Browse By

Xinyuan Real Estate makes major changes in its stateside business

Back in 2012, Xinyuan Real Estate was the first Chinese firm to venture into New York’s real estate market. The company got involved with several high profile purchases, like the multi-million dollar acquisition of the RKO Keith’s Theater in Flushing, Queens, or the purchase of a $54 million luxury-condo development in Williamsburg. Even though the company was the owner of almost 1 million sf distributed all over New York City, new reports have shown the team in charge of the American branch of the firm –known as XIN Development- has been dismantled. Several of the team members were let go, whereas the rest flocked to other ventures. Three of the most high-profile projects owned by XIN were turned over to Kuafu Properties. This second firm is also based in China, but this one is backed by private equity. The projects remain owned by Xinyuan, but several aspects of the development process such as marketing, construction and investment will be handled by Kuafu. These news was confirmed by Shang Dai, CEO and co-founder of Kuafu. The entity managing these co-owned properties will be known as Xin Fu Development.

Even though these reports are fairly new, rumor on the street was that Xinyuan had long ago stopped looking for projects in the New York area. Several theories were made around this fact, but stricter capital controls and the high levels of scrutiny that overseas real estate developments require may be the most important reasons why Xinyuan has decided to back out. The timing of this decision is not random, either. Xinyuan has experienced a recent change in leadership and it has now a new CEO: Lizhou Zhang has replaced Xinqi Wang. An audit was conducted in the New York market, and results showed many customers were unhappy with what the company was offering which resulted in several lawsuits. It is highly likely this did not sit well with the Chinese offices, hence the final decision. Xinyuan held the record of priciest condo deal in Williamsburg with its project known as the Oosten, but it was this very same project the one hit with several lawsuits by contractors and tenants at the same time. Furthermore, the “days on market” number for the remaining units in this project was growing more and more, which probably raised a few eyebrows back in China. The total expected sellout for this project alone is set at $380.7 million.

The problems at the Oosten were not the only ones the company had to face in the States. The purchase of the RKO Keith’s theater cost the company several millions and found several landmark issues along the road. The project needed to tear down almost all of the existing structure in order to build a condo tower with 16 stories. The company had purchased this site back in August 2016, but little progress was made. Another purchase Xinyuan had made in NYC was addressed at 615 10th Avenue. This acquisition occurred back in November 2015 and cost the company $108 million, after they managed to secure a loan from Bank of Ozarks. This project called for the construction of condos, too. Even though the issues the company has been facing lately, progress on this project seems to be going as expected.

Some industry experts have expressed some mild concerns regarding this newly- established partnership with Kuafu. This company is very young and has a mixed track record with a fair share of controversy. The head of the company is called Shang Dai, and has invested $750 million in NYC alone. A project that was under construction called Hudson Rise appear to be in limbo, tied in legal battles with the company Kuafu had partnered with for the development. Either way, this decision appears to be at least interesting, and both companies have the potential to gain a lot from this new venture. After all, the companies know each other and there seems to be trust between them. Great things may be in store for them if they manage to reorganize in a timely manner. [The Real Deal]