The Other Chetrit: Isaac stitches together mini-empire in Garment District
TRD takes an in-depth look at the founder of AB & Sons, which is now planning a 70-story tower in the West 30s
When Isaac Chetrit bought the debt for a Garment District office building in 2010, he used a shell company, Mazel 315 W35 LLC. But luck quickly turned against him.
Aaron Chitrik, a diamond dealer who owned the 14-story building, masqueraded as the owner of the mortgage, employing a nearly identical LLC, but with “mazel” spelled “mazal.”
Chitrik “purposefully formed an entity with the exact name so that such entity could fraudulently claim ownership to the notes and mortgages (and, in turn, foreclose on the property),” Chetrit claimed in a lawsuit he brought against Chitrik.
“I’ve never seen Isaac in a bad mood, except at that time,” said David Hayum, a Meridian Capital Group broker who’s worked on several debt deals for Chetrit. “Chitrik acted dishonestly and it kind of got to him.”
Mazal 315 W35th LLC defaulted on the mortgage and in 2015 filed for Chapter 11 bankruptcy protection. Later that year, Isaac and the Aini family won a bid to buy the property at the bankruptcy auction , and in August 2016, they entered contract to sell it to importer-exporter Frank Ng for $38 million. Just when Isaac thought he was in the clear, the deal saw another hiccup: Ng defaulted twice after going into contract, Isaac alleges in a March 2017 lawsuit.
If the deal does close, Isaac will walk away with a tidy profit: selling for $38 million after paying only $14 million on the $43 million purchase. (At the time of the auction, the total debt on the building was $29 million.)
When real estate observers in this town hear the name “Chetrit,” they immediately think of Joseph Chetrit [TRDataCustom], the rotund Moroccan émigré who bought the Sony Building and is co-developing the Bronx’s most ambitious residential project. But Joseph’s 54-year-old cousin Isaac is another Chetrit making a dent in the New York market, with something of a fiefdom in the Garment District. His companies own about 25 commercial buildings in the city, which sources close to the firm say are collectively valued at north of $2 billion. Two of his most valuable assets are the 24-story, 415,000-square-foot office building at 1412 Broadway and the 28-story, 618-key Affinia Manhattan NYC, now named the Stewart Hotel – which he acquired for $250 million and $217.5 million, respectively.
And he’s now making his biggest bet yet: A 70-story mixed-use tower on Sixth Avenue that’s the kind of project more in Joseph’s wheelhouse.
“They are very different personalities,” said Stephen Meister, a real estate attorney who has represented both Chetrits. “Joe is a very big risk taker. Isaac is more conservative. ‘Slow and steady wins the race’ fits Isaac.”
The Chetrit family is notoriously press-averse, and Isaac declined several requests to be interviewed for this story. But sources, court documents and other records illustrate a tale that has much in common with other immigrant families who made it big in New York’s property market.
In the 1980s, a teenage Isaac moved from the Moroccan port city of Casablanca to Brooklyn with his brother Eli and cousins Joseph and Meyer. Isaac’s uncle, Simon Chetrit, was a shipping magnate in Morocco.
Details of how the Chetrits came to the U.S. are fuzzy. In a 2015 lawsuit accusing the Chetrit Group of an international money laundering scheme, the city of Almaty in Kazakhstan and BTA Bank alleged that Joseph had stated that “his own family had faced political sanctions in his native Morocco, a result of having defrauded the King and being forced to flee.”
Sources said the Chetrits lived on Ocean Parkway in South Brooklyn and commuted to the city to work in textiles. In the 1990s, with cash from the textile trade, the Chetrits began buying New York real estate. Isaac’s father, Abraham, paid $1 million for a 10-story Tribeca office building at 396 Broadway in 1994, rescuing it from foreclosure, records show. (AB & Sons later sold it to Atit Jariwala’s Brideton Holdings for $42 million in 2014.) That same year, Joseph made his first deal, paying $13 million for a 16-story office building at 19 West 44th Street.
Sometime in the early 2000s, after the family had amassed a substantial portfolio, Simon and Abraham decided to split up: Simon and his sons Joseph, Meyer, Jacob and Juda began operating under the banner of the Chetrit Group, while Abraham and his sons Isaac and Eli began AB & Sons.
He and Joseph, who lives on the Upper East Side, do not see much of each other outside of occasional family gatherings, sources said. But Eli is married to Monique, sister to Joseph. “That’s how they did it back in Morocco,” a source said.
The two companies operate separately in New York, although sources said they continue to hold properties together in Morocco and Israel. Simon and Abraham stay in the background, but no deals can happen without their blessing.
“We might partner one day,” a source close to Isaac said of teaming up with the other branch of the family. “There’s no competition. We show each other respect.”
Man of the cloth
The Garment District, a nearly one-square mile stretch of Midtown, is now known less for actual fashion manufacturing than for being “Silicon Alley,” New York’s hub for tech startups. Isaac has zeroed in on this territory and, through a series of savvy value-add plays, has become one of the area’s dominant landlords.
In 2007, he had his heart set on 240 West 37th Street, a 10-story prewar loft office building in the heart of Garment District. In the final round of bidding for the property, two remained: Isaac and Ray Yadidi, another scrappy investor active in the neighborhood.
“They were killing each other,” said a source involved. Rather than duke it out and risk a price war, they decided to partner up and buy the property for $44 million, pooling funds from their respective apparel businesses.
Isaac lured early-stage tech tenants such as Axiom Digital, Work Market and Grind to his buildings. And on the retail front, he signed Japanese clothing chain Uniqlo to its first New York City store location, at 546 Broadway in Soho, back in 2006, and signed StubHub to 1412 Broadway in 2016 for its only Manhattan service center and office. For at least four of his Garment District office buildings, Chetrit was able to make upgrades and increase the occupancy to full or nearly full in about a year, according to CBRE’s Joseph Mangiacotti. In the process, he raised the average asking rent from the $20s per square foot to as much as the low $50s.
“He’s a dealmaker, but he’s also reasonable and understands tenants’ needs,” Mangiacotti said.
After a couple years stitching together a block-long Assemblage On Sixth Avenue between West 36th and 37th streets, Isaac is now preparing to build a 70-story, 375,000-square-foot tower there. It’s likely to have residential, hotel and retail components, sources said.
AB & Sons is a lean operation, run by Isaac, his son Abraham and his brother Eli out of one of their buildings at 25 West 36th Street, where a total of 11 people work. He also operates a clothing wholesaler called D&H Ladies Apparel, also known as IAJ Apparel, which reportedly does distribution for Fruit of the Loom and other companies. Distribution is based out of a Ridgewood warehouse for which Isaac is seeking a rezoning that would allow it to be converted into a residential rental property.
Hayum said Isaac is skilled at freeing up unused or under-utilized space at the buildings, such as building out a mezzanine office floor.
Sources said the profits from Isaac’s Garment Business Drive his real estate deals. But he can also rely on a partner to chip in. Isaac’s frequent partners include Yadidi and Charles Aini, a real estate lawyer.
In these partnerships, Isaac likes to hold at least 50 percent of the equity, sources said. He refuses to syndicate his deals, and has been able to steadily refinance his buildings with major institutional lenders. He secured, for example, a $130 million refinancing of two Diamond District office buildings from Signature Bank in October 2015 and a $125 million refinancing of the Uniqlo-anchored mixed-use building in Soho from Wells Fargo in February 2016.
“Some of the less sexy stuff is where he cut his teeth,” said Jeff Schor, managing director at Wells Fargo, a lender to Isaac. “He scopes out low-quality, underutilized Garment District buildings and puts a little TLC in them.”
Coffee and cigarettes
Outside of news reports on Isaac’s deals and projects, details about the man himself are hard to come by. But sources who know the investor well have widely described him as an old school and blunt businessman, one who counts in French.
“You can convince him of very little,” said Meridian’s David Schechtman. “He has to feel on his own that there’s value.”
“He always likes a backup copy of everything – leases, contracts,” said D.J. Dashti, a broker who co-founded the co-working startup Workville, a tenant at 1412 Broadway. “He likes a paper trail.”
“Like any family-run business, it’s difficult for an outsider to penetrate,” Dashti added.
An Orthodox Jew who alternates between the Talmud and the Discovery Channel, Isaac is, according to Hayum, “never more than a couple inches away from a coffee and a cigarette.” A father of four, he lives in Midwood among a close-knit community of Syrian Jewish real estate families such as the Hidarys, Sitts, Suttons and Gindis, and prepares the Thanksgiving turkey every year at home.
AB & Sons rarely does development and has scrapped office-to-luxury-residential conversions at 396 Broadway in Tribeca and the long-troubled 315 West 35th Street in the past. But by elevating his son Abraham’s role and tackling more development, Isaac is setting things up for the next stage of his business.
Last year, he formed a separate company with his sons called Patriarch Equities. Abraham took the lead on negotiating Patriarch’s $217.5 million purchase of the Affinia Manhattan NYC from Pebblebrook Hotel Trust. In partnership with Sioni and Highgate Holdings, the firm secured acquisition financing from Blackstone Group.
“We worked under a microscope because Highgate knows hotel financing better than anybody,” said Hayum, who added that Blackstone requested at least one in-person meeting with Isaac to close the deal.
Abraham, who is 25, works at the company part-time while studying at Benjamin Cardozo School of Law until he graduates in May. He would likely play a key role in making the skyscraper a reality.
The developers are now in negotiations with two prominent international architects, Christian de Portzamparc and Jean Nouvel, sources said. Neither architect could be reached for comment. The developers are also considering buying other buildings on the block to add to the tower’s size. But sources said there is still the chance that they might abandon the plans and sell the assemblage to another developer.
“Even during family time, his mind is racing,” said a source close to the family. “He’s crunching numbers and always trying to find something that’s not very visible.”