese residential property developer Vanke Co., Ltd., by Cinda 610 Lexington LLC (69.5% stake in 93% equity stake), a United States-incorporated wholly-owned subsidiary of Cinda 610 Lexington Holdings LLC, a wholly-owned subsidiary of Cayman Islands-incorporated Spring 610 Limited, a wholly-owned subsidiary of Cayman Islands-incorporated Heroic Season Limited, a wholly-owned subsidiary of Chinese state-owned asset management company China Cinda (HK) Asset Management Co., Ltd., and by 610 Lexington Venture GP LLC (1% stake in 93% equity stake), a Delaware-incorporated joint venture equally owned by Vanke Holdings USA LLC (50%) and by Cinda 610 Lexington Holdings LLC (50%) — for the 100 East 53rd Street Project. This loan carried a maturity period of five years and a final maturity date of May 1, 2020. This loan was secured by (i.e. collateralized against) a mortgage on 100 East 53rd Street and an assignment of leases and rents as charged by 610 Lexington Property LLC. ICBC served as the sole lead arranger for the debt. Holliday Fenoglio Fowler, L.P. (HFF) arranged the loan. This was claimed ICBC's first major construction loan and first leading of a syndicate {see pg.113 of ID#203519}}. The proceeds were to be used by the borrower to finance the construction of 100 East 53rd Street (also known as 610 Lexington Avenue), a 61-story luxury residential condominium tower with 94 for-sale residencies and ground- and second-floor retail and restaurant space and included a swimming pool, sauna, steam room, fitness center, yoga room, pilates studio, massage and spa treatment rooms, lounge, media room, and concierge service, at the corner of East 53rd Street and Lexington Avenue between Lexington and Park Avenues adjacent to the Seagram Building in Midtown East of Manhattan, New York City, New York. RFR and Vanke purchased land at the site in 2014, with Vanke as financial partner and RFR charged with the day-to-day construction and the sales process. In 2014, China Cinda paid $140.5 million USD for a stake in the project. Foster + Partners was the project designer. Hines Interests Limited Partnership was also involved in development advising. The project broke ground in February 2014. The project was due for completion in 2017. Construction finished in 2019. However, by the time the project was completed, the luxury condo market in New York City housing had come to be seen as overbuilt, and the outbreak of the COVID-19 pandemic further harmed it. Thus did issues with repaying the ICBC debt come to the forefront. Vanke alleged that as the loan approached maturity, RFR proposed a strategy to address the default by making the property's outlook look bleak, thereby leading to ICBC to offer a large discount on the loan, which would give RFR a disproportionate portion of the value of any such distressed refinancing. Since Vanke had 93% of the venture, it would give it almost all of the downside risk and it assessed the strategy as commercially unreasonable. Vanke alleged that Rosen told Vanke that it would force Vanke to buyout RFR's stake at a value exceeding its economic interest if Vanke did not cooperate with the strategy. When Vanke refused, RF tried to force a buyout of their position by refusing to act in a commercially reasonable manner and address the ICBC loan maturity default. RFR allegedly made a "low-ball offer" to ICBC for a loan modification that included principal forgiveness and an interest rate slash, which was rejected by ICBC, and thereafter ceased negotiations with ICBC. RFR allegedly claimed to Vanke that it would use the COVID-19 pandemic as a cover to delay, forcing ICBC to sue for foreclosure, which was intended to make ICBC lose patience with litigation and choose to negotiate a better deal. Vanke began to engage in discussions with ICBC without RFR, which was the subject of RFR's initial lawsuit claiming that the two were attempting to engage a deal that would leave out RFR. RFR claimed it had the exclusive right to discuss the loan with ICBC, but Vanke’s countersuit claimed the parties’ agreement had no such rate (and that ICBC's participation in the loan was because of Vanke's existing banking relationship). In mid-March 2020, ICBC notified the borrower that it would not extend the date and sent further notices for repayment. In late March 2020, Vanke offered to pay $75 million USD to buy 25 of the least expensive (most sellable) condos at 100 East 53rd Street at above then-current market prices to inject capital help handle loan payments and strengthen the borrower's negotiating position to obtain a potential one-year loan extension from ICBC. RFR blocked the offer since it argued it would only benefit Vanke (by allowing it to flip the units at a profit) and ICBC (giving it another year of interest and de-levering the loan) and make it impossible to repay the loan since the most expensive and sellable condos would be left, which Vanke alleged was a violation of the JV agreement. No was struck. In May 2020, the borrower defaulted on the construction loan. Because of the COVID-19 pandemic, there was a moratorium on mortgage foreclosures and because the New York State court system was effectively closed, RFR argued that ICBC was incentivized to modify the loan, and when it failed to do so, it blamed Vanke for trying to make an independent deal with ICBC. In August 2020, Vanke disclosed that an affiliate, PTB, had executed a participation agreement with ICBC to acquire a $115 million USD participation interest in the loan without RFR’s involvement or consent, thereby making PTB a controlling party over the remaining noteholders with the right to control enforcement of the loan. In late October 2020, Aby Rosen of RFR Realty filed a lawsuit against Vanke Holdings (USA) LLC, accusing it of an improper conflict of interest because of its affiliate's purchase of a $115 million USD interest in the $360 million USD syndicated loan and seeking damages and an injunction to prevent Vanke from using its interest to negatively harm RFR. On November 23, 2020, Vanke filed a countersuit in New York County Supreme Court seeking to remove RFR as the partnership’s managing member entirely, accusing of it behaving in order to deliberate harm the JV in order to obtain a buy-out of its own interest in it at an exorbitant rate and seeking its removal and all costs and attorneys' fees. Because the issues of the modification of the loan, Vanke alleged that in December 2019, when further capital was needed to cover expenses, overruns, and real estate taxes, Vanke funded its share but RFR refused, and that RFR breached the JV agreement in 2019 by signing a restaurant lease that required $15 million USD more than budgeted for developing the commercial space over Vanke's objection and that RFR mismanaged the sales of condo by making prices too high. In April 2021, Vanke filed another lawsuit claiming that RFR’s Rosen and Fuchs had missed nearly a dozen capital calls for the 100 East 53rd Street Project since 2019 and owed Vanke almost $700,000 USD. On April 20, 2021, ICBC filed a lawsuit in the New York County Supreme Court seeking foreclosure on 100 East 53rd Street because of the default, claiming the borrower still owed $270 million USD total, $248 million USD principal and $22 million USD in interest, had failed to repay despite numerous notifications, and had ceased paying real estate taxes in summer 2020.