In the latest setback for Joe Chetrit, the developer is in danger of losing his planned 1,300-unit apartment project in Two Bridges.
The Chetrit Group defaulted on an $8 million mezzanine loan it used to finance the acquisition of the development site at 265-275 Cherry Street, The Real Deal has learned.
Chetrit bought the site for $78 million in 2022 from CIM Group and L+M Development Partners. He financed the deal with a $63 million first mortgage and an $8 million mezzanine loan, both from Madison Realty Capital.
Now, Madison has filed a UCC foreclosure for the property, where Chetrit plans to build two towers.
A representative for Chetrit was not immediately available for comment and a spokesperson for Madison Realty Capital declined to comment.
A Meridian Investment Sales team led by David Schechtman is handling marketing for the foreclosure.
The plot at 275 Cherry Street is one of four sites overlooking the East River on the Lower East Side where a thicket of high-rise apartment towers has sprouted.
Gary Barnett’s Extell Development was the first out of the gate with his 851-unit One Manhattan Square condo tower at 252 South Street, which opened in 2019. Barnett bought a neighboring site at 259 Clinton Street in January 2023 for $40 million from The Starrett Corporation, which had already broken ground on a 61-story tower with a planned 765 units.
Nearby, Michael Stern’s JDS Development owns a site at 247 Cherry Street, where he plans to build a 660-unit building.
The developers have faced delays, though, as they faced challenges from lawmakers and local groups that opposed the towers.
In 2018, the City Council and then Manhattan Borough President Gale Brewer filed a lawsuit claiming that the de Blasio administration erred in finding the towers could be built without City Council approval. That case was finally decided in the developers’ favor in 2021.
In 2022, Councilmember Christopher Marte and residents of the Lower East Side and Chinatown filed another lawsuit trying to block the towers on environmental and health issues. The judge in the case dismissed the plaintiffs’ motions last year.
The delays might have pushed the projects into the high-interest-rate environment that has plagued the industry since the Federal Reserve began raising rates in March 2022.
The Two Bridges setback is just the latest challenge for Chetrit.
The investor defaulted on a $480 million loan backing 43 rental properties across 10 states last year. He was ultimately able to stave off foreclosure but in the process drew the ire of Indiana’s attorney general, who accused the landlord of allowing an apartment building to fall into disrepair and neglecting tenants’ health.
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