Can Chetrit Beat the Heat?

"I'm shocked — shocked — to find that gambling is going on in here!" - Casablanca

There is a breed of real estate investor that is almost pure merchant: developing & operating are lesser thrills than trading. Buying low, selling high, a piece here, a trophy there. Brick holds little romance for them; all the juice is in the dealmaking.

The king of that merchant class is Joseph Chetrit. Along w/ his brother Meyer, he controls a 14M sf empire nationally: offices, development sites, apartments. For the Chetrits though, the actual holdings are less important than the trades they can enable. The hefty lads are as nimble as anyone out there – all they need is for the capital markets to cooperate long enough for them to make their next moves. It’s a strategy that has worked spectacularly since the 90s.

No longer.

Coming Soon: The Promote Podcast

There’s a need for a sharp, short (25m) weekly pod that captures the CRE zeitgeist à la what The Town does for Hollywood. Think of The Promote’s signature 🌶️ , but w/ even more behind-the-scenes action, co-hosted by Hiten & a CRE insider and featuring cameos from top players. Our pilot episode is ready, and we’re putting together the 🦴 for S1 now – if you’re interested in sponsoring what’s sure to be the most avidly listened-to pod in the space, reach out here. 📻️ 

Chetrit (Cont.)

Collectively, the Chetrit family (incl. Juda Chetrit’s Chetrit Org., which controls 2M sf) has defaulted on $1.6B in debt, per a new (and excellent) dive by Crain’s, w/ another $300M worth of loans distressed. Many of its bigger office bets are in shambles, grappling w/ vacancies & lower appraisals. A $540M loan on 2 massive UES rentals is in special servicing, and a large rental complex in Queens is in foreclosure. In ‘19, the Chetrit Group made a massive multifamily bet, paying half a billion dollars for nearly 9K units across the country owned by Roco Real Estate (Tyler Ross, now a convicted mortgage fraudster); it went through a massive workout fight to save that portfolio. In Feb., the Chetrits lost Brooklyn’s Hotel Bossert to foreclosure.

“They’ve done everything wrong the last 10 years,” a family adviser told the publication.

Let’s rewind a decade ⏪️ , to when Chetrit was at the peak of his powers: in partnership w/ frequent collaborator David “my vice is money” Bistricer, he had just paid $1.1B to beat out 20 other suitors for Manhattan’s Sony Building. He scored the prize w/ a $100M down payment and a ≈ $600M letter of credit from a Middle Eastern SWF, per the Times, and then convinced rival bidder SL Green to help him sort out his financing.

“He has a nose for finding deals and an ability to make people comfortable with his ability to close a transaction quickly,” Arbor Realty Trust’s Ivan Kaufman, who’s been both an investor & a lender to Chetrit, said at the time. Chetrit & Bistricer planned a luxe condo conversion, but instead sold the tower to the Saudis for $1.3B in ‘16 – for a child of the Silk Road, the only thing sacred is the trade.

For now, the hustle continues. Joseph & Meyer are battling to keep control of 3 Fort Lee properties, a legal back-forth w/ their lender that the brothers’ attorney, Leo Jacobs, likened to a “brass-knuckle fight.” 👊 And in South Florida, they’ve been able to dodge foreclosure on projects in Hollywood Beach and Pompano Beach, as well as recap a Miami Beach project. Jacobs insists that the fact that the distressed boat is crowded w/ blue-chip sponsors will work in the brothers’ favor – lenders will be more willing to play ball.

"Things are difficult, but the Chetrits' judgment hasn't changed, their talent hasn't changed, their ability hasn't changed," he said. "The market changed."

Banks Most Exposed to CRE

When Rebel Cole isn’t warring w/ market observers on LinkedIn, the finance prof prepares these interesting crunches of bank exposure to CRE. Using publicly available Q4 Call report data from the FFIEC, Cole analyzed a lender’s exposure to mortgages & construction loans, as well as unused commitments to fund such loans. Of note: Bank OZK has continued to nip at its total CRE exposure ($30.6B) to equity ($5.7B) ratio – it’s now at 537%, down from 566% in Q3 & 597% in Q2. Also peek NYCB/Flagstar, which had $46.4B in total CRE exposure compared to $8.6B in equity, w/ its exposure ratio (541%) staying static. Across the banking sector, Cole calculated aggregate industry total CRE exposure at 132%, the same as Q3.

SY of Relief: Cayre & Rialto Make Up

Quickly ✒️ for the record: Joe Cayre’s Midtown Equities dropped its suit against Rialto, w/ Rialto agreeing to grant Cayre a 1Y loan extension on the Brooklyn Heights property to Aug. Cayre had sought class-action status, alleging that Rialto slow-rolled the contractually agreed-upon ext. request as part of a “sinister pocket veto" scheme. But we’re all good now, and this deal gives Jonathan Landau ample time to close on the site and get cracking on his 47-story resi tower.

See also: Landau’s Omakase Dealmaking 🍣   

HUD in the MUD

If you pass your favorite HUD lender on the street, maybe buy them a 🥯 and give them a hug. Word is that the agency’s 25bps “Green” Mortgage Insurance Premium for new dev & refis, is indeed up for elimination 🌲 – the rumor’s been floating for a couple weeks, but a HUD insider has now reiterated to newsletter HUD Network LLC that the Green MIP – whose lower premiums just about justified the 🧠 damage to qualify – is on borrowed time ⏳️ The move would make HUD loans less competitive w/ Fannie/Freddie, and so HUD lenders are staring into the abyss. However, there’s hope: MIPs on new construction (65 bps) & refis (60bps) are likely to be reduced to 35bps, per the newsletter, which reported that mortgagee letters for both the green elimination & the reduction have been drafted and will be concurrently released 🖋️ If both things do in fact happen, it’s a win.

Quickies

• 🎥 Wall Street’s new ruling class (and why they’d make great tenants)

• HFZ 👷 boss pleads guilty in fraud scheme (catch up on whole saga here)

• CoreWeave IPO a great 👀 into data-center game (See also: AI Papi)

• Hines closing in on $600M+ CMBS for Chicago’s Salesforce Tower 

• Universal Music to Roth’s 👂️: 300K sf deal in the works at VNO’s Penn 2

• A&E willing to take $87M 💇 at UWS rent-reg campus 

• Has Extell struck a deal w/ Solil in Lenox Hill? ⛰️ 

• Boring but valuable: GT discusses EB-5 kill plan and “gold card” 💼 🦅 

Unquotable Quotes