Chetrit Sells 850 Third Avenue to HBS for $266M

Chetrit Group has transferred a 21-story Midtown East office tower on Third Avenue in Manhattan to the lender that helped it avoid foreclosure on the property in 2021.

Chetrit handed the 617K SF building at 850 Third Avenue to private investment firm HPS Investment Partners in a deal valued at $266 million—about 60% less than the price Chetrit paid in 2019 to acquire the building—according to a report from Pincus. The transaction, which closed two weeks ago, translates to about $431 per SF.

In 2021, a $177M CMBS loan Chetrit used to finance the acquisition in 2019 of 850 Third Avenue from the Chinese conglomerate HNA Group went into special servicing. Harbor Group International, which held a $25M mezzanine loan on the property, initiated a UCC foreclosure auction.

Chetrit refinanced the property, securing a $320M financing package from HPS, including a $220M senior loan and $30M in funding for a renovation of the tower, which was half empty at the time.

The property, with tenants including a Chase Bank outlet, which leases ground-floor retail space, generated $31M million in revenue, according to Pincus.

Chetrit acquired 850 Third Avenue in 2019 for $422 million, China’s HNA Group was the seller.

Earlier this month, an $85M pre-development loan that Chetrit secured for a property on West 37^th Street that is part of the Hudson Yards mega-development was put on the market by the lender, who has declared Chetrit in default.

Chetrit acquired the financial package, which originally included a $54M senior loan and a $31M mezzanine loan, for 545 West 37^th Street from JPMorgan Chase and Mack Real Estate Credit Strategies in 2018.

Mack, who subsequently took ownership of both loans, has declared Chetrit in default and is shopping the financial package as “a one-of-kind opportunity [to acquire] a direct and quick path to ownership” of the Hudson Yards property via a UCC foreclosure.

Newmark is marketing the debt for Mack. According to the offering, New York-based Chetrit still owes $85M on the mortgage, which includes a payment guaranty from Chetrit of $18.5M in the event of default.

Chetrit purchased the 545 West 37th Street for $27M in 2012, planning to build a hotel and residential development that never came to fruition. The site is zone for a 375K SF project within the Hudson Yards Special Purpose District, which includes several new Class A office towers as well as a luxury retail mall.

At the end of 2022, Trepp reported that Chetrit defaulted on a $481B loan for a national portfolio of 43 properties encompassing 8,671 apartments that it acquired in 2019 in a transaction financed by JPMorgan Chase.

According to the year-end report by Trepp, the mortgage for the portfolio entered special servicing in Q4 for majority default, an indication that Chetrit had failed to pay its lender the principal balance when the loan came due.

As of March 22, the portfolio had an occupancy of 76%, which hasn’t been high enough to pay the debt service on a floating loan rate pegged to Libor plus 5%, Trepp reported. The floating rate has nearly doubled the interest due on the loan.

Trepp’s report also said Chetrit is delinquent on a $225M mortgage for the Parkhill City apartment complex in Jamaica, Queens.

Chetrit purchased a portfolio of properties in 11 states spanning New York, the Sun Belt, Illinois, Indiana and Ohio from Bloomfield Hills, MI-based Roco Real Estate in a transaction valued at $573M the purchase price is adjusted at a loan-to-value ratio of 84%.