Extell’s $86M assemblage sale underscores Midtown East value

The pricing on two Midtown East properties Extell Development sold to a joint venture late last month has been revealed — $86 million, according to records filed with the city today.

That figure pencils out to about $600 per buildable square foot for the two buildings, 138 East 50th Street and 151 East 49th Street – a significant sum for a commercial development site, according to Real Capital Analytics managing director Dan Fasulo.

“It feels a little high to me at that location,” Fasulo said. “It’s midblock.”

Together, the two properties between Lexington and Third avenues offer just over 142,000 square feet of buildable space. With the planned rezoning of the Midtown East area, however, that number could grow even higher, which, naturally, would drop the overall price per buildable square foot.

Under the rezoning, the city plans to sell additional air rights in Midtown East for $250 per square foot, a sum that underscores just how high the $86 million price tag is. “It’s supposed to be equal to the cost of land,” Fasulo said of the $250 mark.

But Bob Knakal, chairman of Massey Knakal Realty Services, who has represented Extell in building sales in the past, said the sum was in line with the market.

“It’s at the high end of the range, but that’s the market value,” he said of the sales price.

Of course, it’s hard to compare commercial development sites in Midtown, especially on the east side, as very few such transactions take place. Last month Glenwood Management sold a West Side parcel on Eighth Avenue between West 46th and West 47th streets to hotel developer RIU for $111 million, which rounds out to $346 per buildable square foot.

Last May, marketing maven-turned-developer Michael Shvo bought 239 10th Avenue in West Chelsea for about $800 per buildable square foot, as The Real Deal reported. Alas, for residential development sites, these sky-high figures are becoming the new normal, as high-end condominiums soar to stratospheric prices, buoyed by the rise of a global elite and their desire to invest in New York City real estate. For commercial development sites, the market is considerably less tested, Fasulo said.

The buyers, a joint venture that includes developer Robert Skolnick and Connecticut-based Ceruzzi Properties, will likely opt to develop a hotel on the approximately 12,000-square-foot site, for which Extell paid $70.6 million in late 2011.

“You have to look at the fact that the area is in desperate need of new office stock — and new hotel stock for that matter,” Knakal said, suggesting that a hotel or office-and-hotel combination are likely for the parcels.

However, Fasulo maintained that the midblock site appears to have commanded a hefty price given that the existing buildings still need to be demolished.

“It’s a huge number to build a hotel,” Fasulo said.

Extell has begun exiting a number of smaller sites. For example, last month the developer sold 112 West 25th Street, between Fifth and Sixth avenues, to hotel developer John Lam for $67.5 million.

Neither Ceruzzi reps nor Gary Barnett, president of Extell, were immediately available for comment. No working number for Skolnick was listed.