Prolific development duo Joseph Chetrit and Clipper Equity received $228.5 million in construction funds to convert a Midtown hotel that was foreclosed on last year to a combination of office and residential condominiums.
The Flatotel, at 135 West 52nd Street, will become a five-floor “boutique” office condominium and 37 floors of luxury residential condos, according to a representative for Meridian Capital Group, which brokered the loan with Deutsche Bank.
Sales of condos at the $300 million project have commenced, according to StreetEasy. The lone unit to sell so far, #35A, went for $8.5 million, closing on the same day as the construction loan did—Monday—according to city records. The other 108 condo units are listed for an average of $2,120 per square foot according to StreetEasy, with several homes in contract.
The two-year, non-recourse, interest-only construction loan has a floating Libor-based interest rate and a one-year extension option, according to Meridian. Clipper and Mr. Chetrit’s Chetrit Group did not respond to request for comment; Deutsche declined to comment on the deal.
Chetrit and Clipper bought the building early last year from a venture among the Rockpoint Group, Atlas Capital Group and Procaccianti Group for $180 million, according to previous reports. That venture bought the debt on the 289-room hotel from Anglo Irish Bank after previous developer the Alexico Group fell in to trouble, reports show.
Chetrit and Clipper financed the acquisition with a $115 million loan from the Variable Annuity Life Insurance Company, according to city records. VALIC is a subsidiary of notorious insurer American International Group.
Meridian’s Aaron Birnbaum and Emanuel Westfried negotiated the most recent loan deal as well as the mortgage for the initial buy, according to the firm’s representative. The proceeds of the construction loan will also be used in part to refinance the acquisition loan.
“The project has enjoyed a significant level of presales and construction [and] is well underway and being funded with equity, making this an attractive opportunity for lenders,” said Mr. Westfried in a statement provided exclusively to Mortgage Observer. “Meridian was able to identify several capital sources interested in financing the transaction on a non-recourse basis.”