NYTimes: For Joe Chetrit, a Secretive Buyer, Sony Building Is Eye-Catching Purchase
The New York Times reports on Joe Chetrit, an Orthodox Jewish developer in NYC, who on Friday closed his biggest deal yet: a $1.1 billion purchase of the Sony Building.
For nearly 20 years, Joe Chetrit has sought to remain far outside the spotlight as he has bought and sold billions of dollars in property in New York City.
But some of the mystery surrounding Mr. Chetrit may come to an end with the closing on Friday of his biggest deal: the $1.1 billion purchase of the Sony Building, the 53-story tower on Madison Avenue with the distinctive curved top and pink granite walls.
His plan to convert the skyscraper, which has served as headquarters for AT&T and Sony, into a mix of luxury condominiums, a hotel and high-end retail shops is already drawing scrutiny from city officials, neighborhood residents, architects and other developers.
Mr. Chetrit, a stout, blunt-talking man with a mustache and an old felony conviction, guards his privacy fiercely.
He first attracted significant attention when he led a consortium of investors that bought the Sears Tower, now called the Willis Tower, in Chicago, for $840 million.
His financial partners on his deals are largely unknown. Few people, friends or enemies, are willing to speak publicly about him.
“He has a nose for finding deals and an ability to make people comfortable with his ability to close a transaction quickly,” said Ivan Kaufman, chief executive of Arbor Realty Trust, who has been both an investor in and a lender to Mr. Chetrit’s projects. “He is somewhat secretive, so it’s hard to know all that he’s involved in.”
Mr. Chetrit won the January auction for the Sony building in characteristic fashion, outmaneuvering 20 or so bidders.
Although at least two others offered a billion dollars or more, Mr. Chetrit clinched the deal with a $100 million down payment and a letter of credit worth nearly $600 million from a sovereign Middle Eastern investment fund, according to executives briefed on the negotiations.
He then asked a rival bidder, SL Green Realty, to arrange $925 million in financing for the transaction so he could close the deal on Friday, the executives said. The Bank of China is expected to provide a $600 million mortgage.
But many in the real estate industry say that the deal is fraught with risk. Sony will remain in the building for three years. Experts say it will then take up to two years and $500 million to completely renovate the building. Interest rates can soar and the market for expensive condos can dry up before the building reopens in 2019.
In a brief telephone interview, Mr. Chetrit declined to answer questions. “It’s a beautiful, iconic building,” he said. “We’re going to keep it that way.”
Mr. Chetrit, 55, comes from an Orthodox Jewish family with roots in eastern Morocco, where his relatives were active in the import-export business. He arrived in the United States in the late 1980s and worked in the garment industry.
In 1990, he pleaded guilty to violating customs laws by illegally importing more than 1.5 million square yards of fabric into the United States from South Korea. He had the fabric shipped through France in an attempt to disguise its origin, according to court records.
Mr. Chetrit was sentenced to three years of probation and 250 hours of community service and was fined $10,000. His lawyer at the sentencing hearing said Mr. Chetrit had lost his business as a result of the charges. After his conviction, Mr. Chetrit plunged into real estate, gradually moving from smaller to larger buildings.
Mr. Chetrit buys and sells for profit, rather than with the goal of amassing a real estate empire.
Real estate brokers often say they love Mr. Chetrit because he is not hesitant about writing big checks, even as other developers scratch their heads over the prices he pays and wonder how he raises so much cash for his deals. His investors have made a fortune with him, real estate executives say, but partners have not always fared so well. More than one joint venture has ended in lawsuits and recriminations.
Unlike many prominent landlords, Mr. Chetrit is also more than willing to tangle with corporate or residential tenants who do not fit with his plans for his properties, which include the International Toy Building, Park West Village or the Chelsea Hotel.
Dozens of longtime residents at the Chelsea, the legendary hotel on West 23rd Street, have complained that renovations have often left them without heat and hot water, forcing them to endure dust, mold and toxic conditions. A lawyer for the tenants say they plan to go back to court charging that Mr. Chetrit violated a court order to improve conditions. “They want the tenants out,” said the lawyer, Janet Ray Kalson, referring to Mr. Chetrit.
Mr. Chetrit’s partner in the Sony deal, David Bistricer, a real estate investor from Brooklyn, has also had trouble with the law. In 1998, the New York attorney general obtained a court order barring him for life from converting rental buildings in New York to condominiums or co-ops because he had committed financial improprieties. The lifetime ban was later partially lifted, according to state records.
But in 2007, the federal housing secretary ruled Mr. Bistricer was an unsuitable landlord and rejected his $1.3 billion bid for the country’s largest federally subsidized housing complex, Starrett City in Brooklyn. Since then, Mr. Bistricer has been on the city public advocate’s list of the worst city landlords in 2010 and 2011.