Renzo Piano-designed 100 Varick Street could become the first major New York development to get debt, equity and mezzanine financing all from China. The developers’ turn to China comes as U.S. lenders increasingly shy away from funding luxury condo development.
Bizzi & Partners Development, Halpern Real Estate Ventures and Aronov Development are raising EB-5 funds for their 115-unit, 320,000 square-foot luxury condo development in Soho, according to a press release from the leading Chinese EB-5 placement agency, Wailian Overseas Consulting Group. The developers already secured a $320 million construction loan from Bank of China and a $135 million equity investment from Cindat, the U.S. subsidiary Chinese investment firm Cinda Asset Management, as Crain’s reported in January.
It wasn’t immediately clear how much money the developers are raising through the EB-5 program, which offers foreigners U.S. visa in return for investments. Bizzi & Partners declined to comment, while Halpern and Aronov did not respond to requests for comment.
EB-5 investors typically provide mezzanine financing. If Bizzi and its partners manage to raise the funds, 100 Varick would become the first major New York development to get all three major layers of the capital stack – debt, mezzanine and equity – from Chinese sources. Presumably Bizzi, Aronov and Halpern hold equity stakes in the project, meaning it still won’t be entirely Chinese-funded.
Other projects have come close. Vornado Realty Trust secured senior and mezzanine financing for its luxury development at 220 Central Park South from Bank of China, but not equity. Meanwhile, Chinese developers in New York tend to mix in domestic financing. For example Xinyuan Real Estate secured a $165 million construction loan from U.S.-based Fortress Investment Group for its Oosten condo development at 429 Kent Avenue in Williamsburg.
As The Real Deal recently reported, domestic lenders are increasingly shying away from financing luxury developments amid slowing condo sales and global capital markets turbulence.
“Everyone’s a little worried,” Michael Stoler, a managing director at investment firm Madison Realty Capital, told TRD in February. “With anything at $2,500 (per square foot) or more, lenders are very cautious.”