540 West 21st Street seeks $700,000 DIP loan via Ray New York

By Sarah Lizee

Olympia, Wash., Aug. 28 – 540 West 21st Street Holdings LLC is seeking approval of a $700,000 debtor-in-possession facility via Ray New York, LLC, according to a motion filed Monday with the U.S. Bankruptcy Court for the District of Delaware.

If approved, the company would have the option to request additional funding of up to $250,000.

The DIP financing is set to mature on Nov. 30.

Interest will be 10% per annum. Default interest would be 12% per annum.

There is a 3% closing fee and a 1% unused line fee.

As background, the company plans to sell its real property in New York. It had purchased the property with plans to secure financing and eventually build a 20-story, 275-foot-tall luxury mixed-use condominium building set to include 34 residential units.

However, since purchasing the property, the company has been unable to secure enough funding to complete construction of the project.

Financing attempts

The debtor had initially obtained a $20 million loan from Bank Hapoalim BM secured by a mortgage on the property.

In addition, West 21st Street Investment Member LLC, 540 W. 21st Development LLC, 540 West 21st Street LLC and 540 West 21st Street Investments III LLC were created as the ultimate owners of 540 West 21st Street Holdings LLC for the purpose of obtaining equity and additional unsecured debt financing.

West 21st Street Investment Member got roughly $5 million of unsecured financing from a single individual, 540 West 21st Development LLC got about $32 million of unsecured financing from various individuals and entries, many of which are also equity holders in 540 West 21st Development’s parent companies, 540 West 21st Street and 540 West 21st Street Investments II.

Meanwhile, 540 West 21st Street got about $178 million of unsecured financing and 540 West 21st Street Investments II obtained about $13 million of unsecured financing from various individuals and entities, many of which are also equity holders in 540 West 21st Street and 540 West 21st Street Investments II.

Starting in December 2021, Bank Hapoalim indicated that it was unwilling to extend more capital and informed the debtor that it intended to exercise remedies and collect on the original loan.

On May 9, 2022, Ray New York, with SL Green Realty Corp. acting as servicer, purchased the original loan from Bank Hapoalim and agreed to provide additional financing up to $80.45 million.

Ray New York then proposed a potential restructuring transaction where the debtor would transfer the property to Ray New York to complete development and then provide returns to the debtor and its stakeholders through a nonrecourse promissory note.

The debtor presented the terms to equity holders and unsecured creditors on Oct. 11, 2022, but a significant number of stakeholders indicated a preference for selling the property on an as-is basis as an alternative to pursuing the restructuring transaction proposed by Ray New York.

In November 2022, the debtor retained Jones Lang LaSalle Americas, Inc. to market and sell the property instead.

In June, the debtor and 550 W21 Owner LLC (Chelsea 540 Owner LLC), entered into a purchase and sale contract, which contemplated that the debtor would file the Chapter 11 case and engage in a bankruptcy sale process.

Ray New York also agreed to provide the debtor with enough financing to complete the transactions and fund operations throughout the case.

The New York-based real estate holding company filed Chapter 11 bankruptcy on Aug. 2 under case number 23-11053.

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