Stalled Garment District condo conversion in bankruptcy

Chen Foundation at impasse with lender as project debt hits $70M

Chen Family’s Garment District Condo Conversion in Bankruptcy
Lucia Chen with rendering of 335 West 35th Street (X.com, Issac-Stern Architects/CityRealty)

The saga of a Garment District conversion from factory to fancy condos has a new chapter: Chapter 11, that is.  

The Chen family has put the entity that owns 335 West 35th Street into bankruptcy as it seeks funding to complete the project, records show. It also put a Soho property it used as collateral into bankruptcy.

The family bought 335 West 35th Street, a vacant, 12-story building near Penn Station, for $50 million in 2016, planning to redevelop it. The plan was for condo units, to be sold for a collective $99 million, and space for the family foundation’s TF Chen Cultural Center.

Shanghai Commercial Bank agreed in 2017 to lend the Chens $34 million, consolidating earlier loans and setting a December 2021 maturation date. The first sign of trouble surfaced in 2021, when the developer sued a loan broker it had retained for failing to close on $82 million in new financing from a South Korean firm in 2020.

Interest rates were still low at the time, but the pandemic had brought international travel and capital markets to a virtual standstill.

The construction lender, Shanghai Commercial Bank, refinanced the condo project in November 2020 for $60.6 million. But eventually it refused to keep funding the endeavor, the Chens’ bankruptcy attorney said.

“The condo project is 75 percent done and the borrower is in position to borrow another $15 million to $18 million, but the bank won’t let them,” said the attorney, Leo Jacobs. “Now it’s as if it became a loan-to-own.”

For the Chens, more than just 335 West 35th is at risk: They had used their Soho property at 250 Lafayette as collateral and made various guarantees to secure the loan. According to the bankruptcy documents, the ownership entities are valued at $50 million to $100 million with liabilities in the same range.

The 73,000-square-foot property on West 35th Street is 85 percent owned by Neo Image Enterprises and 15 percent by New Tent. Together the entities owe over $70 million.

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Designed by Issac and Stern Architects, the building is slated to have 65 apartments plus a penthouse on a newly constructed floor, as well as a roof deck, two-story gallery for the cultural center, gym and bike storage. It owes the city $2.4 million in late property taxes.

Google photos in August 2022 show the building clad in netting with a sidewalk shed in front. The most recent permit, for elevator work, was filed Jan. 5.

The Soho property used as collateral, a four-story loft building, is owned by the Chen Foundation, which owes $25.4 million on the mortgage, also from Shanghai Commercial Bank. The foundation is affiliated with renowned Taiwan-born painter Dr. Tsing-Fang Chen.

It is not clear why the project fell into trouble, but at one point last year the contractor stopped taking direction from the developer, Ted Chen, and instead was looking to the bank, Jacobs said. City records show a stop work order was issued in August after the site safety director quit.

The 2017 loan was renegotiated in 2020 but the developer needed more funding to complete construction. After the loan from South Korea fell through, the Chens tried to find other mezzanine lenders but allege they were thwarted by Shanghai Commercial Bank.

“Because of that, the clients can’t refinance and can’t get out from under. The lender keeps charging interest and the project is falling into distress,”  Jacobs said.

No one at the Shanghai Commercial Bank was available to comment.

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