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HNA Sued By One-Time Failed Purchaser Vasco Ventures (ZVG@Palisades) Over Breach Of Contract

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ZVG Asking Court To Compel HNA To Close On The Property Transaction; Files Notice Of Pendency To Prevent Pending Transaction To Proceed

By Tina Traster

The one-time buyer of the HNA Palisades Training Center that defaulted on its contract in 2019 claims it is still entitled to purchase the 106-acre campus on Route 9W in Palisades, according to a lawsuit filed this week in Rockland County Supreme Court.

ZVG@Palisades LLC has accused HNA of a breach of contract, saying its efforts to thwart the sale of the hotel and conference center two years ago violated terms of the contract. The plaintiff is asking the court to force HNA to convey title to ZVG in accordance with the original and amended contract. The suit also seeks unspecified damages from HNA for breaching its contract with ZVG.

Meanwhile, HNA is allegedly close to signing a contract with a team of California developers tapped by the Town of Orangetown to redevelop the property. Documents obtained by RCBJ show the developers have negotiated a $33 million purchase for the property and are seeking financing.

The lawsuit filed by ZVG also included a “Notice of Pendency” which puts potential buyers, title companies and financiers on notice of the lawsuit and effectively clouds title — meaning that the lawsuit likely needs to be settled or resolved before a transfer to another buyer could take place.

On April 19, 2019, the Brooklyn-based Vasco Ventures (ZVG@Palisades) entered into an agreement to purchase the center at 334 Route 9W for $40 million from its Chinese owners. Vasco put down, in three installments, a $2 million deposit. The closing date had been set for July 10th, 2019. However, the closing date was extended to September 2019, and the down payment was increased to $8 million.

In August of 2019, Vasco assigned its rights to ZVG, giving it the contractual rights to purchase the property, the complaint says.

By September HNA agreed to allow the closing deadline for ZVG@Palisades LLC, an entity affiliated with Vasco Ventures, to be pushed to Nov. 12th, according to court documents.

The suit alleges that “HNA was frustrating its ability to complete its financing,” and ZVG sought relief from the bankruptcy court after filing a Chapter 11 petition in the Eastern District of New York asking a judge to impose a 60-day extension to enable it to close the transaction.

HNA did not choose to contest Vasco’s request for 60 additional days to close. However, the agreement was contingent upon HNA keeping the $8 million deposit as liquidated damages. The agreement also stipulated there will be no additional court proceedings even if Vasco Ventures does not close.

But the current suit says that after the 60-day grace period, the transaction was still pending, and that HNA and ZVG were in continued discussions over the $40 million sale. ZVG was given more time to raise financing, the suit says.

“ZVG, through its lead investor Ephraim Vashovsky was able to complete negotiations on obtaining financing..,of $30 million…from Filmore Venture Capital LLC,” the suit says. But it then alleges that HNA refused to allow Filmore’s assessor access to appraise the property, which interfered with Filmore’s ability to complete its financing and close on the deal.

In 2020, after it seemed that HNA had no buyer at the table, Orangetown inserted itself into the future outcome of the property sale or redevelopment. The town put out a Request for an Expression of Interest (RFEI), which called for a “preferred developer or preferred development team” to facilitate the town’s redevelopment goals, which may include rezoning the site to enhance rateables.

It has been one year since REVEIL (the team of Mark Kitching and James Pelayo) was tapped by the town to redevelop the site – a process that eliminated at least two local developers from the pool. Michael Zarin, outside counsel for Orangetown said, the two sides are “actively negotiating and are working diligently toward making a deal, but there is no signed contract yet.”

REVEIL LLC, a Delaware Limited Liability Company, says in a capital request it’s in contract to purchase HNA for $33 million. The developers are seeking $26.5 million, which includes $5 million in acquisition, predevelopment, and financing costs to cover the purchase price for the hotel/conference facility owned by the Chinese entity. The capital request also represents that the team will provide $11.4 million in equity but it is ambiguous as to whether the team has an equity partner at present or is seeking one or more.

Between debt and equity, the team needs $38 million to acquire HNA, according to its capital request document.