- RXR has scaled back investment with Extell amid loan delay
- Israeli creditors said to demand urgent meeting with trustee
Luxury builder Extell Development Co., trying to cobble together funds for a condo tower in Lower Manhattan, is finding out just how much time costs these days.
Extell is hoping to complete a $463.2 million financing agreement with office landlord RXR Realty LLC to build One Manhattan Square on South Street, but that partnership was postponed for a fourth time Monday. The company still hasn’t secured a construction loan for the project, which is a condition of the deal, according to filings on the Tel Aviv Stock Exchange, where the New York-based developer sells debt.
With this delay, the value of the RXR agreement has decreased and the costs on the money have climbed. RXR will now commit $300 million toward the project, and choose within 120 days of the deal closing whether it wants to add the other $163.2 million, according to filings, written in Hebrew. The interest rate RXR will receive on its investment is now 8 percent, compared to the 7 percent agreed to in March.
Extell said it expects to secure a $550 million construction loan from a consortium of lenders led by Deutsche Bank AG by Aug. 31, after which the revised RXR deal can close, according to Israeli filings. That loan could grow to $750 million within nine months.
“As an Israeli investor who’s looking for cash or liquidity, it’s a good announcement,” Yaniv Saylan, a real estate analyst with Israel Brokerage & Investments, said by phone from Tel Aviv. “For the first time, Extell has revealed the terms of the construction loans and the terms of the RXR deal.”
Extell President Gary Barnett didn’t respond to an e-mailed request for comment.
Extell, which ushered in Manhattan’s luxury condo boom with the construction of the One57 skyscraper across from Carnegie Hall, is now getting caught up in its aftermath. The luxury market is showing signs of a slowdown as inventory swells and interest from ultra-wealthy buyers cools amid so much competition. That has made construction loans increasingly hard to get, as lenders are wary of adding more units to a market where they do not appear to be in demand.
If Extell can increase its loan from Deutsche Bank to $750 million, it would still be about $300 million short of what’s needed to complete the One Manhattan project, which will have 816 condo units, according to Ori Eisenberg, a partner with New York-based One Ha’am, a real estate finance advisory firm.
“Barnett is definitely better off with Deutsche Bank and RXR,” Eisenberg, who has analyzed Extell’s filings but doesn’t advise the firm, said by e-mail. His “objective is to develop and deliver these projects and he gets closer to his goal, closer to the money.”
Bondholders in Extell have become increasingly rattled by the company’s delays and financing structures. The developer announced a joint venture with China’s SMI USA last week that will allow SMI to jump in front of Israeli creditors in laying claim to the assets backing their bonds.
Extell’s creditors in Israel requested an urgent meeting with the bond trustee to discuss their options in the event that Extell doesn’t get construction financing, newspaper Calcalist reported Tuesday.
Extell’s bonds due in 2019 fell 1.7 agorot to 83 agorot on the shekel in Tel Aviv Tuesday, the second day of declines. The yield climbed to 11.2 percent, a three-week high.