The Real Deal New York

Extell’s Israeli bonds still post high yields, despite recent financing successes: report

Yields were close to 13% by close of business Wednesday
By Katherine Clarke | December 09, 2016 07:00AM

From left: Gary Barnett, Central Park Tower and One Manhattan Square

From left: Gary Barnett, Central Park Tower and One Manhattan Square

Extell Development’s bonds continue to trade at high yields, despite the company’s recent success in securing financing for its projects, according to a new report by Israel Brokerage & Investments, a research and investment firm based in Tel Aviv.

By the end of trading Wednesday, Extell’s TRData LogoTINY bonds were trading at yields of 12.9 percent. While that’s below the 16-percent yields the company’s bonds were trading at in March, it’s still much higher the yields offered by many of the its competitors. By comparison, the Moinian Group’s bonds are currently trading at yields of 4.4 percent and 4.3 percent.

“Extell’s financial situation today is a marked improvement on what it was six months ago. So it is difficult to explain why the bonds should be trading [so high,]” the IBI report stated. “None of Extell’s reports recently have given any indication of a downturn in its situation so we do not see any clear reason for the rise in yield.”

Gary Barnett, founder and CEO of Extell, did not immediately respond to a request for comment.

It’s odd, IBI said, that yields have not moved substantially since the spring, when they were effectively junk bonds and “when the visibility around the company’s finances was much lower.”

The company has achieved several of its financing goals this year. Since August, Extell has locked down more than $1 billion in financing for two of its most ambitious projects. For One Manhattan Square on the Lower East Side, he scored a $300 million mezzanine loan from Scott Rechler’s RXR Realty and a $500 million construction loan from a consortium led by Deutsche Bank and Natixis. For his planned Central Park Tower at 217 West 57th Street, commonly referred to as the Nordstrom Tower, he nabbed approximately $300 million in equity from SMI USA, the U.S. subsidiary of Shanghai’s largest state-owned enterprise.

Still, uncertainty persists. Among the biggest risks to Extell’s business is a $900 million gap in financing for Central Park Tower, for which Barnett is currently seeking a construction loan. IBI’s Yaniv Saylan said Barnett had not specifically updated his investors on that loan search, which is challenging amid a drought in new condo financing.

“We would stress that Extell is still a high – risk investment and is not suitable for everyone,” the IBI report said. “3Q results exhibited no small measure of financial acrobatics.”