Olayan America, a division of Saudi conglomerate Olayan Group, is in contract to acquire the former Sony Building at 550 Madison Avenue for more than $1.3 billion, after the Chetrit Group and David Bistricer’s Clipper Equity scrapped its plans to convert the upper floors of the property to residential condominiums, The Real Deal has learned.
The deal is expected to close in May, sources said. Olayan is partnering on the purchase with Chelsfield, an asset manager active in Europe and Asia. Chelsfield will hold a minority stake in the property and the partners will continue to operate it as an office building, sources said.
JLL’s Yoron Cohen is representing the buyer, while Eastdil Secured’s Doug Harmon is representing the seller.
Representatives for Chetrit and Bistricer could not be reached for comment, nor could the brokers.
In early 2013, Chetrit and Bistricer agreed to pay Sony $1.1 billion for the 37-story, 850,000-square-foot building, located between East 55th and East 56th streets. The following year, the partners filed plans to convert the upper floors to 96 residential condos, to be designed by Robert A.M. Stern. The developers were aiming for a $1.9 billion residential sellout. In January, the project entered a “soft sales” phase, with Douglas Elliman’s Roger Erickson tapped to market the units. The 21,000-square-f
Rendering of the condos at 550 Madison Avenue (Credit: DBOX)
“It was just one of those offers that was too good to pass up,” Elliman chair Howard Lorber said about the sale on Monday. Lorber said the project would have performed well in the market, despite concerns of a slowdown for ultra-luxury product. “Is the market a little bit tougher than it was before? Yes. But this would have sold,” Lorber said.
Construction began on the condo-hotel conversion in March. German hotel operator Oetker Hotel Management Company had agreed to run the 170-key New York Masterpiece hotel.
For the acquisition, the developers secured around $300 million in mezzanine debt from SL Green Realty and a $600 million mortgage from the Bank of China. In March, Crain’s reported that though the partners secured a six-month extension for that amount, they were still searching for a new $1.4 billion loan that would pay off SL Green and Bank of China and pay for the conversion. However, such financing was hard to come by, with lenders uncertain about the depth of the luxury market and concerned about potential oversupply. Other developers have also shelved condo conversion plans, including Steve Witkoff at the Park Lane Hotel.
Founded in 1947 by Saudi businessman Sulaiman Olayan, the Olayan Group today is a multinational conglomerate headed by Aziz Syriani and active in manufacturing, distribution, telecommunications and real estate. Its holdings include the 167-key Hotel Ritz in Madrid and the 23-building Knightsbridge Estate in London, which it acquired for $862.7 million in 2010, according to Real Capital Analytics. In the U.S., it owns nearly 3,000 residential units across Maryland, and is an investor in the Related Companies. It was also Starwood Capital’s partner in the Baccarat Hotel in Midtown, which later sold to Chinese insurance firm Sunshine Group for a record $2 million per room.
Kyna Doles and Katherine Clarke contributed reporting.