A federal judge appointed a receiver to manage two market-rate apartment buildings in Queens after their owner, Meyer Chetrit, fell behind on nearly $2 million in utility bills and risks putting thousands of residents in the dark.
The appointment is another setback for Chetrit and his older brother Joseph. They together own 16 million square-feet of property and are struggling to hang on to much of it. At least eight buildings owned by Chetrit Group have been or are in foreclosure, including the one that just got the receiver, a 540-unit complex in Jamaica called Parkhill City.
U.S. Magistrate Judge Vera Scanlon ruled Monday that a receiver, which is a court-appointed building manager, is needed to ensure the lights remain on and the value of Parkhill City is protected. Chetrit, who has defaulted on the property’s $225 million mortgage, had argued in court papers that the $680,000 cost of a receiver was too high.
“The property is at risk of imminent and irreparable harm,” Scanlon wrote in a ruling handed down Monday. “If borrower is unable to shoulder the cost of a $680,000 receiver, borrower would have even greater trouble paying its utility debts and ensuring that the property’s residents have consistent power and water.”
She added: “Borrower’s concerns about the cost of a receiver makes the imminent risk to the property more serious.”
An attorney for the Chetrit brothers, Leo Jacobs, said: “We disagree with the decision. We will defend the matter in short order.”
Parkhill City owes at least $1.3 million to Con Edison, $300,000 to the New York City Water Board, and $100,000 to National Grid, court documents show. Chetrit had warned that service disruptions “could occur at any time,” which the judge said means harm to the property is “imminent.”
Utility payments are one of many bills the Chetrits are behind on. Court documents and credit-rating agency filings show the brothers have defaulted on $1.6 billion worth of mortgages, including for the Hotel Carter near Times Square, 26 Broadway in the Financial District, and Lexington and Yorkshire Towers, two large Upper East Side apartment buildings. Another $300 million in loans are at risk of default.
For nearly 30 years the Chetrits were some of the busiest players in New York real estate. The Moroccan immigrants owned the Chelsea Hotel for two years before selling it in 2013 and sold the Sony Building at 550 Madison Ave. in 2016 after five years of ownership. They held the Willis Tower in Chicago for nine years before selling it in 2015 for $1.3 billion to Blackstone Group.
Around the time of the Willis Tower sale the brothers started developing Parkhill City on the site of a former Catholic hospital in Jamaica. The two apartment buildings include doorman service, a pool, and are close to the subway and Long Island Rail Road. Yet although Parkhill City is more than 95% occupied, it has been in foreclosure for a year. Lenders accused the Chetrits of violating the terms of their mortgage trying to convert the rental complex into condominiums without permission. Parkhill produces $16 million in annual net rental income and conversion would have allowed the brothers to sell individual units rather than rent them.
The Chetrits counter-sued and alleged lenders “manufactured” a default in order to seize Parkhill City, which has a lot of land eligible for tax incentives still to be developed.
Parkhill City isn’t the Chetrit’s only property with delinquent utility bills. Con Edison recently threatened to shut off the power at a five-story building on West 26th Street unless an overdue $9,000 bill was paid, according to resident Cynthia Vogt. She said part of the bill was paid. The elevator hasn’t worked in more than two years, according to a lawsuit Vogt and a neighbor filed in state court.
Judge Scanlon observed that appointing a receiver for Parkhill City will help hold the buildings together during an uncertain time.
“If borrower cannot afford to keep the lights on at the property, its risk of undeserving – and losing – tenants dramatically increases,” she wrote.
