Manhattan's biggest condo tower gets new loan for unsold units
Call it a sign of a dreary Manhattan condo market, as well as optimism for an eventual comeback.
Extell Development, facing an Aug. 30 maturity for a construction loan on a Lower East Side tower — the biggest newly built tower in Manhattan by number of condos — signed an agreement for a new loan on the property, using the unsold units in the 815-apartment project as collateral.
The New York-based developer secured a $553.5 million "inventory loan" for the One Manhattan Square project, according to filings made this week with the Tel Aviv Stock Exchange, where it sells debt to Israeli investors. Extell also obtained a mezzanine loan of $138.2 million.
The funds allow the builder to pay off the balance of its construction loan and free up proceeds from condo sales so they can be used to pay down a separate loan from RXR Realty, according to the filings. They also give Extell additional time to find buyers for its One Manhattan Square units, which the company began marketing almost four years ago.
"Extell is not in the business of holding units for a very long time, and this was probably not their original business plan," said commercial real estate attorney Joshua Stein, who is not involved in the financing deal. "When a developer gets a condo-inventory loan, it means the original plan didn't work out the way it was expected and they're obtaining new financing that better matches the sales horizon."
Extell didn't respond to an email seeking comment Friday.
New York's luxury developers who financed projects during a more optimistic era for high-end condos are now bumping up against loan maturities in a slowing market, with a shortage of buyers to make good on rosy repayment projections. Rather than slash prices to move inventory and meet sales milestones included in their loans, builders such as Extell are finding temporary financing solutions so they can live to sell another day.
"Nobody is cutting their prices by significant amounts just because the market is presently sluggish or because a construction loan is due," said Stuart Saft, a real estate partner at Holland & Knight LLP, who has represented clients and lenders in inventory-loan deals. "The general consensus is that the market has softened but that, once the inventory is absorbed, the market will continue to increase."