HPS Investment Partners acquires 850 Third from Chetrit Org, $265.9M transfer amount

Former lender HPS Investment Partners acquired control of the office building (O4) at 850 Third Avenue in Midtown East, Manhattan from the Chetrit Organization. The city valued the transfer at $265.9 million.
The transaction closed on March 16, 2023 and was recorded on March 27, 2023.

HPS Investment Partners acquired the property through the entity 850 Third Nominee LLC and the Chetrit Organization turned it over through the entity 850 Third Avenue Mezz I, LLC.

The property has 574,675 square feet of built space according to a PincusCo analysis of city data. The sale price per built square foot is $462 per the PincusCo analysis. (The price per square foot analysis is the transaction price divided by square feet as reported in public records and assumes no air rights have been sold.)
The Chetrit Organization bought the property on January 8, 2019, for $422 million.
Then in September 2021, the Chetrit Organization, run by Jacob Chetrit, refinanced a $177 million loan that had been sent to special servicing with $320 million in debt from HPS Investment Partners, as The Real Deal reported at the time. The article did not specify the breakdown of the debt by senior and mezzanine, but HPS at the time recorded a $220 million senior loan, implying $100 million was in the form of a mezzanine loan, but that could not be confirmed.
This transfer was an entity level transaction with $6.98 million in city transfer taxes and $1.7 million in state transfer taxes.

The Chetrit Organization is separate from the Chetrit Group, which is headed by Joseph Chetrit.

Prior sales and revenue

The 574,675-square-foot property generated revenue of $30.9 million or $54 per square foot, according to the most recent income and expense figures.

The property

The parcel has frontage of 200 feet and is 195 feet deep with a total lot size of 31,632 square feet. The lot is irregular. The zoning is C6-6 which allows for up to 15 times floor area ratio (FAR) for commercial and up to 10 times FAR for residential with inclusionary housing. The city-designated market value for the property in 2022 is $164.3 million. The most recent loan totaled $220 million and was provided by HPS Investment Partners on September 30, 2021.

Violations and lawsuits

There were no lawsuits or bankruptcies filed against the property for the past 24 months. In addition, according to city public data, the property has not received any significant violations in the last year.

Development

There are no active new building construction projects or major alteration projects with initial costs more than $1 million on this tax lot.

The neighborhood

In Midtown East, The majority, or 81 percent of the 61.6 million square feet of commercial built space are office buildings, with hotel buildings next occupying 7 percent of the space. In sales, Midtown East has the 2nd highest sale turnover among other neighborhoods in the city with $3.6 billion in sales volume in the last two years. For development, Midtown East is the most active neighborhood among other neighborhoods. It had 15.9 million square feet of commercial and multi-family construction under development in the last two years, which represents 26 percent of the neighborhood’s built space. There was one pre-foreclosure suit filed among other office buildings in the past 12 months.

The block

On this tax block, PincusCo has identified the owners of four of the five commercial properties representing 3,216,416 square feet of the 3,243,029 square feet. The largest owner is Angelo Gordon, followed by Chetrit Organization and then Princeton International Properties.
There are no active new building construction projects on this tax block.

The majority, or 99 percent of the 3.2 million square feet of built space are office buildings, with elevator buildings next occupying 1 percent of the space.

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