A luxury condo project overlooking the Hudson is up for auction in the latest example of a Chinese developer facing distress in the United States amid tighter surveillance at home.
Lender Parkview Financial has launched a UCC foreclosure sale for interests in a 282-unit development in Weehawken, New Jersey, planned by the U.S. subsidiary of the Beijing-based Hongkun Group.
Hongkun USA bought the site for around $75 million in 2019, securing some of its funding through the federal EB-5 program, before receiving a $61 million loan last year from Parkview, a London-based REIT. Los Angeles.
The developer planned to go vertical with an amenity-rich skyscraper, which it would market to Manhattan workers who could have a cheaper cost of living and more space with a short commute. The project was to be one of the final components of a mega-development known as Port Imperial, which is expected to span 2.8 million square feet and include 1,500 condo units and 45,000 square feet of retail. detail on the ground floor.
But Hongkun’s plan ran into trouble as Chinese regulators began to crack down on excessive borrowing and low liquidity ratios by property developers in the country.
Megadevelopers such as Oceanwide Holdings have been forced to sell or abandon real estate projects in the United States in order to comply with new debt controls. China’s property market has also weakened, hurting developers’ incomes.
The demise of Hongkun and its affiliates appears to stem from a combination of factors. In December, the company’s Chinese residential construction subsidiary lacked sufficient liquidity to meet its upcoming debt obligations and had limited access to capital market financing, according to a Fitch Ratings Report.
A federal lawsuit filed in February by another Hongkun USA lender, New Asia International, reveals other possible reasons for the company’s problems.
The lawsuit alleges that a Hongkun representative said the company’s owner was detained in China in connection with a criminal case and that control of the company passed to the owner’s son. The lawsuit also said that Beijing Hongkun Weiye Real Estate Development, the Chinese home-building subsidiary, defaulted on its privately issued debt. The lawsuit ended in April.
Hongkun USA’s parent company, Hongkun Group, has $7.7 billion in assets, according to its website. His projects include the NBA Center in Tianjin, China.
Newmark’s Brock Cannon is spearheading the marketing for the UCC foreclosure sale, which is scheduled for June 29. Matthew Mannion of Mannion Auctions is the auctioneer.
A UCC foreclosure allows a lender to claim the interest in a property while bypassing the legal process. To foreclose, the lender must put the interests up for sale in a “commercially reasonable” auction. Often the lender wins the auction with a credit offer using their existing debt.
Neither Hongkun nor Parkview returned requests for comment.