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Chetrit Organization Sells 850 Third Ave. For $150M Haircut

Midtown East office tower 850 Third Ave., which the Chetrit Organization sold to its lender this week for a significant discount.

The Chetrit Organization has sold its 850 Third Ave. office tower to its lender for less than the value of the mortgage it took out on the Midtown East property less than two years ago.

The firm closed on a sale of the 21-story property to its lender, HPS Investment Partners, for $266M this month, PincusCo first reported. The deal works out at a price of roughly $431 per SF for the 617K SF building.

The price tag on the most recent sale of the building is a steep discount from what Chetrit bought it for — which was already a haircut for its predecessor. The New York landlord run by Jacob Chetrit paid $422M for the building in 2019.

Building occupancy had already fallen from over 90% to roughly 57% under the previous owner, HNA Group, which paid $463M for it in 2016 amid its New York buying spree. By October 2021, 850 Third Ave. was still only half-leased and Chetrit was facing foreclosure after falling behind on a $177M securitized mortgage. The firm scored a $320M refinancing deal, including $220M in senior debt, from HPS, The Real Deal previously reported.

Both the Chetrit Group and the Chetrit Organization — the two firms formed after the Chetrit brothers split the family business in two — have had trouble with debt on some of their more recent purchases since interest rates started spiking.

The Chetrit Group, run by Joseph Chetrit, was looking to offload 8,000 multifamily units across several U.S. states in January, with the portfolio’s occupancy hovering at 76% in spite of demand for apartments. The Chetrit Group also found itself in trouble a month later, when it defaulted on a pre-development loan in Hudson Yards and its lender set about looking for a buyer for the debt who might foreclose on the site.