Too Much Money? Unappealing? No.
It would seem that the healthcare business and the real estate business are more than a little incestuous. It would also appear that moral compasses are lacking. In May a series of articles came out regarding the sale of the former Sony Building. At the time it was reported that Joseph Chetrit and his partner David Bistricer had decided to scrap plans to transform the Sony building into a residential luxury building. The speculation was quite simply that the spate of luxury housing developments was not financially lucrative given market conditions and that Chetrit and Bistricer were already under water with other loans that they had leveraged against this building and others. While the articles dealt with concerns about the businesses that were planning to open, including several kosher restaurants, our focus is in following the money. Once again, when you claim to not be able to pay for something because it is over-valued, you are deflating the value, whether artificially or otherwise. We have our speculation regarding this building and another Madison Avenue building for which the two are also in debt. We don’t think, however, that the debt is the issue. We think that similar to the Apthorp strategy, if you make a building appear unappealing to the high-end investor, you are opening up an opportunity for a predator to come in and make the kill. We do not believe that Chetrit and Bistricer are cash poor, quite the contrary. We just think that they view the rest of us to be complete fools. Are they right? Only you know…
Two weeks ago, in line with the luxury real estate decline, Joseph Chetrit decided to abandon his plans of residential transformations and signed a deal to sell the Sony Building for $1.4 billion to the Olayan Group, which is run by a Saudi family, and Chelsfield, which manages its properties.
Chetrit and his partner, David Bistricer, owed $925 million in short-term loans on the property that they were pressured to pay back. The pair also faced difficulties in getting a construction loan due to the decline in the market for high priced apartments making lenders wary.
Many questions are left unanswered regarding the pending sale of 550 Madison Avenue. The most notable is what will become of the former Sony Building’s “Chippendale” roof.
The Post reports: “What’s to become of the heavily publicized plan for a new luxury hotel that Europe’s Oetker Collection signed a deal with outgoing owner Joseph Chetrit to open there?
And, on a smaller scale, what will happen to restaurateur Joey Allaham’s three Kosher eateries in the tower’s lonely atrium, which will soon have a new, Saudi Arabian landlord?
We first reported in June 2015 that Oetker, which owns 5-star hotels in Europe including Le Bristol in Paris, was talking to Chetrit about launching an inn at 550 Madison, which Chetrit planned to convert from offices mostly to condos. The deal was soon inked and Oetker proudly announced it in November.
Just three weeks ago, WWD carried a gushing story on Oetker’s New York debut, to include 170 rooms and an 82-foot pool on the building’s lower floors.”
The sale of the Sony building to Saudi-based Olayan Group’s US division and London-based Chelsfield for between $1.4 billion and $1.5 billion is expected to close within a month or two. With the change in the overpriced condo market the new owners will stick with keeping the37-story property as office space.
Kosher steakhouse Prime Grill, takeout pizza place Del Solo and a snack stand are the only current tenants in the building, since Sony’s recent departure.
According to The Post, “Allaham has been in court for years with Sony and Chetrit, who tried to evict him over allegations that he’s in violation of a lease that runs until at least 2019. Among their claims is that Allaham has done illegal construction and spread garbage.
Allaham countersued, blaming both landlords for any problems. He could not be reached for comment on Monday. But a courtroom tiff between a Saudi conglomerate and kosher cafes might be an “Only in New York” spectacle to remember.”
Three years ago, developer Joseph Chetrit purchase the Sony Building at 550 Madison Avenue for $1.1 billion, when luxury apartments for billionaires was the craze in Manhattan.