Extell Development Lost $206M in 2020

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Extell Development Company, one of the city’s most visible luxury developers, reported a loss of $206 million in 2020, as a result of falling property values, higher financing costs, and the sale of some of its holdings and interests, according to its annual financial report on the Tel Aviv Stock Exchange.

While the amount represented the total loss in the company’s Tel Aviv subsidiary, which includes most of its major properties, Extell’s share of the loss was $190 million, according to a spokesperson.

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The loss occurred even as Extell completed its crown jewel, Central Park Tower, the tallest residential building in New York City, and began closing on its 179 ultra-luxury condos early this year, according to the report. 

Extell also completed a large condo development in Downtown Brooklyn, the 483-unit Brooklyn Point, in 2020 and negotiated significant financing deals across its portfolio, including the recent close of a $146 million inventory loan at The Kent, another condo tower in Brooklyn; a $17 million inventory loan at supertall One57 on Billionaires’ Row; and a $380 million mezzanine loan on Central Park Tower.

But as prices fell and sales slowed during the coronavirus pandemic, the expense of maintaining and financing its properties ate away at Extell’s bottom line.

Despite the progress at Central Park Tower, Extell is now expecting to make $1 billion less at the property than it did in 2018. It revised down its expected gross profits at the 95-story tower by 17 percent from the estimate in 2019, and more than 60 percent from 2018. 

In 2020, Extell estimated that it would cost a total of $3.1 billion to construct the property and would make $3.9 billion off it, for a total of $845 million in gross profits. But, back in 2018, Extell had estimated that it would cost $2.8 billion to build, and bring in $4.9 billion.

That $3.9 billion estimate is based off selling condos at a price of $5,750 per square foot and selling them all by the end of 2023. If prices fall further, or if the timeline is extended, leading to additional financing costs, the profits will be further eroded. None of the 179 units were closed as of the first quarter of 2021, per the report. 

Despite these revised figures, Extell still closed on a $380 million mezzanine loan at the tower in January and negotiated a change to its agreement with the senior lender on the project, JPMorgan Chase, eliminating a requirement that the developer sell $500 million worth of condos by the end of 2020. The lenders on the mezzanine loan were Sail Harbor Capital and The Baupost Group, The Real Deal reported.

In the third quarter of the 2020, Extell started closing on condos at Brooklyn Point and closed 76 units at $1,629 per square foot in 2020. Profits there have been revised down from 2019 and 2018, though less drastically than at Central Park Tower. The project is expected to bring in $166 million in profit, based on a price point of $1,650 per square foot, lower than the $205 million Extell expected in 2019, at $1,809 per square foot, and the $233 million expected in 2018.

Extell also launched leasing for a 441,000-square-foot office building in East Harlem and continued to sell condos across its other projects, such as One Manhattan Square, One57 and The Kent. 

Sales appear to have picked up in 2021. At Brooklyn Point, Extell closed another 45 contracts in the first quarter of 2021, in addition to the 76 signed last year. At One57, Extell closed two units last year totaling $16 million, and three more in the first quarter of 2021, totaling $17.1 million. Although, a condo at One57 resold at a record 51 percent loss in January, TRD reported.

Update: This story has been updated to reflect that Extell’s share of the loss was $190 million.