Key Takeaways
- • SME Capital Ventures will pay $700,000 to settle an Attorney General investigation into mismanagement of a 9-unit luxury condo building at 441 West 37th Street (The Westerley) in Hudson Yards, New York.
- • The settlement requires SME to pay $523,000 in overdue monthly condo fees, $15,000 in reimbursements to owners for certificate of occupancy renewal costs, and a $54,000 penalty for violations.
- • SME acquired the building as sole bidder in a 2023 foreclosure auction after original developer Levi Bakalny defaulted on a $3 million loan, but subsequently neglected to pay building expenses while actively marketing units for sale and renting the penthouse at $12,000 monthly.
- • The settlement mandates repairs and certification of the building's fire suppression system and payment of $139,000 in associated fines and taxes—critical issues that prevented residents from selling or refinancing their units.
- • Homeowners will regain control of the condo board and the building's sponsor company oversight as part of the resolution.
Summary
Attorney General Letitia James secured a $700,000+ settlement with SME Capital Ventures, a private credit lender, over management failures at The Westerley, a 9-unit luxury condo building located at 441 West 37th Street in Manhattan's Hudson Yards neighborhood. The settlement addresses allegations of systematic neglect, unpaid fees, and misrepresentation spanning from SME's acquisition of the property through foreclosure in 2023 until the investigation's conclusion.
SME Capital acquired the building as the sole bidder at a foreclosure auction in 2023 after original developer and sponsor Levi Bakalny defaulted on a $3 million loan from the lender. Rather than assuming traditional sponsor responsibilities, SME allegedly failed to notify state authorities of its takeover of the sponsor company and withheld control of the condo board from homeowners—a material violation of condo governance structures.
The settlement's financial components address substantial unpaid obligations. SME must remit $523,000 representing the accumulated balance of monthly common charges, reimburse condo owners approximately $15,000 for costs incurred in independently renewing the building's certificate of occupancy, and pay a $54,000 administrative penalty. Additionally, the firm must commit $139,000 toward repairs and certification of the building's fire suppression system, along with related fines and back taxes. The AG's office emphasized that fire safety deficiencies created material risk to residents and prevented owners from executing sales or refinancing transactions without permanent occupancy certification.
Investigation records indicate SME engaged in contradictory conduct: while neglecting to pay monthly operating expenses, the firm actively marketed remaining units for sale through brokers and rented unsold inventory, including the building's penthouse unit at $12,000 monthly. This strategy prioritized revenue generation over fiduciary obligations to the building's sponsor responsibilities. The investigation launched in 2024 following formal complaints from residents regarding nonpayment and mismanagement.
As part of the resolution, homeowners will assume control of the condo board and the building's sponsor company, restoring standard governance structures. The settlement does not indicate reputational or portfolio implications for SME Capital, as Hudson Yards luxury condos represent an atypical investment class for the firm's core lending business.
SME Capital acquired the building as the sole bidder at a foreclosure auction in 2023 after original developer and sponsor Levi Bakalny defaulted on a $3 million loan from the lender. Rather than assuming traditional sponsor responsibilities, SME allegedly failed to notify state authorities of its takeover of the sponsor company and withheld control of the condo board from homeowners—a material violation of condo governance structures.
The settlement's financial components address substantial unpaid obligations. SME must remit $523,000 representing the accumulated balance of monthly common charges, reimburse condo owners approximately $15,000 for costs incurred in independently renewing the building's certificate of occupancy, and pay a $54,000 administrative penalty. Additionally, the firm must commit $139,000 toward repairs and certification of the building's fire suppression system, along with related fines and back taxes. The AG's office emphasized that fire safety deficiencies created material risk to residents and prevented owners from executing sales or refinancing transactions without permanent occupancy certification.
Investigation records indicate SME engaged in contradictory conduct: while neglecting to pay monthly operating expenses, the firm actively marketed remaining units for sale through brokers and rented unsold inventory, including the building's penthouse unit at $12,000 monthly. This strategy prioritized revenue generation over fiduciary obligations to the building's sponsor responsibilities. The investigation launched in 2024 following formal complaints from residents regarding nonpayment and mismanagement.
As part of the resolution, homeowners will assume control of the condo board and the building's sponsor company, restoring standard governance structures. The settlement does not indicate reputational or portfolio implications for SME Capital, as Hudson Yards luxury condos represent an atypical investment class for the firm's core lending business.
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