A nine-unit condominium at 441 West 37th Street in Hudson Yards sat with an unresolved fire suppression system and unpaid municipal fines for years while the private equity firm controlling the building kept collecting rent checks on its unsold units. Now that firm, SME Capital Ventures, has agreed to pay more than $700,000 and hand control of the building's board back to the homeowners who live there.
The settlement, announced Tuesday, resolves a case that New York Attorney General Letitia James summarized bluntly: SME Capital Ventures “took control of a Manhattan condo building” and “abandoned all ownership duties at the building” while continuing to collect rent, according to a post from NY AG James on social media. “Companies can't put profits over New Yorkers' safety,” James said in that statement.
The building's troubles trace back to 2020, shortly after units first went on sale, when developer Levi Balkany borrowed $3 million from SME Capital Ventures and pledged his ownership stake in the property as collateral, according to the New York Attorney General's office. Balkany later defaulted on that loan, and SME Capital won a foreclosure auction in October 2023, taking control of the condo's corporate sponsor entity.
Rent Collected, Duties Denied
State investigators found that once SME Capital controlled the sponsor entity, the firm denied owning the company in order to avoid sponsor liabilities, even as it kept collecting rent on the building's unsold units, per the same account. That arrangement left basic safety inspections and building operations unaddressed for an extended period, according to investigators.
Under condo sponsorship rules, the party controlling unsold units typically retains seats on the building's board. But abandoning maintenance duties while still holding those board seats left resident owners stuck without functioning building management, the attorney general's office noted.
What SME Capital Must Pay
The settlement requires SME Capital to pay more than $523,000 to cover overdue building fees and to reimburse unit owners for costs they incurred renewing temporary certificates of occupancy and securing a permanent one. New York City's Department of Buildings requires valid certificates of occupancy to confirm that residential buildings meet safety standards.
SME Capital and two affiliated entities, 441 W 37 SME, LLC and West 37th ST, LLC, must also pay at least $139,918 in outstanding municipal fines and back taxes while repairing and certifying the building's fire suppression system, the attorney general's office said. Beyond the money, the settlement requires SME Capital to surrender control of the condominium's board of directors directly to the resident homeowners.
Martin Act Violations Cited
State investigators concluded that SME Capital violated the Martin Act, New York's primary statute governing real estate securities and condo sales, along with state laws barring repeated illegal business conduct. The Martin Act, formally New York General Business Law Article 23-A, requires condo developers and sponsors to file and maintain an accepted offering plan with the Attorney General's Real Estate Finance Bureau before marketing or selling units, according to MD Squared Property Group. The law grants the Attorney General exclusive authority over real estate offering disclosures in the state.
SME Capital Ventures is a private equity firm founded in 2012 and headquartered in New York City, led by managing principal Eran Silverberg, according to Thesis Driven. The firm specializes in structured real estate lending, distressed debt acquisitions, and opportunistic property investments through discretionary credit and equity funds.
Part of a Broader Pattern
Foreclosures on distressed mezzanine debt across New York City have increased in recent years, as rising interest rates and elevated construction debt service costs pushed developers into default, per The Real Deal. Mezzanine lenders frequently pursue UCC foreclosure sales when original borrowers fall behind on high-yield debt, a dynamic that mirrors how SME Capital ended up controlling the Hudson Yards sponsor entity in the first place.
The case adds to a string of enforcement actions from James's office targeting real estate practices across the city. In January, a $4.2 million judgment for defrauded families resolved a separate Brooklyn real estate scam targeting Chinese immigrant families. For 441 West 37th Street's owners, this settlement means the building's board — and its long-delayed repairs — is now finally in their hands.
