The Real Deal New York

Extell closes on $500M construction loan for One Manhattan Square

Developer also gets $300M mezz loan from RXR, and extension from partner SMI to secure funds for Central Park Tower

September 01, 2016 06:05PM
By Mark Maurer and Katherine Clarke

Extell OMS CPT

From left: Rendering of One Manhattan Square, Gary Barnett (credit: STUDIO SCRIVO) and rendering of Central Park Tower

UPDATED, 6:25 p.m., Sept. 1: Extell Development has finally scored a $500 million construction loan for One Manhattan Square, a $1.4 billion condominium project on the Lower East Side.

The Gary Barnett-led firm also closed on a $300 million mezzanine loan from Scott Rechler’s RXR Realty. That financing, which was contingent upon Extell securing the construction loan, may be upped to $463 million in the future. The interest rate on the mezz loan, originally slated to be 7 percent, is now 8 percent.

“Gary has done an excellent job of acquiring and assembling parcels of land that have a great land basis and that appeal to lower price point product, which there’s a scarcity of in Manhattan right now,” Rechler told The Real Deal Thursday. “Clearly, the construction loan market has become much more challenging. Over the last year, it’s gotten even more challenging. That’s something we anticipated on the RXR side and tried to play into that marketplace and provide financing to fill that gap for the best developers with the best sites.”

On Wednesday, Extell told bondholders it was waiting on a crucial signature from Solil Management, which manages the assets of late real estate mogul Sol Goldman and owns the ground lease, imminently. That lapsed Aug. 31 deadline technically marked the fifth delay of the mezzanine loan for three projects, including One Manhattan Square.

The size of the construction loan, provided by a consortium led by Deutsche Bank and Natixis, was chopped from $600 million to $550 million, and now to $500 million. The interest rate is Libor+3 percent for the facility and Libor+4.5 percent upon drawing the money.

In a filing submitted on the Tel Aviv Stock Exchange, Extell also provided an update on the Central Park Tower, a $4.4 billion condo project at 217 West 57th Street. The firm said it paid back $50 million in outstanding debt of a $285 million senior mortgage provided by Blackstone Group in 2013 for the project. The deadline for repayment of the remainder of the loan has been pushed to Dec. 9.

Also, Extell received an extension from its new Central Park Tower equity partner SMI USA for securing a new construction loan. The firm’s deadline is now July 31, 2017, instead of May 24. If Barnett misses it, SMI can force him to buy back its $300 million stake. If he can’t buy it back, SMI can push him to sell the project in full.

Barnett could not be reached for comment.

“We’re seeing certain patterns,” Ori Eisenberg of real estate financial advisory firm One Ha’am told The Real Deal. “Lenders are becoming more informed about the sponsor’s other projects and those deadlines. Terms are being customized.”

Eisenberg continued: “Once SMI secured a corporate guarantee in the Central Park Tower deal, we heard Deutsche Bank will get a corporate guarantee regarding One Manhattan Square. This is unusual for a New York developer, but I don’t think it’s by chance.”

News of Extell’s announcements was first reported by Israeli websites Calcalist and TheMarker.

One Manhattan Square also has $200 million in equity and $150 million in debt from M&T Bank.