Chetrit Org sells 850 Third Ave to former lender

HPS Investment Partners acquisition valued at $266M

From left: Chetrit Organization principal Michael Chetrit, HPS Investment Partners CEO Scott Kapnick, and 850 Third Avenue (Getty, LinkedIn/Michael Chetrit, Google Maps)
From left: Chetrit Organization principal Michael Chetrit, HPS Investment Partners CEO Scott Kapnick, and 850 Third Avenue (Getty, LinkedIn/Michael Chetrit, Google Maps)

Less than two years after fending off a foreclosure auction, the Chetrit Organization has thrown in the towel at a Midtown East office building.

Jacob Chetrit’s firm transferred the property at 850 Third Avenue to private investment firm HPS Investment Partners in a deal valued at $266 million, PincusCo reported. The acquisition closed two weeks ago and comes out to about $431 per square foot for the 617,000-square-foot property.

Jacob Chetrit in October 2021 refinanced the property — half-empty at the time — with a $320 million loan from the same firm that is now buying the building. 

The financing package included a $220 million senior loan. It also featured a $30 million future-funding piece Chetrit could have tapped to renovate empty space and market it to a new tenant, though it’s unclear if the firm did so.

The property generated $30.9 million in revenue, or $54 per square foot, according to PincusCo’s analysis of the most recent income and expense figures. Tenants at the building include Chase Bank, which occupies ground-floor retail space.

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Chetrit purchased the 21-story building in 2019 for $422 million, a drastic premium compared to what it is selling it for today. China’s HNA Group was the seller as it looked to get out from under a pile of debt.

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By the time Chetrit closed on the building, its largest tenant, Discovery Inc., decided to relocate. Occupancy soon dropped from 91 percent all the way to 57 percent.  

Chetrit fell behind on a $177 million securitized mortgage and missed the loan maturity date. The developer faced down a UCC foreclosure auction with the funding from HPS, allowing the organization to pay off the loan.

HPS and the Chetrit Organization did not immediately respond to requests for comment. 

Holden Walter-Warner