Extell Development Corporation galloped onto the New York City real estate scene in full regalia last year with a big land buy on the Upper West Side, and its high-profile arrival has many veteran market observers wondering how fast one firm can move.
The company, led by president and CEO Gary Barnett, formerly a diamond merchant, claimed a multitude of headlines in 2005 – some flattering, some less so.
First was a residential purchase that topped the charts for New York City: Extell – a national real estate developer as well as construction and asset manager in office, retail and multifamily properties – paid a reported $1.76 billion for a swath of land on the Upper West Side owned by Donald Trump and several Hong Kong-based partners.
The move triggered a high-profile lawsuit filed by Trump against his partners for undervaluing the property.
Around the same time, Extell launched a surprise bid to develop the Atlantic Yards in Brooklyn, attempting to snatch away an opportunity for creation of a New Jersey Nets arena from developer Forest City Ratner. Though the strategy was ultimately unsuccessful, Extell gained much community support – at least in Brooklyn.
However, at about the same time, Extell’s twin skyscrapers project, the Ariel, planned for the Upper West Side between 99th and 100th streets, caught flak from area residents for their towering silhouettes. And a building collapse during demolition of a supermarket to make way for the offending structures injured several people.
Since then, Extell has launched sales at six new residential developments, including the two Ariel buildings. At the Orion at 350 West 42nd Street, about 500 of 551 units have been sold since last spring. More recently, Extell put its stamp on the Stanhope Hotel on Fifth Avenue, a leasehold with a 150-year lease that has been converted to co-ops offered for $10 million or more. Sales also just began on Altair 18 and Altair 20, two buildings on 18th and 20th streets off Fifth Avenue, respectively.
“We’re not interested in going about tooting our horn,” said Barnett, who gave his first New York City interview to The Real Deal. “Fortunately, or maybe unfortunately, some of the deals we’ve done recently have had a higher profile. But we’ve been fairly active in New York City for over the past 10 years.”
Extell, known as Intell Management and Investment Co. until about nine months ago, purchased the 226-unit landmark rental building the Belnord Apartments at 2360 Broadway in 1994. The purchase was made with a group of investors including Ziel Feldman of Property Markets Group, which is no longer involved, though the property has been renovated.
The company also developed the W Hotel in Times Square and 45 Walker Street, a law building converted in 2001 to loft condominiums in Tribeca. Also completed in 2001 was the Gatsby at 65 East 96th Street, a prewar 17-story condominium conversion.
More recently, 330 East 72nd Street, a new development with 13 full-floor condominiums went on the market and recently sold out, Barnett said.
A native New Yorker who lived in Belgium for 12 years, Barnett said he is seeing the same craving for new construction in New York that he experienced in Europe. “We’re seeing a bit of a mentality shift to new construction, where people really want something new,” he said. “Or if it’s not new, it should be really a gut renovation, not just some kind of cosmetic.”
As for the potential convergence of a slew of condo projects entering the market at once, Barnett said he believes the New York City market can handle it.
Extell this fall began construction on 100 Riverside, a building on the former Trump property. Extell plans to create a total of about 600 units in two buildings on the property in the near future.
“The first building will have a lot of one- and two-bedroom units,” Barnett said. “The second building, which will be magnificent, is a 41-story twin tower building with a mix of larger, family-sized units.”
Though Trump’s lawsuit claims that Extell intends to flip the property referred to as both Trump Place and Riverside South, Barnett said that ultimately as many as 3,000 units may be created there.
Barnett said the company, along with investment partner the Carlyle Group, a private equity investment firm, purchased a developable footprint of about 20 acres with about five million developable square feet. The rest of the acreage, which reportedly totaled 74 acres, consists of parkland and roads, as well as three rental buildings and parking garages sold for a reported $816 million or more before the deal closed.
“I don’t understand the basis for the lawsuit,” Barnett said. “Nobody has purchased any of the land from us… and we didn’t buy it in a vacuum. At least four or five other very capable large developers saw the property and chose not to pay the price we paid.”
Trump did not respond to calls regarding his lawsuit, which a New York state Supreme Court judge dismissed in September. Reportedly, Trump intends to appeal the decision.
Extell is also developing luxury condominiums and retail space at 86th Street and Lexington Avenue. At the same time, it has purchased four buildings at West End Avenue and 86th Street that it plans to demolish for a new residential construction.
A complete list of Extell’s future New York City developments includes 221 West 57th Street and the Stuart Dean Building at 355-366 10th Avenue, though detailed plans have yet to be worked out for those properties.
Extell’s penchant for building up in New York City upset some Upper West Side residents when the company purchased air rights from St. Michael’s Church in order to build its Ariel East tower to about 40 stories.
“We’re doing everything as of right,” Barnett said. “It’s unlikely that there will be other tall buildings built, simply because there are no other sites there, but we’ve tried to do what we could in presenting it to the community.”
Extell bought the air rights around the 60-story Orion building to build taller, but also to insure residents will have unobstructed views from the fifth floor up. Unusually, the luxury building has its amenities mid-building, on the 28th, 29th, and 30th floors.
“We took prime real estate and turned that into amenity space,” said Raizy Haas, senior vice president for development at Extell. “We were trying to create a lifestyle for the people occupying the building. The views are unbelievable.”
Pamela Liebman, president and CEO of the Corcoran Group, said the brokerage is excited to be marketing numerous developments for Extell in New York City.
“They’re not a formula developer,” she said. “They’re a developer that reads the market very well, and reads the neighborhood well, and then delivers a product that exceeds expectations of value.”
As for the community unrest regarding the Ariel buildings, Liebman said, “sometimes what people want is not what the future holds.”
David Wine, vice chairman of the Related Companies, said Extell has been particularly canny in predicting the strength of the condominium market on West 42nd Street with the Orion. The Related Companies, Twining Properties, and MacFarlane Partners are planning a gargantuan project with retail, rental apartments and condominiums on West 42nd Street between Ninth and 10th avenues.
“We actually started working on our site before [Extell] started its for-sale campaign,” Wine said. “To their credit, they were the first to anticipate real strength in the condo market in that submarket.”
Alex Twining, president of Twining Properties, said he is aware of two Boston-area projects being done by Extell, including the Intercontinental Hotel and Residences at 500 Atlantic Avenue and 303 Third Street in Cambridge, where Extell is planning 600,000 square feet of rentals and condominiums.
Twining is doing a 24-story apartment tower across from Extell’s Cambridge development.
“In the last several years, [Extell] is one of the more active players in the New York market,” Twining said. “They’ve chosen locations we think are good, and timing-wise, I think they’re going to do well, before the market slows down.”
Extell has pursued many high-profile deals in other parts of the country in the past decade, including the purchase of the Enron Center South in Houston, which it sold about a year later, and the redevelopment of 1.8 million square feet at the Insurance Exchange Building in Chicago. Currently, Extell is developing more than 500 units in a condominium development called Avenue in Miami.
Miki Naftali, president of Elad Properties, which had a joint venture with Barnett on 65 East 96th Street, said Extell is a bloodhound when it comes to seeking out hot neighborhoods.
“When it comes to their locations, they’re one of the so-called two or three developers that are leading the city,” he said. “I think they’re one of the best in town.”