Casco puts $539M Chelsea condo project in bankruptcy to prep for sale

Casco Development filed a chapter 11 petition in U.S. Bankruptcy Court in Delaware with a plan to sell the vacant development site at 540 West 21st Street in Chelsea, Manhattan to the entity 550W21 Owner LLC for an undisclosed price where it planned a $539 million luxury residential condominium project. PincusCo could not determine the identity of the true owner behind the Delaware-based entity.

Casco’s owner entity 540 West 21st Street Holdings LLC bought the property on January 30, 2014, for $50 million, and in July 2018 refinanced the debt with a $50 million loan from Bank Hapoalim. Noam Teltch, who signed on the previous mortgage is associated with Casco Development. Quinlan Development’s Marc Lazarus filed plans in 2017 for a 34-unit, 171,800 square foot building.

Casco submitted plans (CD180304) in 2018 to sell 34 residential condominium units for between $3.4 million and $58 million listing Uri Chaitchik and Noam Teltch as the principals. In April 2022, the anonymous entity Ray New York LLC bought the $50 million note secured by the project, as PincusCo reported at the time.

The project never obtained construction financing, and the owner now seeks to sell the property through the structured bankruptcy. 23-11053-MFW

According to the plans restructuring officer, Tomer Jacob, “The Debtor purchased the Property with the intent to obtain financing to eventually construct a 20 story, 275-foot-tall ultra luxury mixed use condominium building. The proposed development would include 34 residential units with a total area of 116,818 square feet, a 4,682 square foot retail component and a 48,737 square foot gallery…

“Debtor was and continues to be unable to secure funding to complete construction at the site and bring the project into existence…. On or around May 9, 2022, Ray New York, LLC (“Ray”), with SL Green Realty Corp. (“SLG,” collectively with Ray, “Secured Lender”) acting as servicer, purchased the Original Loan from Bank Hapoalim B.M. and agreed to provide additional financing up to $80,450,000.00 (“Loan”) pursuant to that certain Amended and Restated Second Consolidated Amended and Restated Promissory Note dated May 9, 2022…

“Secured Lender proposed a potential restructuring… On October 11, 2022, the Debtor sent a letter to its equity holders and unsecured creditors outlining the terms of Secured Lender’s proposal…On November 1, 2022, the Debtor sent a follow-up correspondence to its equity holders and unsecured creditors indicating that it would now seek to proceed with a sale…on November 9, 2022, the Debtor retained Jones Lang LaSalle Americas…

“I [Tomer Jacob] identified 550W21 Owner LLC (“Buyer”) as the party who provided the highest and best offer for the Property…. Debtor and Buyer then entered into a Purchase and Sale Contract dated June 13, 2023 (“PSA”) which, among other things, contemplated that the Debtor would file the present Case, engage in a bankruptcy sale process.”

The unsecured financing totaled $228 million, according to a PincusCo analysis of the filing: West 21st Street Investment Member LLC obtained approximately $5 million in unsecured financing from a single individual. 540 West 21st Development LLC obtained approximately $32 million in unsecured financing…540 West 21st Street LLC obtained approximately $178 million in unsecured financing from various individuals and entities…540 West 21st Street Investments II LLC obtained approximately $13 million in unsecured financing.

The unsecured creditors include a $28.75 million put option payment held by David Zwirner and a $958,000 brokerage contract dispute with JLL. The property is valued at $95.8 million using a cost basis, and secured and unsecured debt is $256.7 million, according to the filing. Ray New York LLC has a $75 million lien.

Marc Lazarus of 540 W 21st Street Holdings, Llc submitted a new building construction project for a 34-unit, 171,800 square-foot residential (R-2) building at 540 West 21st Street in Chelsea, Manhattan. The plan was filed with the New York City Department of Buildings on December 26, 2017 under job number 121187820 and was permitted on July 9, 2019. It calls for the construction of a 20-story building. The project is described in the filing as: filing new building as per plans.

Development

On the tax lot, the most recent condominium plan was filed by 540 WEST 21ST STREET HOLDINGS LLC to create 34 residential units and 2 commercial units in a building at 540 West 21st Street in Chelsea, Manhattan, called 540 West 21st Street Condominium that has a $539.3 million sellout, according to an July 27, 2018 submission to the New York State Attorney General. The principals of the sponsor, 540 WEST 21ST STREET HOLDINGS LLC, were Uri Chaitchik and Noam Teltch.

Marc Lazarus of 540 W 21st Street Holdings, LLC submitted a new building construction project for a 34-unit, 171,800 square-foot residential (R-2) building at 540 West 21st Street. The plan was filed on December 26, 2017 and was permitted on July 9, 2019. It calls for the construction of a 250-foot tall, 20-story building and was filed with the New York City Department of Buildings under job number 121187820. The project is described in the filing as: filing new building as per plans.

Violations and lawsuits

According to city public data, the property has received one DOB violation in the last year.

The property was involved in two lawsuits and zero bankruptcies over the past two years. The highest value suit was a $548,819 money judgment concerning a construction filed on May 19, 2023, by Renzo Piano Building Workshop against Casco Development.

The neighborhood

In Chelsea, The bulk, or 36 percent of the 52.4 million square feet of commercial built space are office buildings, with elevator buildings next occupying 28 percent of the space. In sales, Chelsea has the 6th highest sale turnover among other neighborhoods in the city with $2.4 billion in sales volume in the last two years. For development, Chelsea has near average amount of major developments among other neighborhoods and is the 17th highest in Manhattan. It had 2 million square feet of commercial and multi-family construction under development in the last two years, which represents 4 percent of the neighborhood’s built space.

The block

On this tax block, PincusCo has identified the owners of six of the 11 commercial properties representing 633,836 square feet of the 691,983 square feet. The largest owner is Casco Development, followed by Eagle Point Properties and then Larry Gagosian. On the tax block, there were two new building construction projects totaling 263,795 square feet. The largest is a 34-unit, 171,800 square-foot residential (R-2) building submitted by Marc Lazarus with plans filed December 26, 2017 and permitted July 9, 2019. The second largest is a 32-unit, 91,995 square-foot residential (R-2) building submitted by Mitch Solomon with plans filed December 17, 2012 and permitted December 20, 2013.

The owner

The PincusCo database currently indicates that Casco Development owned at least one commercial property with 30 residential units in New York City with 211,060 square feet and a city-determined market value of $13.2 million. (Market value is typically about 50% of actual value.) The portfolio consists of at least a single elevator property. It is located in Manhattan.

The surrounding

Within a 400-foot radius of 128 11 Avenue, PincusCo identified 12 commercial real estate items of interests occurred over the past 24 months. Of those 12 items, nine were sales above $5 million totaling $298.2 million. The most recent of the nine was David Zwirner Gallery which bought the 13,800-square-foot, one-unit mixed-use building (K2) on 527 West 19th Street for $11.7 million from Keith D. Jacobson on February 3, 2023. Of those 12 items, three were loans above $5 million totaling $1.7 billion. The most recent of the three was Albanese Organization in which borrowed $20 million from Dime Community Bank secured by the 29,600-square-foot, one-unit office building (O7) on 154 11th Avenue on November 17, 2022.

Correction: An earlier version of this post reported the petition was filed in U.S. Bankruptcy Court in Manhattan, but in fact it was filed in Delaware.

Direct link to the property’s ACRIS page and link to DOB NOW portal.