Developer Jason Lee and his company Six Sigma NYC are being accused of defrauding investors in their Chelsea residential project at 517-523 West 29th Street, in a new lawsuit.
“Lee lured his investors with fancy websites, artistic renderings of the project, suggestions of luxury and purported associations with famous architects (such as Pei Partnership Architects, the sons of world-renowned architect, I. M. Pei),” according to the suit, which was filed by four of the project’s investors. Instead, the suit claims Lee caused the investors “financially devastating harm.”
It accuses Lee of using funds for the West 29th Street development on other projects and unrelated matters, along with paying himself developer fees that he did not earn or deserve. This apparently led to the companies owned by his investors to default on their loans.
Lee formed 29 West Chelsea Development LLC in 2015 to develop his planned 11-story condo project at the site, and his investors contributed a total of about $43 million to the project initially, almost $36 million of which came from the plaintiffs, according to the lawsuit.
Six Sigma bought the property — which straddles the High Line between 10th and 11th avenues — in 2015 for $54.8 million. The company then purchased 4,900 square feet of air rights the following year for $800 per buildable square foot.
Lee then used funds from his LLC to pay himself $3 million in developer fees and more than $250,000 in consulting fees, along with “numerous other payments to himself or for his personal benefit” that he was not entitled to, the suit says.
In 2017, Lee took out a series of loans from Churchill Real Estate Holdings on the 29th Street site for a total of $75 million, and the project’s investors put an additional $15 million into it, according to the lawsuit. However, the project still failed to progress, as Lee and his company did not move forward with demolition, permitting and construction work, the suit says. Lee’s company ultimately defaulted on the Churchill loan in late 2018, according to the lawsuit.
The lawsuit criticizes Lee’s commitment to finishing the project, saying that he withdrew as manager of it in October to transfer control to Churchill, and that all he did to advance the building was “squander capital, collect fees, co-mingle funds and spend money with little or no benefit to the project.” It cites a July 2016 article from The Real Deal as evidence that Lee was spending multiple nights a week clubbing when he was supposed to be working on the Chelsea project.
The suit criticizes his accounting abilities as well, claiming that he failed to properly account for about $47 million worth of funds for the project and that he “skimmed funds from the project budget and unlawfully retained those funds for himself.” Several ledger entries are either missing or unsupported, according to court documents.
Lee and attorneys for the plaintiffs did not respond to requests for comment.
This is not the only project from Lee that has recently faced troubles. His planned condo development at 435 West 19th Street just filed for bankruptcy for the second time in the spring. Lee previously filed for bankruptcy at the project last fall to avoid a foreclosure auction, and was facing a separate lawsuit there from Churchill that accused him of using a kickback scheme to pocket almost $300,000 in construction financing. The two sides settled the lawsuit in January.