Stalled Hell’s Kitchen hotel and condo project may get boost from Chetrits
But original minority investor seeks to block new $15M infusion
A stalled Hell’s Kitchen hotel and condominium project that’s now just a large foundation filled with a few inches of standing water could get a much-needed infusion of $15 million, thanks to a Chetrit family member and a Brooklyn partner, who are poised to take control of the property. But a minority investor in the project, a firm that also does construction work, is trying to halt the new partnership, saying that it has not given consent.
The new investment is to recapitalize Assa Properties’ development at 511-515 Ninth Avenue, planned as the 12-story Galerie515 Hotel & Condominium Residences, designed by architect Costas Kondylis. The concrete foundation has been poured, but the project has been on the Department of Buildings stalled construction sites list since June 2009, agency records show.
Investors identified only as “Chetrit” and “Wolf” plan to make the $15 million contribution to take a controlling interest in the vacant development site on Ninth Avenue at 39th Street, near the access ramps for the Lincoln Tunnel, a lawsuit filed Wednesday in New York State Supreme Court shows.
The site has development rights for 196,633 square feet, information from PropertyShark.com shows.
Real estate insiders said Joseph Chetrit and Robert Wolf are frequent partners on deals, but calls to the Midtown-based Chetrit Group and Wolf’s Read Property Group in Borough Park were not returned.
The J Companies, a minority investor, is seeking to block the Chetrit and Wolf investment because the J Companies did not provide its written consent, as the development operating agreement requires, the lawsuit shows.
J Companies is claiming that it would be hurt by the new investment because it reduces its ownership interest and also “deprives [J Companies] of construction management work and its attendant profits.”
The J Companies are seeking an order from the court blocking the investment until it gives its consent.
J Companies’ attorney Jay Itkowitz, a partner with law firm Itkowitz & Harwood, declined to comment on the case.
Allan Brot, a principal with J Companies, bought a minority share in the deal in May 2009 with a payment of $1 million and a pledge to put in another $4 million during construction, court records show.
Assa ran into challenges during the downturn. In April 2011, it put its project Cassa Hotel & Residences at 70 West 45th Street into bankruptcy to protect its investment there. In February, it was announced that Assa Properties would sell the site to the Chinese firm HNA Property Holding Group.
Under the proposed investment agreement, dated Oct. 26, 2011, Chetrit and Wolf would put in $15 million over several months, following a due diligence and financing period. They would have a 50 percent interest and full control of managing construction, the court papers show. However, the Chetrit and Wolf entity will only get 45 percent of the cash distributions, with the balance going to the original investors.
The Chetrit Group is one of the city’s more active real estate firms, data from Real Capital Analytics shows. Even as the firm struggled in several investments amid the downturn — the large development site at 855 Sixth Avenue near Herald Square and the landmarked Temple Court property at 5 Beekman Street in Lower Manhattan, among them — the company has profited from other projects. For example, earlier this year the Chetrit Group and partner Stellar Management sold the 710-unit Columbus Square apartment complex to residential landlord UDR for $630 million, and more recently the Chetrit Group and a partner sold the Falchi Building at 31-00 47th Avenue in Long Island City for $81 million to Jamestown Properties.