Two apartment towers on the Upper East Side have been sent to special servicing after their owners, two major players in New York real estate, defaulted on the properties’ mortgage.
The $540 million loan for 305 E. 86th St. and 160 E. 88th St. was sent last month to special servicing, where troubled mortgages get worked out, after a “payment default,” credit-rating agency KBRA said in a report yesterday. That indicates a monthly payment was missed by owners Meyer Chetrit and Stellar Management.
Chetrit is a principal at Chetrit Group, a developer with a portfolio of 14 million square feet nationally that once owned Chicago’s Willis Tower, the country’s second-tallest skyscraper after 1 World Trade Center. Stellar was co-founded in 1985 by Larry Gluck and Steve Witkoff, who went his separate way in 1997 and recently was tapped to serve as Middle East envoy in the Trump administration. Gluck passed away last year at age 71; his firm, which the Real Deal said is run by a partnership including his widow and oldest daughter, owns over 12,000 apartments in New York plus 2 million square feet of commercial space.
In 2014, Chetrit and Gluck teamed up to buy the Upper East Side buildings, called Yorkshire Towers and Lexington Towers, for $485 million. The 21-story Yorkshire, at the corner of Second Avenue and East 86th Street, has nearly 700 units and amenities including an indoor pool, saunas, and private balconies. It also shares 204 parking spaces with nearby Lexington Towers, which has about 125 market-rate apartments.
In recent years cracks have appeared in the buildings’ finances. Their combined occupancy rate of 90% early last year was six percentage-points less than in 2022, KBRA said. Net cash flow has slipped by nearly 25% in that period, to $27 million. A broker familiar with the properties said that rents for the more than 300 stabilized units haven’t kept pace with escalating costs, even as market-rate units command record rents.
The Yorkshire and Lexington also carry hefty debt loads, giving them little margin for error if rental revenue falls short. In addition to the $540 million mortgage, they have $175 million in mezzanine debt, KBRA said, which presumably comes with a higher interest rate. The mortgage comes due in 2027, the result of a 2022 refinancing in which Chetrit and Stellar extracted $55 million in cash from the properties.
Both the Yorkshire and Lexington were developed in the early 1960s. In 2016, Con Edison shut off the gas at Yorkshire after unauthorized electrical work was discovered on the premises. The building paid an $800 fine but city records show the code violation remains open.
Chetrit didn’t return a call to his office, and a spokesman for Stellar had no immediate comment.
