Extell unloads Midtown development site at apparent loss

Gary Barnett is letting go of a development site in Midtown.

His Extell Development has agreed to sell 1710 Broadway, at the southeast corner of West 54th Street, for $173 million, records show. In 2017, Extell paid $268 million for it.

Riu Hotels and Resorts bought the site, PincusCo reported. A Riu spokesperson confirmed the sale.

Extell is working to get plans approved for a 54-story, 673-unit hotel to replace the six-story, 52,000-square-foot office building at the address, but the Department of Buildings has yet to sign off.

Bad Boy Entertainment leased the entire building in 2004. Barnett’s assemblage includes 360,000 square feet of air rights obtained in 2016.

Extell owned about 82 percent of the property, and the transaction is expected to create $54 million in cash, according to regulatory filings with the Tel Aviv Stock Exchange, where Extell’s bonds trade. The price of the site works out to around $590 per buildable square foot.

Barnett’s firm had bought into the project in 2015, taking a 39 percent ownership stake, using proceeds from the sale of its Ring Portfolio. The developer, in partnership with C&K Properties, hoped to bring a 60-story, hotel-condominium building to the site. The year after the 2016 air rights deal, Extell acquired the deed for $268 million. It sought to sell the site in 2018, then refinanced it the following year with a $124 million loan.

That loan, from Israel’s JVP Partners at a rate of 4.5 percent over LIBOR, may have come due and helped motivate the building’s sale. The LIBOR interest rate, which underpins many financial contracts, has risen to nearly 6 percent from below 1 percent in 2021.

The sale to Riu may help Extell build a financial cushion while debt costs remain elevated and the Federal Reserve signals that it might keep interest rates up for a while yet. Prior to the sale, Extell told bondholders it valued the Midtown site at $193 million, or $20 million more than the eventual price.

Yields on Extell’s bonds have risen more than 10 percent this year, according to the TASE — a sign of increased risk perceived by investors.

Extell remains active in Midtown. It recently enlarged an apparent hotel project at 201 West 54th Street, at the northwest corner of Seventh Avenue, by adding 100 more rooms, and wants to reopen the former Wellington Hotel with 208 rooms.

The hotel at 1710 Broadway would be Riu’s third in Midtown and largest in New York.

In 2022, the Spanish brand opened its Plaza Manhattan Times Square hotel, a 47-story tower with 656 rooms at 145 West 47th Street. The company said at the time that it was seeking to expand by buying more urban locations. In 2016 it opened its first New York hotel, the 650-room Plaza New York Times Square, at 305 West 46th Street.

Hotel revenue has rebounded in New York City following the pandemic. An average night at a city hotel rose to $264 during the first seven months of the year, according to hospitality data firm STR, an increase of about 8 percent from a year ago.

That recovery has helped spur plans to add hotel rooms in the city, and a recent regulatory crackdown on competing short-term rentals will likely boost demand. At the start of the year, New York was scheduled to add more than 10,000 rooms — or about 8.5 percent of inventory. 

Extell did not respond to a request for comment.

This story has been updated with information from Riu Hotels and Resorts and with details on Extell’s history at 1710 Broadway.

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