Before he purchased the City Point site for $120 million, Extell Development’s Gary Barnett wasn’t eager to venture into the outer boroughs.
“I never was interested in developing in Brooklyn or Queens, and shame on me. I totally missed the market,” he said Tuesday during the eighth annual Brooklyn Real Estate Summit at City Point. “People saw the opportunities earlier and did great things here.”
Barnett said he and Paul Travis, founder of Washington Square Partners, began discussing the site 138 Willoughby Street back in 2013. He noted that the 25-year tax break on the property was “critical” to the deal. He said the Bloomberg administration approved the subsidy program to encourage development in what was once considered a “blighted” area of Brooklyn.
Extell’s 68-story tower will be the third built as part of the 1.8-million-square-foot, mixed-use City Point project. The condo building will feature 458 units and has a projected sellout of $901 million.
Barnett said that Extell had looked at 11 Hoyt Street, a site Tishman Speyer bought in 2015 for $170 million and is now developing a 480-unit condo building. He said Extell also competed for the mixed-use development at Pier 1 at Brooklyn Bridge Park, which ultimately went to Starwood Capital Group and Toll Brothers.
When asked by Regina Myer, president of the Downtown Brooklyn Partnership, whether Extell is eyeing any other sites in Brooklyn, Barnett said the company is being cautious about what new projects it pursues. He noted that construction costs are continuing to rise, while a revenue yield is declining. For its part, Extell has a few projects keeping it busy, like its $4 billion Central Park Tower. While he doesn’t think the market is headed for a “major cataclysm,” developers are likely going to have to wait for existing and pending residential supply to be absorbed, he said.
“It’s hard to make the numbers work. There is a tremendous supply of product coming to market,” he said. “I think it’s a time to be careful. Let the market digest.”