The startup, which offers subscription-based veterinary service, signed for 2,620 square feet at the Chetrit Group’s 1231 Third Avenue, at the corner of East 71st Street. It will be the three-year-old company’s second location after opening its inaugural outpost in the West Village in January of this year. 

Zachary Diamond and Greg Tannor of Lee & Associates represented Small Door, while Jeff Winick, Patty Holmstrom and Michael Shkreli of Winick Realty Group represented Chetrit. 

The deal for the Third Avenue location was negotiated entirely during COVID, according to someone with knowledge of the transaction.

Chetrit purchased the mixed-use property in 2018 after it had cycled through several owners, including Thor Equities and SL Green Realty Corp., over the course of a few years. The four-story building includes 20 apartments and about 16,000 square feet of retail space. 

Small Door, founded in 2017, raised a $3.5 million seed round in 2019, and is backed by the founders of Silicon Valley successes like Warby Parker, Flatiron Health and Sweetgreen. 

It joins a crop of startups looking to disrupt health care for pets and humans alike. Bond Vet, a veterinary urgent care startup, has opened three locations in New York since last year; membership-based health care company One Medical has locations cropping up throughout the boroughs; and prescription delivery startup Medly Pharmacy recently opened a three-story office and pharmacy in Bushwick.

One thing that hasn’t received nearly as much attention is the race for City Council. The current council has been the most politically progressive council (and anti-landlord) in its history and, as it turns out, around 40 of the council’s 51 seats are completely up for grabs in November, a massive turnover. But landlords who are dreaming of a friendlier, less-antagonistic council, will probably not breathe a sigh of relief any time soon. It’s very possible that an even more left-wing council awaits.

The District 35 race is illustrative: It is currently being fought between Crystal Hudson, former aide to outgoing councilwoman Laurie Cumbo, and Michael Hollingsworth, a graphic designer and tenant advocate, who grabbed a Bernie Sanders endorsement and whose platform includes a bill that would cancel rent during the pandemic, repeal 421a, and end capital improvements.

The new council will no doubt be a big issue that the Real Estate Board of New York will deal with in the coming months. 

Speaking of REBNY, after postponing their annual banquet and awards ceremony in January, they came back last week and honored some of the big names of real estate, including Bess Freedman, Kevin McCann, Gregg Schenker, Robert Shaprio, Alan Wiener, Laurie Zucker and New York’s essential workers (an accolade accepted on their behalf by Gary LaBarbera, Kyle Bragg and Kuba Brown.) But, we also looked at the progress REBNY’s made on their diversity initiatives and what the board is doing to aid the city’s recovery, now that New York has finally lifted COVID-19 restrictions.

The good (and a smidge of bad) news

As per usual, there was a mix of good and bad news. (No frogurt, alas.)

To start with some bad, a Chetrit Group CMBS loan of $177 million on 850 Third Avenue has hit special servicing. And CBRE decided to take FreshDirect to court for trying to renege on $400,000 worth of fees.

But there was actually plenty more good to share. Sales, for one!

In Washington, D.C., WashREIT sold off its office portfolio to Brookfield Asset Management for $766 million; it consists of a good 2.37 million square feet of office space. And, in Manhattan, Igal Namdar and Empire Capital Holdings shelled out $107 million for 345 Seventh Avenue, a 220,000-square-foot office building right near Penn Station.

Leases, for another. In L.A., legendary talent agency CAA renewed its 290,000-square-foot lease at 2000 Avenue of the Stars in Century City. In Miami, Citadel is hungry for even more office space. The San Francisco-based cryptocurrency platform Coinbase just nabbed 30,000 square feet of sublease space from Steven A. Cohen’s Point72 at 55 Hudson Yards. And FlatRate Moving just opened its first retail store at 936 Broadway. (Before you say, “What the heck does a moving company need with a retail store?”, we’ll answer that for you: packing materials!)

And there was some good overall news for the industry: a lot of companies are hesitant to reduce their office footprint, a new CBRE study found. Plus, according to a report from Avison Young, the worry about reduced lengths for leases might be overblown as well. And there has been so much demand in the ground lease sector that some players can’t even find a foothold in the space.

Oh, and there were financings! Wells Fargo and JPMorgan Chase closed a $250 million refinance of 375 Pearl Street, and, in the Windy City, Beacon Capital Partners sealed a $370 million refinance for the 1.2 million-square-foot AMA Plaza.

In work-from-home news, American Express is allowing staff to work two days per week remotely from now on, which seems to be a step in the opposite direction from what we had been seeing lately. Just this week, Bank of America called all vaccinated workers back to the office, starting after Labor Day.

The heck with the Styles Section!

There’s nothing we like more on a lazy Sunday afternoon than to lounge around our homes and look at the pretty pictures.

This week, we saw some really pretty pictures of … the Brooklyn Navy Yard?

No foolin’. The renderings of the buildout (which has cost hundreds of millions, when you look at all the work being done throughout the 300-acre yard) are incredible: polished concrete floors, suspended plant walls, large oversized windows.

Happy Father’s Day!

Meadow Partners is partnered with AM Property Holding Corporation and Columbia Property Trust in the property. Meadow was previously teamed with AM Property and Normandy Real Estate Partners when 80-90 Maiden Lane was financed in 2018. Normandy has since been acquired by Columbia Property Trust in a deal that was announced in January 2020. 

Newmark’s vice chairmen and co-heads of debt structured finance, Dustin Stolly and Jordan Roeschlaub, led the arrangement of the financing, alongside Chris Kramer, Nick Scribani, Eden Abraham and Jake Neeb. Stolly and Roeschlaub’s team handledthe financing arrangement on the property in 2018 as well. 

“Executing on an office financing at this stage in the pandemic is a testament to the sponsorship associated with the transaction,” Stolly said in a statement. “Each member of the sponsorship is best in class.”

Normandy had picked up a controlling stake in 80-90 Maiden Lane in 2014 from Chetrit Group and Read Property Group in an off-market deal. Three years later, Normandy decided to up its interest in the assets for a $54 million price tag,The Real Deal reported.

The site features two contiguous office properties that are located between Pearl and William streets. Built in 1912, 80 Maiden Lane stands at 25 stories, and 90 Maiden Lane is a much smaller, four-story asset that was constructed in 1900.

Since 2012, the property has had a number of improvements made to it, including lobby, facade, common area, retail space renovations and modifications to the buildings’ elevators, according to Newmark, which indicated that this new financing from JPMorgan will facilitate more work to the assets. The borrowers are aiming at including an amenity center and a bike room, as well as pre-built suites, Newmark said. 

“The sponsorship team has undertaken important steps toward realizing the assets’ potential, and the property is well positioned to realize stabilization in the post-pandemic world,” Roeschlaub said. 

An official at Meadow Partners declined to comment, as did a representative for JPMorgan.

Mack Burke can be reached at mburke@commercialobserver.com.

G4’s bridge-to-construction loan is collateralized both by the Upper East Side development site — at 252-254, 257, 259 and 260 East 72nd Street — and Chetrit’s luxury condominium at 49 Chambers Street in Tribeca. 

Galaxy Capital’s Henry Bodek arranged both the sale and the financing. 

​​”This financing was particularly attractive to us as it involves assets in different submarkets, and is collateralized both by completed luxury condominium units in Tribeca and a prime Upper East Side development site,” Robyn Sorid, co-managing partner at G4 Capital, told CO. “The Tribeca building is already almost sold out and therefore a proven product, which is particularly appealing.”

It’s not G4’s first deal with Chetrit Group. In fact, Joseph Chetrit’s company is a repeat borrower. In December 2020, G4 lent $207.5 million to Chetrit, Clipper Equity and Read Property Group for the trio’s Gramercy Square condo project at 230 East 20th Street, and in July 2021 the lender provided a $40 million construction loan for Chetrit’s residential project at 88 153rd Street in Jamaica, Queens, as reported by The Real Deal. 

“In terms of sponsorship, G4 really enjoys working with repeat borrowers who have a demonstrated track record for success, especially seasoned developers like Chetrit Group,” Sorid said. “This was a particularly compelling opportunity for our group, both with respect to the sponsorship and the collateral here.” 

While details couldn’t be confirmed, some sources familiar with the 72nd Street assemblage said the plan is to erect a condominium project at the site. 

The deal is the most recent of many in New York City’s residential sector for G4.

In mid-November 2021 it closed a $284 million refinance for Fortis Property Group’s Olympia Dumbo, the firm’s sail-shaped condominium development at 30 Front Street in Brooklyn, and a month later it provided a $130 million loan for The Jay Group’s $130 million acquisition of 101 Fleet Place in Downtown Brooklyn. Galaxy Capital’s Bodek arranged both of the aforementioned transactions. 

“I think we’re cautiously optimistic that we’ll continue to see the same strong residential sales activity that we saw in the last two quarters of the year and hopefully, with more return to office in the next few months, we’ll see dynamic growth across all asset classes,” Sorid said. “At G4 we are firm believers in New York City and have focused our investments on this market for more than 15 years. New York is resilient, has unique economic and cultural offerings and has weathered storms in the past. We’re confident that it will emerge stronger through any short-term dislocation that may occur.” 

Bodek said that the 72nd Street assemblage refinance “represents another successful closing with a stellar sponsor and reliable, competitive lender. I look forward to many future deals with Chetrit Group and G4.” 

Officials at Chetrit Group couldn’t immediately be reached for comment.

Cathy Cunningham can be reached at ccunningham@commercialobserver.com.

Galaxy Capital Solutions’ Henry Bodek arranged the financing.

“260 South Street will provide much-needed housing in Two Bridges, a highly desirable area of Manhattan where there are significant barriers to entry,” Josh Zegen, managing principal and co-founder of Madison Realty Capital, said in a statement. “The East River waterfront is poised for growth and we are excited to play a role in the development of new housing in the submarket” 

Manhattan-based Chetrit is planning a 1,300-unit residential complex with a 64-story and 70-story tower at the site, sources said. L+M and CIM previously targeted a 1,400-unit project at the site with roughly 360 affordable homes. 

In January, Chetrit refinanced its Upper East Side assemblage with a $117 million loan from G4 Capital Partners, in a transaction also arranged by Bodek. 

Officials for Galaxy Capital weren’t immediately available for comment. Officials at Chetrit Group did not immediately return a request for comment.

Andrew Coen can be reached at acoen@commercialobserver.com. 

Chetrit will most likely seek to terminate the property’s condo association, granting the developer complete control over the property and paving the way for redevelopment. The property is on a barrier island in Hollywood.

The move is part of a growing trend among developers. In light of the collapse of the Champlain Towers South condominium last year in nearby Surfside, owners of decaying buildings similar to Champlain are opting to cash out instead of paying for costly repairs. For developers, it’s freed up valuable land along South Florida’s crowded coast line to develop luxury properties.  

Further south in Bal Harbour, the Related Group is buying out an oceanfront condominium for approximately $130 million with plans to develop a luxury residential property designed by architectural firm Skidmore, Owings & Merrill. Earlier this year, the Miami-based developer and a partner offered $500 million to buy a condo building in Miami Beach. 

But the Chetrit Group still has a long way to go if it wants to terminate the condo, since it only owns 33 percent of the Hollywood resort’s apartments. Condo terminations require the majority of unit owners — often over 90 percent — to sell, making it notoriously hard to achieve. 

Besides the condo portion, which also functions as a hotel, the Hollywood Beach property holds a mall and parking lot, which are owned by separate entities, only adding to Chetrit’s herculean buyout. Originally built in 1925, the Hollywood property is at 101 North Ocean Drive, adjacent to Hollywood Boulevard, which leads into the mainland. 

Chetrit — led by Joseph Chetrit — is fast at work in Miami too, developing a 6.2-acre mixed-use project after nabbing a $310 million loan last year. 

A representative for Chetrit could not be reached for comment. The Real Deal first reported the transactions in Hollywood. 

Julia Echikson can be reached at jechikson@commercialobserver.com.

Located at 2635 North Riverside Drive in Hillsboro Shores, the 513,929-square-foot project will feature 121 units, 250 parking spaces and 20 marina slips. 

Chetrit Group also secured $78 million from MRC to acquire Hollywood Beach Resort in Hollywood, Fla., at 101 North Ocean Drive. The property is a 371,240-square-foot condo project. Chetrit Group recently bought 33 percent of the resort’s apartments.

Henry Bodek from Galaxy Capital negotiated both deals on behalf of Chetrit Group. 

Chetrit Group and MRC did not immediately respond to requests for comment.

Emily Fu can be reached at efu@commercialobserver.com.

The debt opportunity wasn’t widely marketed but rather “quietly shopped” by Cushman & Wakefield’s Adam Spies, Lauren Kaufman and Daniel OBrien, sources said. 

According to city property records, Arbor Commercial Mortgage was the previous lender on the project. Arbor officials declined to comment. 

One source said the loan was current and “nearing maturity” at the time of the sale. 

Construction is currently underway at the hotel, which sits in a prime spot between Seventh and Eighth avenues overlooking Moynihan Train Hall and across from One Penn Plaza.  

The 155,594-square-foot hotel is designed by Stonehill Taylor Architects and planned as a Hotel Indigo, which is part of the IHG hotels and resorts family of brands. 

Like most other buildings under construction in New York City during the COVID-19 pandemic, the hotel’s development stalled during 2020, picking back up in late 2021. Chetrit is said to have recently invested a further $25 million into the asset. 

The developer jointly purchased an assemblage of retail properties at 251-263 West 34th Street with Cornell Realty Management  in 2014. The two firms later parted ways and divided the assemblage — each taking 80 feet of frontage — with Chetrit getting the 255 West 34th parcel and closing construction financing for its hotel and retail asset in 2017. 

The property includes 15,000 square feet of retail space, with hotel rooms starting on the fourth floor.

Elsewhere in New York City, Chetrit Group is having a busy second quarter. Only last week, the firm locked down $714 million in financing for the two Upper East Side rental towers it owns with Stellar Management. 

Officials at Chetrit Group couldn’t be reached for comment. Officials at Maverick Real Estate Partners didn’t return a request for comment. A C&W spokesperson declined to comment. 

Cathy Cunningham can be reached at ccunningham@commercialobserver.com.

Galaxy Capital’s Henry Bodek negotiated the financing for all three assets, and the Park West Village deal closed Aug. 3. 

The 773,271-square-foot, 850-unit property — at 784, 788 and 792 Columbus Avenue — is a collection of three newly renovated apartment buildings between West 97th and West 100th streets. 

The Yorkshire and Lexington Towers CMBS financing was split across several conduit deals, and the Park West transaction has the same destiny, sources said. 

Officials at Stellar, Chetrit Group, Citi and Galaxy didn’t immediately return requests for comment. Officials at BMO and Starwood declined to comment. 

Cathy Cunningham can be reached at ccunningham@commercialobserver.com.

The museum, backed by the venture capital firm Merida Capital Holdings, will cover three floors of the five-story building when it opens this fall. Also dubbed THCNYC, the House of Cannabis will feature art inspired by marijuana, a top-floor event space and LED light shows. 

Despite its name, Frey told TRD he’s keeping out of weed sales because of New York’s complicated regulatory environment and because he wants to “help all the dispensaries.” The state legalized lighting up recreational weed last year, but has been slow to allow the sale of cannabis for non-medical purposes. The first licensed dispensaries are expected to open at the end of the year, following Gov. Kathy Hochul’s decision this month to open applications for retail permits to those previously convicted of a marijuana-related offense.

Frey plans on making his museum 420-friendly in other ways. THCNYC will feature the work of weed photographer Chris Romaine, local scent maker Victorine Deych and light designer and Lightchitects Studio founder Carlos Hano. The trio will create an immersive, 4-D experience, at the building, which also holds the short-term office rental company Office Spaces NY and Keats Insurance Agencies.

Frey is no stranger to immersive art, or marijuana. He co-created Perception Las Vegas, an immersive museum exploring the work of famous Italian painter Leonardo Da Vinci, and was a part-owner of dispensary-owner Naturex. He also helped create the star-studded clubs the Pussycat Dolls Lounge and Pure Nightclub in Las Vegas, known for attracting VIPs like Lindsay Lohan and Britney Spears in the early aughts.

Chetrit, Merida and a representative for Frey did not immediately respond to requests for comment.

Celia Young can be reached at cyoung@commercialobserver.com.

Isaac and Eli Chetrit purchased an $18 million defaulted bank note on the currently vacant single-story property from Signature Bank last year, with plans to use it as a development site at the time, Crain’s New York Business reported. In September, the Chetrits consolidated additional debt on the building into one $16.2 million loan with Signature, according to property records.

David Chetrit then filed permits to demolish the interior walls of the 20,000-square-foot property last month, which could potentially clear the way for a grocery store — something Tursunov is known for — according to New York City Department of Buildings records.

Tursunov opened the first Tashkent — named after the capital of Uzbekistan — at 713 Brighton Beach Avenue and bought a 36,000-square-foot retail property at 1769 86th Street in Bensonhurst for a new outpost last year. He also plans to open a location in the West Village at 378 Sixth Avenue in February. 

Representatives for Tashkent and the Chetrit Group did not immediately respond to requests for comment.

Lee & Associates NYC’s Mark Kapnick brokered the sale for Tursunov. Kapnick declined to comment.

Celia Young can be reached at cyoung@commercialobserver.com.

Maverick wants Chetrit and President Meyer Chetrit, the debt’s guarantor, to pay $19 million to cover the principal of the loans and interest, and to either complete the project or give Maverick the roughly $106.4 million it would take to finish the hotel, according to a suit filed in New York County Supreme Court Monday.

But it’s unlikely Chetrit would get to keep the finished product since the 155,594-square-foot hotel development is scheduled to be sold at auction Jan. 18 after Maverick foreclosed on the property in November, Crain’s New York Business reported. 

Spokespeople for Maverick and Chetrit did not immediately respond to requests for comment. Maverick’s lawyer, Katsky Korins’ Steven Newman, declined to comment. 

Chetrit purchased the site as part of an assemblage of retail assets in 2014 and began work on building a 323-key hotel in 2019, with plans for IHG Hotels & Resorts to operate it, Crain’s reported. It secured financing from Arbor Commercial Mortgage to kick off construction, but the project stalled during the pandemic.

Maverick bought the debt from Arbor in May 2022 and asked Chetrit to pay up two weeks later since the loan had matured. However, Maverick and Chetrit negotiated an agreement to extend the repayment date until Oct. 30, according to the suit.

Even with the new deadline, Maverick claimed that Chetrit failed to come up with any of the cash and skipped out on property taxes on the site — another breach of its loan agreement. 

Chetrit isn’t the only landlord Maverick went after on Monday. Maverick sued Thor Equities to force it to sell its Meatpacking District retail building at 446 West 14th Street after Thor allegedly missed payments on about $25 million in loans on the property, Crain’s reported.

Additional reporting by Cathy Cunningham.

Celia Young can be reached at cyoung@commercialobserver.com.

Average U.S. asking monthly rents for December 2022 fell $4 to $1,775 during the month and were down by $10 in the fourth quarter, with 25 of the top top 30 metro areas showing negative growth, according to data from Yardi Matrix. National asking rent growth was also down 6.2 percent compared to late 2021 and slipped 80 basis points from November, the Yardi Matrix data showed. 

While the multifamily market overall saw record-low vacancy rates in 2022, some developers are facing pressures to stay afloat. That includes the Chetrit Group, which was in danger of defaulting on a 2019 $481 million commercial mortgage-backed securities (CMBS) loan tied to 43 rental properties, according to a year-end Trepp report. The company failed to pay off the loan when it was due last year as it got saddled with below-average occupancy levels and rising interest rates on its floating-rate debt.  

JPMorgan Chase supplied the loan for Chetrit’s acquisition of a 8,671-unit portfolio spread across New York, the Sun Belt, Ohio, Indiana and Illinois. The loan entered special servicing after it was transferred for maturity default on July 9, 2022, according to Marc McDevitt, senior managing director at CRED iQ. McDevitt noted that as of January, four Ohio properties were released to help pay down the debt.

“CMBS investors are typically concerned with adverse selection in situations that require drawn-out portfolio releases of distressed properties, which could leave behind some of the lower-quality properties when it’s time to endgame the remaining debt,” McDevitt said. 

McDevitt noted that the remaining 39 properties in the Chetrit portfolio have occupancies ranging from below 70 percent to above 90 percent on the high end, with all but six experiencing declines since loan origination. 

Even though the Sun Belt’s population has grown robustly the last few years, properties in Tennessee and Louisiana, as well as Ohio, were among the worst performing in the Chetrit portfolio, according to McDevitt. He stressed that some of the assets marketed for sale could attract interest from investors with dry power pursuing value-add or core-plus strategies.

“Working in investors’ favor are release prices ranging from 115 percent to 120 percent of a property’s allocated loan amount and loan-to-value thresholds,” McDevitt said. “The borrower will likely walk a fine line choosing which properties to sell in order to pay down the mortgage, and the special servicer is expected to be prudent in securing the best outcome for certificate holders.”

Representatives at the Chetrit Group did not return a request for comment. 

While multifamily rents increased nationally by 6.2 percent in 2022 — marking the second-highest annual growth in the 21st century behind only 2021’s nearly 15 percent jump — the rental market is shaping up for only modest growth in 2023 after remaining relatively flat early in the year, according to Paul Fiorilla, director of U.S. research at Yardi Matrix. The only two major markets to record rent growth in the fourth quarter were Indianapolis and New York City, with 0.4 and 0.3 percent growth, respectively. 

Even with slightly less growth this year, the multifamily market is well positioned overall given the last two years of strong growth, Fiorilla said. Rising interest rates will challenge multifamily owners, but he noted that properties are not as overleveraged as they were during the 2007-2008 Global Financial Crisis, and he said sponsors who took out loans more than three years ago will have some cushion from rent growth.

The delinquency rate for multifamily properties is likely to rise in 2023, but it remains around 2 percent, far lower than other sectors such as office, according to Fiorilla. 

“Any increase in delinquencies is not a good thing, but I think we have to put it in perspective given how we are coming off such incredibly low levels,” Fiorilla said. “We’re looking at some scattered problems related to individual properties that are not well capitalized, but I don’t see a hard landing or crash or bubble.”

The delinquency rate for multifamily properties is likely to rise in 2023, but it remains far lower than other sectors such as office, according to Fiorilla. Multifamily delinquencies are roughly two percent for CMBS and much lower for government-sponsored entities and portfolio lenders.

The multifamily loans that will face the most risk of default, according to Fiorilla, are ones issued in the last three years with a floating-rate structure, made at very low interest rates, which have not benefited as much from rising rent growth as similar transactions that went to market around a decade ago. However, if interest rates decrease in the next couple of years once inflation stabilizes, owners of these struggling properties will be better positioned to refinance loans. This will gain them necessary capital to improve cash flows and building enhancements. 

Tony Fineman, senior managing director and co-head of national originations for Acore Capital, said multifamily still has some positive fundamentals such as a lack of supply and higher mortgage rates that result in more would-be homeowners seeking rentals instead. However, he noted that Acore is proceeding more “cautiously” with multifamily deals at the moment given how rising interest rates are affecting valuations.

“There were a lot of very low cap rate acquisitions and valuations that we believe will be impacted by the interest rate environment that we’re going to be in for the next at least many months to a couple of years,” Fineman said. “There’s going to be some pressure on a bunch of acquisitions and trades over the last many years, which doesn’t necessarily affect the demand for the product, but it does affect how the capital markets treat them.” 

Fineman stressed that Acore continues to invest in multifamily projects but is lending at a lower basis than two years ago because of the effect on values from higher cap rates amid rising interest rates and the need for more cash flow. He said some properties with loans from around a decade ago will benefit from increased rent growth to offset the pressure on valuations. 

Despite some headwinds facing multifamily, the asset class remains very attractive to foreign investors, according to Mitchell Hunter, global chief commercial officer at Trimont Real Estate Advisors.

Hunter said investors he works with around the world are focused very heavily in the growing Sun Belt and are prioritizing assets with strong environmental, social and corporate governance (ESG) characteristics such as upgraded sustainability features. 

“We have seen a huge exit of renters in the gateway cities, so I expect to see investors follow renters to the growing areas located mostly in the Sun Belt region,” he said. “Cities like Dallas, Houston and Atlanta have seen an influx of renters over the past couple of years.”

Hunter said that physical occupancy numbers for U.S. multifamily will look bad for much of 2023 as eviction protections implemented during the COVID-19 pandemic work their way through the legal system for nonpaying tenants. Still, he sees overall numbers improving “considerably” as more units become available for rent.

Demand for multifamily remains very high in markets like New York where the rate of production is way behind targets necessary to make a material dent in the city’s housing crisis. The Real Estate Board of New York’s latest report on multifamily construction, released Feb. 1, showed developers filed foundation permit applications for 22 new projects citywide in December 2022 for a total of 590 residential units, a 90 percent annual decline. 

Sentinel Real Estate has been investing in multifamily since 1969. Nick Stein, its managing director, noted that while some markets that experienced significant rent growth during the pandemic’s first two years, like Phoenix and Tampa, are experiencing more of a dip as conditions normalize, operational performance continues to remain healthy. Investors just have to take the long view.

“What we’ve seen so far is those markets have adjusted back to a more normalized environment a little bit more quickly, but they had a longer way to adjust because they had been so strong,” said Stein of multifamily in the Sun Belt. “It’s not necessarily that those markets are performing badly or even badly relative to other markets. It’s just that they were so strong relative to other markets before, and that outperformance is not there.”

Andrew Coen can be reached at acoen@commercialobserver.com. 

The deal is in the early stages and contingent on the additional equity being raised, but Public is currently in “aggressive expansion mode,” sources said. Schrager declined to comment.

As part of the deal, Schrager and Scheetz, the former CEO of Hard Rock hotel owner Morgans Hotel Group, would become 50-50 ownership partners with Chetrit, but the hoteliers would fully take the reins when it comes to managing the hotel’s operations. Further, Chetrit’s current $80 million equity interest would be written down to $11 million, according to the OM.

The historic 282-room hotel at 98 Montague Street was built in 1909 and purchased by Chetrit and Clipper Equity’s David Bistricer for $81 million in 2012, with Chetrit buying out Bistricer in 2019.

The $112 million loan on the hotel — originally provided by CCRE but assigned to Wells Fargo in March 2020, per property records — is currently in default.

The hotel faced foreclosure starting in May 2022, after Chetrit Group defaulted on the debt — at the time owing the lender $126.7 million in total, PincusCo Media first reported. By late 2022, real estate advisory firm Hodges Ward Elliott had been retained to conduct a Uniform Commercial Code (UCC) foreclosure auction, scheduled for Dec. 12, 2022.

According to sources familiar with the situation, the UCC foreclosure was halted when Chetrit Group presented a new business plan for the property that included Schrager and Scheetz as business partners.

As such, deal parties are currently working with the loan’s special servicer, Trimont, to modify and extend the loan out for an additional two years with the intention of refinancing it further down the line when debt markets return to some semblance of normalcy, and the new, repositioned hotel has been up and running for a year.

Last March, PincusCo also reported that Chetrit was facing foreclosure on its Empire Hotel after defaulting on its $180 million loan after purchasing the property from Schrager and NorthStar Capital in 2004.

The Chetrit Group and Scheetz could not be reached for comment.

Cathy Cunningham can be reached at ccunningham@commercialobserver.com. 

JP Morgan Chase and Mack Real Estate Credit Strategies (MRECS) originated the loans in connection with the site’s predevelopment in December 2018, The Real Deal reported. The debt— now owned by MRECS solely— still has an outstanding balance of $85 million, not including default interest and other costs and expenses accrued, according to an offering memorandum (OM) viewed by Commercial Observer. 

Newmark’s Dustin Stolly and Jordan Roeschlaub have been engaged by Chetrit’s lenders to lead the marketing of the non-performing loan, along with Adam Spies and Doug Harmon, who recently joined Newmark from Cushman & Wakefield, the OM shows. The Hudson Yards loan sale marks the first transaction for the new Stolly-Roeschlaub, Harmon-Spies debt and investment sales partnership, and is “the first of many,” one source said, adding that “right out of the gate, they’re taking no prisoners.”

The sale is being touted as a “one-of-a-kind opportunity” to purchase debt with “a direct and quick path to ownership via a UCC foreclosure.” 

The OM notes that the senior debt is accruing interest at a rate of LIBOR + 5.75 percent, while the mezz debt is accruing interest at a rate of LIBOR + 10.51 percent. Both loans, however, include 10 percent default interest, equating to all-in rates of LIBOR + 15.7 percent and LIBOR + 20.5 percent, respectively. The deal also includes a $18.5 million payment guaranty — an agreement made by Chetrit Group in the event the loan goes into default — bringing the loan purchaser’s basis down to around $178 per square foot. 

The as-of-right, mixed-use development site collateralizing the debt is currently zoned for 375,000 square feet within the Hudson Yards Special Purpose District, with 75 feet of frontage along West 37th Street plus another 100 feet of frontage along West 38th Street, per the OM.

Chetrit Group purchased the site for $26.5 million in 2012 with early plans for a 46-floor hotel and residential project, according to TRD. Those plans never came to fruition, leaving a shovel-ready site now for sale.

Chetrit’s Bossert Hotel in Brooklyn is also in distress, with hoteliers Ian Schrager and Ed Scheetz possibly stepping in as partners to right the ship, CO first reported. 

Chetrit Group could not immediately be reached for comment. 

Cathy Cunningham can be reached at ccunningham@commercialobserver.com

The $85 million loan package at 545 West 37th Street in prime Hudson Yards territory consisted of a $53.7 million senior loan and a $31.3 mezzanine loan that were originated by JPMorgan Chase and Mack Real Estate Credit Strategies and is currently being shopped around by Newmark super brokers Dustin Stolly, Jordan Roeschlaub, Doug Harmon and Adam Spies. (And this is not Chetrit’s only property in trouble. The company just tapped Ian Schrager and Ed Scheetz to try to turn things around at the historic Bossert Hotel in Brooklyn Heights.)

Another floating-rate loan with a $140 million outstanding balance is also being shopped around by the same Newmark team for the McGraw-Hill Building at 330 West 42nd Street.

And, as one might expect smaller, less high-profile buildings are in trouble, too.

A $38.1 million CMBS loan at 717 14th Street in Washington, D.C. (a building which doesn’t exactly have a tenant problem; the U.S. Department of Treasury is one of the renters) is headed to special servicing. 

Sigh.

The cherry on the week was Cushman & Wakefield’s oh-so-cheerful report that by the end of the 2020s 1.1 billion square feet of office space would likely be vacant and 1.4 billion square feet (more than 25 percent of the office space in the country) would be considered obsolete.

Of course, many owners had been grappling with just this kind of thing for a while. Tech, the tenant that had carried the office market through the first two years of COVID-19, has slowly started to unwind its grand office designs, and the savvy landlords have been preparing for this.

“Obviously, tech is not going to be in a great place this year,” Ryan Masiello, co-founder and chief strategy officer of VTS, told CO, “or even early next year. However, what is starting to change is return to office. The first part of returning to office is getting people back in seats.”

And some are finding that, yes, more old school FIRE tenants have been taking the place of TAMI tenants.

This is probably something that people who are invested in healthy (maybe even overly healthy) asset classes should consider.

Take industrial real estate. Rarely has the market seen the kind of explosive growth that the sector has experienced over the last three years. Which is something to be slightly wary about.

“Some markets like Southern California have seen 12-month rent growth at 70 percent,” said Mark Russo, senior director and head of industrial research for North America at Savills, the real estate services firm. “To say they’ve had a good run is an understatement. It has been an unbelievable ride in terms of rent growth. … Certainly, in some markets — South Florida, Northern New Jersey, Southern California — we are hitting a bit of an affordability wall.”

We hope we didn’t just ruin your Sunday

The truth is that crisis is also opportunity and there are plenty of shrewd operators who are taking a deep look at the landscape and scouring it for interesting possibilities.

Andrew Farkas appears to be very much in the market, for one.

Farkas largely sold off C-III, his collection of businesses over the last 12 to 18 months — the timing of which was pretty inarguably perfect. And since then he has plunked down $185.6 million for the Lexington Hotel in Midtown and $373 million for the Sheraton Times Square.

Today, Farkas told CO in an interview, the Lexington “is 95 percent occupied. And the average daily rate was around $300. So, it’s just —  it’s killing it.”

He’s also been scouring the country for garden apartments and grocery-anchored retail. So take heed, readers, where the smart money is going.

And while we stand by what we said earlier about being somewhat mistrustful of crazy good success (yes, everything good comes to an end) while the ride is going, data centers have been performing excellently.

“In general, demand is stronger than it has ever been,” said Jim Kerrigan, managing principal of North American Data Centers, an industry consultancy. 

And they might do even better in coming months and years as buildings and tenants look to reduce their server footprint.

CO says relax

One final asset class that bears consideration: cannabis.

The legal cannabis market is still fairly new in New York City. So far, only 66 retail licenses have been approved by the Office of Cannabis Management, and the city has been flooded with illegal headshops.

To wit, the Manhattan D.A. Alvin Bragg sent a letter to 400 illicit smoke shops around the city in February with the warning that if they don’t shut down the D.A. will demand that their landlords evict them.

But once these are shut down cannabis could mean big money for the city and for retailers.

“I think it’s going to be a $5 billion market,” the OCM’s head Chris Alexander told Commercial Observer in the Sit Down, “so we can expect hundreds of millions dollars coming back to the community.”

Something to consider on this leisurely Sunday.

See you next week.

The 290,000-square-foot building, at 2 Executive Drive, was completed last year and includes 84 newly developed, market-rate residential units atop 200,000 square feet of office space. 

Chetrit Group filed plans for the development pre-COVID in April 2019, including 40 affordable units in the blueprint at the time. Today, the completed property includes multilevel garage parking and — in addition to a lounge and game room being part of the amenity package — houses a Retro Fitness gym.

The New York Times recently outlined the pull of Fort Lee for renters who desire proximity to Manhattan at a more affordable price, and the development and redevelopment activity that is currently underway to meet demand. While 25 percent of Fort Lee residents are over 65, the NYT reported, several developers are targeting a younger demographic, with top-rated public schools also on offer in the city.

Chetrit’s new building provides ease of access for commuters, sitting less than a mile from the George Washington Bridge and close to public transportation. 

And the firm is in good company. In October 2022, Skylight Real Estate Partners and PCCP teamed up to purchase Hudson Lights, a 276-unit Class A building in Fort Lee’s downtown area, Real Estate Weekly reported. 

Starwood Mortgage Capital declined to comment. Chetrit Group officials could not be reached for comment. 

Cathy Cunningham can be reached at ccunningham@commercialobserver.com 

The sale follows Chetrit refinancing the property with a $342 million loan from HPS in October 2021, according to property records.

The Chetrit Group and HPS did not respond to requests for comment. 

A year after acquiring the building, Chetrit lost its top tenant, Discovery Inc., after a rent dispute, as Commercial Observer previously reported. The property ended 2020 with only a 57 percent occupancy rate, a huge drop from the 91 percent rate it had in 2019, according to Trepp.

By June 2021, the $177.2 million commercial mortgage-backed securities loan that was still owed was near default and on its way to special servicing. Chetrit saved the property from hitting a UCC foreclosure auction after securing the financing from HPS, The Real Deal reported.

The 21-story property between East 51st and East 52nd streets was previously owned by MHP Real Estate Services in partnership with ATCO Properties & Management and Chinese conglomerate HNA Group.

Tenants in the building include Hall Capital Partners, which signed for 27,000 square feet near the top of the building in 2018 with a lease that expires in 2031, CO previously reported. Chase Bank also operates a retail branch on the ground floor.

Mark Hallum can be reached at mhallum@commercialobserver.com.

The new owners plan a two-tower project with around 380 condos, and some ground-floor retail, though the plans are preliminary. The project could also have a parking podium topped with a pool deck and outdoor space, according to preliminary drawings. 

Centennial Bank provided an interest-only $28.5 million acquisition loan for the project, with a 24-month term. “We wanted to allow them enough time to obtain all the necessary approvals for the project,” said Jay Brito, a senior loan officer at Centennial, who executed the deal. 

The loan-to-value ratio of 60 percent reflects the new reality in the market, said Brito. “A year ago, on a general basis, we were a little more comfortable with higher leverage. Nowadays, we’ve pulled back on leverage, but we do everything on a case-by-case basis.”

And this case was a winner. “The project itself, from what we understand, will add a tremendous amount of value to the property,” said Brito. “It’s being used by the city as a parking lot for the beach across the street, so it’s obviously going to improve the value of the surrounding areas.”  It’s also the local bank’s first transaction with condo juggernaut Related, the biggest multifamily developer in the region and especially active in the Pompano Beach area.

The new condo project is not far from where Related is building two other luxury oceanfront condos — the Solemar at 1116 North Ocean Boulevard, which broke ground in 2021, and the Casamar at 900 North Ocean Boulevard, which broke ground just last month — at a scale that is beyond what the beachfront town has been accustomed to in the past. 

But that’s changing fast. Related itself has several more projects coming up in Pompano Beach, which it described as “young and promising,” per a statement from the company. 

“Just a few years ago, this submarket was totally overlooked — today it is one of the most exciting in the tri-county region, with many highly anticipated developments as well as a concerted effort from local government to improve community offerings and infrastructure while maintaining its signature beachfront village atmosphere,” the company stated, though it declined to comment on plans for the site. 

Chava Gourarie can be reached at cgourarie@commercialobserver.com.

G4 Capital Partners provided the financing — which includes a mezzanine component — while Galaxy Capital’s Henry Bodek negotiated the debt on behalf of the borrower. 

“We’re being very selective in determining which projects we’re financing in this environment,” Robyn Sorid, co-managing partner at G4, told CO. “We’re lending to best-in-class sponsors in mature markets where there’s clear demand for specific product types.” 

The development site at 252-254, 257, 259 and 260 East 72nd Street will have two components when completed: a 21-story, 54-unit luxury condo tower on the corner of Second Avenue and East 72nd Street, and an apartment building next door which will house four affordable units. 

The condo tower will span 150,000 square feet and also include 5,700 square feet of retail space. 

The project has been years in the making, as Chetrit Group patiently accumulated the parcels starting in 2015, the firm’s development happily coinciding with the Second Avenue subway extension. 

 In March 2022, Patch reported that much of the Second Avenue block would soon be demolished to make way for the new development, with the Church of St. John the Martyr at 252 East 72nd already having been razed back in April 2020. 

The five-story, 28-unit multifamily building on the block was also purchased by Chetrit Group in 2018 for $47.2 million from previous owner SL Green Realty, and its retail units shuttered in advance of the new development, Patch reported. 

G4’s construction loan follows the lender’s bridge-to-construction loan for the site, executed in late 2021, as reported by CO. At the time, the $116.5 million loan was collateralized by the Upper East Side development site and also Chetrit’s luxury condominium building at 49 Chambers Street in Tribeca. Galaxy’s Bodek arranged the financing in that instance, too. 

“This submarket has ample room to absorb this unique, luxury offering,” Sorid said of the condo tower, adding that in the current choppy market, G4 is focused on flight-to-quality assets and those that fall “right down the middle of the fairway.” 

Closing a deal of this size today is no mean feat, but Galaxy’s Bodek credited the strength of G4. “Along with an exceptional finance partner like G4 comes extraordinary and friendly asset management, and expertise that’s specifically tailored to each customer’s needs,”  he said.

Chetrit Group officials could not immediately be reached for comment. 

Cathy Cunningham can be reached at ccunningham@commercialobserver.com.