Chelsea office redevelopment placed in bankruptcy, estimated to be worth $80M

Property owner Erno Bodek filed an $80 million bankruptcy action Monday to maintain control of the delayed renovation and conversion of the commercial property called The Frame at 541 West 21st Street in Chelsea. In the filing he estimates the property is worth $80 million when stabilized, but it has $57 million in a senior loan and at least $4.7 million in a mezzanine loan provided by SME Capital Ventures. The property is also beset with mechanic’s liens.
Bodek made the filing one day before a scheduled February 14 UCC auction arranged by mezzanine lender SME Capital Ventures. The Real Deal reported on the UCC auction earlier this month.

Bodek of Erbo Properties has owned the property since the 1980s. He submitted a major alteration application for a rehab of the 58,592 square-foot commercial (COM) building at 541 West 21 Street in Chelsea, Manhattan. The plan was filed with the New York City Department of Buildings on March 19, 2019 under job number 121204990 and was permitted on February 20, 2020.
The project is described in the filing as: full interior renovation throughout with change of use on 1st to retail as shown on drawings filed herewith.

The industrial building in Chelsea has 65,307 square feet of built space according to a PincusCo analysis of city data. The property is owned by Erno Bodek. The parcel has frontage of 75 feet and is 98 feet deep with a total lot size of 7,466 square feet. The zoning is M1-5 which allows for up to 5 times floor area ratio (FAR) for manufacturing The city-designated market value for the property in 2022 is $16.7 million.

According to city public data, the property has received five DOB violations, $6,250 in ECB penalties, and $7,250 in OATH penalties in the last year.

According to the bankruptcy filing, “The Property was utilized primarily as storage space for many years. As the real estate market changed in the West Chelsea neighborhood of Manhattan and with the development of Hudson Yards, the Fee Owner elected to redevelop the Property into a first class modern office building. The Mezzanine Borrower and KOVA own the equity in the Fee Owner.

Bodek, in the filing, provided a narrative: “Because I had no experience in redeveloping commercial property in Manhattan, in October 2018, I entered into a contract with an entity known as HigherGround 541, LLC (“HigherGround”) pursuant to which HigherGround was retained to oversee and implement all aspects of the redevelopment of the Property (the “Development Management Agreement”). Construction commenced in or about July 2019. At such time, it was anticipated the redevelopment of the Property would be completed and the temporary certificate of occupancy would be obtained by the end of 2020.

“However, as set forth in more detail below, G-4 threatened to cease funding during the redevelopment phase unless I contributed additional equity monies or obtained additional debt financing. In the summer of 2021, G-4 threatened to cease funding even though monies were still available under the building loan unless I contributed additional monies. I contributed approximately $1 million of additional equity monies to the project which required me to sell certain assets.

“Still, G-4 required additional monies as a condition of funding monies remaining in the building loan and I was introduced to a lender willing to make a mezzanine loan. In November 2021, two new entities were created, and the Debtors obtained a mezzanine loan from 541 West 21 SME LLC [SME Capital Ventures]. The Mezzanine Lender made a mezzanine loan secured by the membership interest in the newly created Mezzanine Borrower in the amount of $4.7 million (the “Mezzanine Loan”). Proceeds from the Mezzanine Loan were utilized primarily for interest payments to G-4 and to a lesser extent for the continued redevelopment of the Property.

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