540 West 21st Street gets conditional OK of plan, disclosure statement

By Sarah Lizee

Olympia, Wash., Sept. 11 – 540 West 21st Street Holdings LLC received conditional approval of its combined prearranged Chapter 11 plan of liquidation and disclosure statement, according to an order filed Friday with the U.S. Bankruptcy Court for the District of Delaware.

The hearing on final approval of the plan and disclosure statement is scheduled for Sept. 28.

The company filed bankruptcy in August with plans to sell its real property in New York.

As background, the debtor 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.

Lender Ray New York, LLC had 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. However, the proposal was rejected by a significant number of stakeholders, which indicated a preference for selling the property on an as-is basis.

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.

Under the plan, debtor-in-possession facility claims, other secured claims and general unsecured claims will be paid in full.

Holders of $85 million of first-lien claims are expected to receive an 88% recovery.

Holders of $28.18 million DZ claims are expected to receive a recovery of at least 57%.

Holders of Casco claims, intercompany claims, subordinated claims and equity interests will receive no recovery.

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

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