Busted: Is One Manhattan Square on the LES Waterfront Extell’s Achilles Heel?

Posted on: August 17th, 2016 at 5:09 am by
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Looks like Extell chief, and Lower East Side boy, Gary Barnett has finally met his match down on the waterfront. His two developments on South Street – the 80-story One Manhattan Square and adjacent 13-story affordable building (poor door) – are rising at a clip but proving difficult to finance.

According to a report in Bloomberg yesterday, this particular project – yielding 816 condos and over-the-top amenities in the market rate tower – could prove to be the company’s Achilles Heel.

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.

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Note the treehouse

And the investors are rattled by Extell Development Co. and the uncertainty of a soft market.

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.

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