The Real Deal New York

Extell finalizing $600M construction loan for One Manhattan Sq.

Deutsche Bank, AIG-led financing for 80-story condo is 2 to 3 weeks away: sources

July 29, 2016 02:15PM
By Mark Maurer Twitter_logo_blue copy

Gary Barnett (credit: STUDIO SCRIVO) and One Manhattan Square

UPDATED, 4:12 p.m., July 29: Gary Barnett’s Extell Development is close to securing a $600 million senior construction loan for One Manhattan Square, following a struggle that led to delays in closing mezzanine financing for the 80-story condominium project.

A consortium of lenders led by Deutsche Bank and AIG is providing the loan for the Lower East Side project. Sources told The Real Deal that Barnett is two or three weeks away from locking in the financing.

As of market close Friday, the development giant’s bonds on the Tel Aviv Stock Exchange were trading at a yield of 10.5 percent, sources said, indicating a high level of concern about the company’s exposure to the New York luxury market. Since May, Extell bonds’ yields have increased by 13 to 17 percent, according to Israeli financial website the Marker, which first reported on the loan Wednesday.

Extell TRData LogoTINY declined to comment to TRD on the loan as it has not yet been finalized.

The financing would also allow Barnett to close on a mezzanine loan of $463 million from Scott Rechler’s RXR Realty, which was used for One Manhattan Square as well as projects at 500 East 14th Street in the East Village and 555 10th Avenue in Chelsea. Extell had previously delayed closing on the mezzanine financing, or greater equity, twice – pushing the deadline back to June 30, and then to July 31.

By Sunday, Extell is expected to announce to the Tel Aviv Stock Exchange another extension on the RXR loan.

Securing the mezzanine loan was contingent on Extell securing a senior construction loan. Completing the $600 million deal is completed is likely to reassure Israeli investors.

Barnett may repay bonds upon maturity in late 2018 or 2019 from the One Manhattan Square recapitalization when the tower is nearly finished, sources said. This would be similar to what Extell did in 2014, when it refinanced its debt at One57 after securing a $337 million mortgage from Deutsche Bank.

The developer has been seeking a total of $890 million in financing for the 815-unit One Manhattan Square, including up to $200 million through the EB-5 visa program. The project is slated to cost $1.4 billion and is expected to wrap up construction by June 2018. Extell recently lowered the total projected sellout for the project to $1.87 billion from just over $2 billion.

Sources said Extell will still need to raise $370 million in either mezzanine or EB-5 funding to complete the project’s budget.

Earlier this month, Extell pulled off a $140 million construction loan its two-building mixed-use project at 500 East 14th Street, as TRD reported. The developer is said to be still seeking funds for its Central Park Tower project at  217 West 57th Street.

Correction: A previous version of the story mischaracterized the status of the RXR mezzanine loan. It would close upon Extell receiving the senior construction loan. 

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