Hudson Hotel: Lender Forecloses, Files Chapter 11 to Save $440M Conversion

The Hudson Hotel, a 24-story Manhattan building that Ian Schrager and Philippe Starck renovated for $125 million in 2000, is the subject of a chapter 11 case involving a stalled hotel-to-residential conversion. Hudson 1701/1706, LLC and its co-debtor Hudson 1702, LLC filed for bankruptcy protection on October 22, 2025, listing between $100 million and $500 million in both assets and liabilities, after lender Parkview Financial foreclosed on the equity interests and assumed control of a stalled 440-unit residential conversion project. The case involves a lender serving dual roles as owner and DIP lender, 32 rent-stabilized single room occupancy tenants alleging harassment that triggered a construction stop-work order, a ground lessor threatening to terminate a 99-year lease and now seeking dismissal of the bankruptcy case as bad faith, and former developers disputing the restructuring terms.

The bankruptcy follows a development effort that began in May 2022, when CSC Real Estate acquired a 99-year ground lease to convert the shuttered hotel into market-rate apartments with Parkview Financial providing $207 million in financing. The conversion effort faced tenant harassment allegations, regulatory stop-work orders, and financing disputes that led Parkview to foreclose on CSC's equity just three months before the bankruptcy filing. The case shows how SRO tenant protections, New York City's Certificate of No Harassment requirements, and ground lease structures can affect hotel-to-residential conversions.

Property Background and History

Historic Origins (1929-1997).

The building at 356-358 West 58th Street dates to 1928-1929. Anne Morgan, daughter of financier J.P. Morgan, constructed the 24-story structure in 1928-1929 as the American Women's Association clubhouse and residence for young women in the city. The original building contained 1,250 rooms along with a swimming pool, restaurant, gymnasium, and music rooms designed to provide affordable housing and social infrastructure for working women.

The American Women's Association went bankrupt in 1941, and the building was converted into The Henry Hudson Hotel. During World War II, the property housed Dutch soldiers. In the subsequent decades, the building served various purposes, including housing WNET studios where the first tapings of The Daily Show took place. Throughout this period, a portion of the building maintained single room occupancy units that would later become central to the bankruptcy proceedings.

The Schrager/Starck Era (1997-2020).

The property's transformation began in 1997 when the Morgan Hotel Group purchased the building for $125 million. A three-year renovation led by Ian Schrager and designer Philippe Starck invested another $125 million into a boutique hotel.

Ian Schrager, the entrepreneur who co-founded Studio 54 and pioneered the boutique hotel category with Morgans Hotel in 1984, led the renovation. The renovation included new bars, a restaurant, and a nightclub. Schrager introduced the concept of "lobby socializing" at the Hudson. The property, rechristened simply as "The Hudson," operated 878 guest rooms.

COVID Closure and Sale (2020-2022).

The COVID-19 pandemic ended the Hudson's run as a boutique hotel. In April 2020, as New York City became the epicenter of the U.S. pandemic, the Hudson joined other major Manhattan hotels in providing 800 free rooms for healthcare workers arriving from out of state. The hotel also donated supplies of N95 masks, latex gloves, hand sanitizer, and disinfectant to local hospitals before closing permanently.

By November 2020, the hotel shut down all remaining operations. Eldridge Industries acquired the Hudson Hotel and Delano South Beach from sbe, with Cain International appointed to lead a strategic repositioning. The property had not undergone a major renovation in nearly 20 years, and New York City tourism data showed approximately 200 of the city's 700 hotels closed and nearly 40,000 rooms went offline.

In early 2022, Montgomery Street Partners purchased the property for $207 million from Eldridge Industries. CSC Real Estate, a Manhattan-based firm led by brothers Alberto and Salomon Smeke, agreed to a 99-year ground lease to redevelop the property. Parkview Financial, a Los Angeles-based alternative investment manager specializing in commercial real estate credit, provided a $207 million leasehold mortgage. The conversion plan called for approximately 440 market-rate rental apartments with over 50,000 square feet of retail space, targeting completion by May 2024.

Path to Bankruptcy

CSC Real Estate and the Conversion Plan.

CSC Real Estate brought experience to the Hudson project. Under the leadership of the Smeke brothers, CSC has acquired and repositioned over $4 billion in assets across the United States and Mexico, operating investments in over 10,000 properties. The brothers own the largest multifamily portfolio in Mexico.

The development plan was to convert the 878-room hotel into 440 market-rate rental apartments while maintaining approximately 51,474 square feet of retail space on the lower levels. The 99-year ground lease with Montgomery Street Partners (operating through 356W58 Ground Lessor LLC) established the framework, while the $207 million Parkview mortgage provided construction financing. Northwind Group later purchased a $100 million senior A-Note from Parkview as part of the financing structure.

The project faced a key complication: 32 single room occupancy units remained occupied in the building, housing 46 persons who were primarily low-income seniors, some of whom were homebound. These SRO tenants had legal protections under New York's housing regulations that constrained the conversion timeline.

The SRO Tenant Crisis.

The conflict with SRO tenants emerged after CSC took control. In June 2022, internal demolition of mechanical systems and partitions began while long-term tenants remained in occupancy. A Tenant Protection Plan was not presented until July 2022—after construction work had already commenced. Tenants received a letter stating demolition work would commence on February 6, 2023.

The tenants organized and brought their concerns to Manhattan Community Board 4 in September 2023, presenting alleged incidents of harassment. New York City's Housing Preservation Department documented 68 tenant complaints about the Hudson and issued 29 housing violations since the renovations began in mid-2022. The complaints described consistent problems: lack of hot water and heat, peeling paint, exposed wiring, and rodents.

On September 25, 2023, HPD made an initial determination finding "reasonable cause to believe harassment occurred." Under New York City law, new property owners must obtain a Certificate of No Harassment (CONH) before applying for permits to demolish or change the occupancy of buildings with SRO tenants. The certificate verifies that no tenant harassment has occurred during a prescribed look-back period.

After interviews with tenants, the owner's initial CONH application was denied. Under NYC regulations, this denial legally required immediate cessation of work on occupied floors. When HPD issued the denial, CSC was legally required to cease work on the occupied floors immediately. However, construction allegedly continued until the local community board pressured the Department of Buildings to issue a partial stop-work order in February 2024.

According to Manhattan Community Board 4's October 2024 letter to HPD, tenants were living in "semi-demolished, active construction zones." The board noted that the majority of these tenants are low-income seniors, some homebound. The partial stop-work order prohibited work on tenant-occupied floors, though construction continued on empty floors.

Financial Deterioration.

The stop-work order and regulatory delays led to financial pressure. The project missed the original May 2024 completion target. Construction delays reduced available liquidity as carrying costs continued while completion remained uncertain.

In November 2024, CSC defaulted on the loan maturity under the Prepetition Loan Agreement with Parkview. The ground lessor also demanded increased ground rent: the Fourth Amendment to the Ground Lease, dated March 29, 2024, increased base rent from $6.4 million per year to $8.75 million per year. The ground lessor also asserted multiple defaults including construction delay violations, mechanics' liens on the property, and failure to meet substantial completion deadlines—threatening to terminate the 99-year ground lease.

Union pension fund withdrawal liability totaled $17.285 million. In December 2024, the debtors negotiated a lump sum payment of $4.582 million to satisfy all future pension fund withdrawal liability.

By April 2025, CSC was facing foreclosure. The Smeke brothers averted the threatened foreclosure action, but only temporarily.

Parkview Lawsuit and Equity Foreclosure.

The relationship between Parkview and CSC deteriorated in mid-2025. On June 30, 2025, Parkview sued Alberto and Salomon Smeke in a lawsuit alleging "gross mismanagement" of the project. According to Parkview's complaint, the Smekes' mismanagement led to the stop-work order that halted construction.

The Smeke brothers contested Parkview's characterization. In their response, they argued that Parkview itself created the situation by failing to properly fund the project. Alberto Smeke wrote that "Parkview was facing financial struggles and repeatedly, and in bad faith, failed to fund" funding requests. The lack of funding, CSC claimed, caused multiple delays and problems at the project, including an inability to pay the general contractor and work stoppages. CSC released a statement calling the lawsuit's mismanagement claims "completely unfounded."

The lawsuit was discontinued with prejudice the following month, and Parkview proceeded with a UCC foreclosure. On July 25, 2025, Parkview conducted a UCC foreclosure sale on the equity interests. Parkview submitted a credit bid of $80 million of existing prepetition indebtedness, acquiring the equity interests and transferring them to PV Hudson LLC, a Parkview affiliate. Post-foreclosure, PV Hudson LLC became the sole member of each debtor entity.

CSC Real Estate no longer controlled the project. A settlement and release agreement dated August 7, 2025 formalized the separation. A representative for CSC confirmed that Parkview was now the only company involved with the project. The Smeke brothers were listed as creditors, with a claim of approximately $1.7 million in the bankruptcy schedules.

Chapter 11 Restructuring

Filing Strategy and First Day Relief.

With Parkview now in control and facing a ground lease termination threat, the debtors filed chapter 11 petitions on October 22, 2025, in Delaware. Parkview's stated goal was to recapitalize the building and continue pursuing the conversion of the 24-story building into 400+ units of rental housing without CSC Real Estate's involvement.

Alan Tantleff of FTI Consulting was appointed co-CRO on November 7, 2025. The First Day Declaration describes the development history, SRO tenant complications, and the events leading to Parkview's equity foreclosure. The bankruptcy filing invoked the automatic stay to prevent the ground lessor from terminating the ground lease, buying time to stabilize the situation.

First day motions included joint administration of the two debtor entities, approval of Kurtzman Carson Consultants (operating as Verita Global) as claims and noticing agent, and authorization of life-safety critical vendors on an interim basis. Insurance and utility motions received final approval by December 10, 2025.

The debtors filed a Ground Lease Extension Motion on November 20, 2025, seeking additional time to meet ground lease obligations. This motion was granted on December 12, 2025.

DIP Financing and Three-Way Opposition.

The most contested aspect of the case centers on debtor-in-possession financing. Parkview Financial, now serving as both 100% indirect owner (through PV Hudson LLC) and proposed DIP lender, sought approval of a $32.76 million DIP facility in the DIP Financing Motion.

DIP Financing Terms:

The court entered an Interim DIP Order on November 17, 2025, releasing $12.27 million in interim availability. Final approval faces opposition from three parties, each with different concerns.

DIP Financing Objections:

The three-way opposition reflects the conflict created by Parkview's dual role as both owner and lender. The former developers argue Parkview's earlier funding failures contributed to the project's collapse. The ground lessor questions whether the DIP adequately protects ground lease obligations. The UCC questions whether the DIP terms fairly balance the interests of unsecured creditors against Parkview's position.

The Smeke brothers also filed an objection to DLA Piper's retention as special counsel. The court denied DLA Piper's retention in January 2026 after the U.S. Trustee raised concerns about undisclosed conflicts stemming from DLA Piper's prepetition representation of Parkview.

Official Committee of Unsecured Creditors.

The U.S. Trustee appointed an Official Committee of Unsecured Creditors on November 25, 2025. The ground lessor—356W58 Ground Lessor LLC—sits on the committee, giving it influence over case strategy beyond its role as landlord.

UCC Professional Retentions:

The professional lineup includes FTI Consulting for the debtors, Province for the UCC, and multiple law firms.

Ground Lessor Dispute and Dismissal Motion.

On December 26, 2025, 356W58 Ground Lessor LLC filed a Motion to Dismiss the bankruptcy case, alleging that it was filed in bad faith to avoid a deadline for the residential construction project.

The motion argues that the debtors are using bankruptcy to avoid ground lease obligations rather than for legitimate reorganization purposes. The ground lessor had been asserting multiple defaults before the filing: construction delay violations, mechanics' liens on the property, and failure to meet substantial completion deadlines.

If granted, the dismissal motion would end bankruptcy protection and allow the ground lessor to pursue termination rights. If denied, the ground lessor's presence on the UCC provides a role in case oversight.

Industry Context: NYC Hotel-to-Housing Conversions

Market Dynamics.

The Hudson Hotel conversion reflects New York City's post-pandemic real estate market. According to NYC Planning, approximately 200 of the city's 700 hotels closed their doors since the start of the pandemic, with the city potentially losing about 30% of its hotels if those establishments remained closed permanently. Nearly 40,000 rooms went offline from a pre-COVID inventory of 127,810 rooms in over 705 hotel properties citywide. Tourism sector and demand for hotel rooms was not projected to fully recover until 2025.

Hotels can be converted in about half the time it takes to build apartments from scratch, and for a lower price, according to research from the NYU Furman Center. The same research identified barriers that complicate conversion attempts.

Regulatory Barriers.

Zoning and building code restrictions present hurdles to residential conversion of hotels in NYC. Hotels must be located in a zoning district that allows residential uses, or be within 800 feet of a residential district. Hotel conversions to affordable housing are "not feasible" without either government subsidies or property tax breaks. Rezoning a property through the Uniform Land Use Review Procedure (ULURP) can allow residential uses but is slow, costly, and uncertain.

The Certificate of No Harassment requirement applies to properties with SRO tenants. Under Local Law 1 of 2018, owners must prove there's no history of harassing tenants before certain building permits are granted. If denied a CONH, owners face a moratorium on the ability to significantly alter or demolish the building—typically lasting five years. Owners may enter into an HPD Cure Agreement to address harassment findings.

SRO Legal Protections.

The laws governing SROs are divided among the Administrative Code, Multiple Dwelling Law, and the Rent Stabilization Code. Under the Rent Stabilization Code, for coverage, an SRO building must house six or more units and have been built on or before July 1, 1969. A permanent tenant is defined as an individual who has continuously resided in the same building as a principal residence for at least six months. NYC Rent Guidelines Board data shows that of 4,474 units registered with the state housing agency, only 59% were registered as rent stabilized, with insurance costs for such buildings rising 21.7% in the most recent reporting period.

Administrative Code Section 26-521 prohibits evictions of SRO tenants where the tenant has lawfully occupied the premises for 30 consecutive days. Local Law 19 of 1983 prohibits an owner from harassing a permanent SRO tenant. These protections define tenant rights during conversion projects.

City of Yes Reforms.

In December 2024, the New York City Council approved "City of Yes for Housing Opportunity," updating zoning rules to allow for incremental additional housing in every neighborhood. The amendment expands the ability to convert non-residential buildings and broadens the universe of eligible buildings to those existing on December 31, 1990. Additionally, Governor Hochul signed legislation creating more flexible rules for converting underutilized hotel space into permanent housing, authorizing Class B hotels within 400 feet of residential districts to operate as permanent residential spaces. These reforms do not address the SRO tenant protections that affected the Hudson project.

Professional Retentions

Key Timeline

Frequently Asked Questions

What is the Hudson Hotel? The Hudson Hotel is a 24-story building at 356-358 West 58th Street in Manhattan, originally built in 1929 as the American Women's Association clubhouse. It operated as a boutique hotel after Ian Schrager and Philippe Starck invested $125 million to transform it in 2000, and it closed due to COVID-19 in November 2020.

Why did the Hudson Hotel entities file for bankruptcy? The entities filed after Parkview Financial foreclosed on the equity interests in July 2025 following construction stoppages and regulatory complications. A stop-work order related to tenant harassment allegations against 32 SRO tenants halted construction, the ground lessor threatened lease termination, and the debtors needed chapter 11 protection to recapitalize and continue the residential conversion project.

What happened to the original developers, CSC Real Estate? CSC Real Estate, led by Alberto and Salomon Smeke, was removed from the project after Parkview Financial foreclosed on CSC's equity through a UCC sale in July 2025, credit bidding $80 million. Parkview had sued the Smekes in June 2025 alleging "gross mismanagement," claims the developers characterized as "completely unfounded" while alleging Parkview failed to fund the project properly.

Who are the SRO tenants and what are their claims? Thirty-two single room occupancy units house 46 persons, primarily low-income seniors. They alleged harassment during construction, including lack of hot water and heat, pest control issues, exposed wiring, and living in "semi-demolished, active construction zones." NYC's Housing Preservation Department found "reasonable cause to believe harassment occurred," leading to a Certificate of No Harassment denial and a Department of Buildings stop-work order in February 2024.

Why is Parkview Financial serving as both owner and DIP lender contested? After foreclosing on the equity in July 2025, Parkview became 100% indirect owner through its affiliate PV Hudson LLC, while also serving as the DIP lender providing up to $32.76 million in financing. This dual role is the subject of objections by the UCC, ground lessor, and former developers in court filings.

What is the ground lease dispute? The ground lessor (356W58 Ground Lessor LLC) holds a 99-year ground lease and has asserted multiple defaults including construction delays, mechanics' liens, and failure to meet completion deadlines. The ground lessor sits on the UCC, objected to DIP financing, and filed a motion to dismiss the bankruptcy case as a "bad faith" filing to avoid a construction deadline.

What is a Certificate of No Harassment and why does it matter? Under NYC's Local Law 1 of 2018, owners must obtain a Certificate of No Harassment verifying no tenant harassment occurred before receiving permits for demolition or change of use. The Hudson project's initial application was denied after HPD found harassment, legally requiring cessation of work on occupied floors. A five-year moratorium on alterations typically applies to denied applications unless owners enter into a Cure Agreement.

How much does the DIP financing provide? The DIP facility from Parkview Financial provides up to $32.76 million, with $12.27 million available on an interim basis. The facility carries a 12% annual interest rate (paid-in-kind monthly) with a 12-month maturity that is extendable.

What is the plan for the property? Parkview intends to continue the conversion into approximately 440 market-rate rental apartments with over 50,000 square feet of retail space, with ground lessor and tenant issues ongoing. The bankruptcy filing aims to provide time to resolve regulatory issues, secure additional capital, and complete the conversion.

What are the key challenges facing the restructuring? The case includes contested DIP financing with three-way opposition (UCC, ground lessor, former developers), a bad faith dismissal motion from the ground lessor, unresolved SRO tenant issues requiring a Cure Agreement, a pending second Certificate of No Harassment application, and Parkview's dual role as owner and lender that has been raised in objections. An interpleader action filed in December 2025 adds litigation complexity.

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Who is the claims agent for Hudson Hotel?

Kurtzman Carson Consultants (Verita Global) serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

For more bankruptcy case analyses and restructuring insights, visit ElevenFlo's bankruptcy blog.