Extell lawsuit with AG

Several of his recent projects have hit sales snags. At the Rushmore, a luxury condo on the Upper West Side, he’s embroiled in a bitter legal dispute with a group of 41 buyers. Some brokers who deal with Extell bristle at Barnett’s hard-knuckle tactics. “He’s tough as nails,” says Upper East Side broker Larry Kaiser. “The brokerage community, whether you like it or not, can make you or break you. His relationship with the brokerage is controversial.”

http://nymag.com/news/features/establishments/68503/index3.html

I'll say it again, just as I have been saying it for over 2 years -- especially on this site. The interesting thing about Barnett is that there is no oversight on this company in spite of the fact that he controls in excess of 11 million sq. ft of NY RE. Is he getting to big to fail? A lawyer who works with a firm that does business with Extell told me that Carlyle is no longer funding any of his projects. Perhaps that is a result of a bad experience at Rushmore, etc. Perhaps it is strictly a business/funding co-incidence (other priorities for Carlyle). But perhaps it is because they no longer have confidence in Barnett's financial stability.

This is the only article that has gotten close to asking some of the questions about the soundness of Extell's investments -- though they ultimately skirted the issue and provided no answers. The press has not been dogging this guy. They have been ignoring him.

If Barnett goes down, will Extell have to be bailed out to support NY RE? I think the city and the AG should be concerned. It is unlikely as each project is funded individually but still a domino-style possibility.

You think we need government oversight over developers who have a certain amount of property?

Or you think that the government needs to be supporting New York real estate?

How is that a good idea?

Intersting stuff apt23. The latest project Aldyn, looks very downscale. Fixtures, flooring, materials(lobby & apartment) seem much cheaper than Rushmore but yet they're charging nearly the same price. It looks like they're willing to sell apartments to anyone who will buy but expect to rent them out. The entire building feels rental. I've said it before, Carlye maybe deep pockets, but not long term money. They have their patience.

"The interesting thing about Barnett is that there is no oversight on this company in spite of the fact that he controls in excess of 11 million sq. ft of NY RE."

"If Barnett goes down, will Extell have to be bailed out to support NY RE?"

FUD
http://en.wikipedia.org/wiki/Fear,_uncertainty_and_doubt

Is posing a question the equivalent of fear mongering sideline? This is a private company that is relatively new in the industry that is taking chances that no other seasoned real estate company is willing to take in a downturn. Normally that is not a problem unless, as we have seen recently with overextended companies, it can have an undue effect on innocent parties.

Barnett might be the smartest guy on the planet -- only time will tell. I am simply pointing out that the press has NEVER asked tough questions about the financial stability of the company, whether they deserve tax breaks (on the gem building, eg), the nature of the fraud lawsuits brought by Barnett's former partners etc. Where is the article about the stalled judgement on Rushmore? And, there is no government oversight. At all.

So I ask you sls, since you have such an inflated sense of your own commentary -- If Extell's ability to take outsized risks in a down market (which every other RE company has refused to do) is not based on sound financial decisions, would a bankruptcy of a company that holds in excess of 11 m sq ft affect the market? It is a legitimate question. You probably also castigated the many individuals who questioned ( and there were many) how Madoff made outsize returns in even a down market.

"So I ask you sls, since you have such an inflated sense of your own commentary..."

Actually not the case. Rather, I have such a deflated sense of your commentary

fine but please note that once again, you have nothing substantive to add to any dialogue. you exist on this board simply to piss on everyone else. not much more helpful than a troll.

So the point of repeatedly citing the 11mm sf is what? To throw out a big number with no context and hope that it scares people? Manhattan has ~400mm sf of office space. I couldn't find a residential number. Is it another 200mm sf? 300mm? 400mm? I don't know, but in this range Extell's holdings are between 1.5 and 2% of the "NY RE" market. Substitute whatever numbers you want in the denominator, but 11mm is rounding.

Further context: many of those scary sf are in buildings that Extell developed and then soldm for example as condos. I don't know what residual financial interest Extell holds in the building, but if you ask a condo owner in the Orion I'm pretty sure they will be under the impression that they own those sf, not Extell. And given that they paid for them, they would be right.

Or maybe the sf to be scared about are the very recent developments that are still selling. Yes, that must be it, the Rushmore and the Lucida are going to take Extell down. I'm sure Extell would have planned to sell both of those developments (much) faster than they actually have, but ultimately it's very hard to go bankrupt selling condos at $1,200 - $2,000 psf. For example, in the last month five units have closed in the Rushmore for a total sales price of $11mm and average ppsf of $1,492. In the Lucida, it's $17mm and $1,816 psf in the same time period. At 5 units a month, it's going to take a hell of a long time to sell 289 units in the Rushmore, but as long as the price holds why not continue to work away at it as they have been doing? Bank loans don't cost much to carry when short term interest rates are approx. zero.

The AG lawsuit and stalled judgment at the Rushmore make for good theater, but they ultimately don't matter unless the market isn't there when the units come back. If the plaintiffs winning (which it seems they have) jsut means that those units go back on the inventory pile, see previous comment about cost of carry on bank loans and patience as long as people will pay close to the asking price.

Will the 57th St project be Extell's Waterloo? Maybe. It's probably the best candidate yet. But what Barnett says in the article about there being no pipeline isn't wrong. Whether he can build it for a cost where he ends up making money I have no idea.

"fine but please note that once again, you have nothing substantive to add to any dialogue. you exist on this board simply to piss on everyone else. not much more helpful than a troll.

Please see my post just above and kindly compare to your posts on this thread and numerous other ones in which you simply assert doomsday scenarios about Extell and back them up with no facts (other than the 11mm sf number, which I'll take as given although you don't source it) or analysis. Is the idea that if you scream "Fire" in the theater enough times eventually someone will listen?

By the way, do you exist on this board simply to piss on Extell or do you have some other purpose? I really can't tell. And good luck with the theory that I do nothing on this board but piss on people, although I have been known to point out the weaknesses in posts from people who post first and think later (if at all).

The Sq. Ft number comes from the NY Observer. And, though they didn't break down the number, I'm pretty sure the Orion would not be included because as you say, Extell does not own it. But they do own wide swaths of Re in upper manhattan, the LES, riverside blvd, a prime undeveloped building site on CPS, two large buildings on w 58th St, others in midtown, the "gem" building, the copa, more buildings on west 26th st (or somewhere nearby) that they want to develop into a hotel, the 10th ave building if he hasn't sold it and many more.

I am not saying he will go under. As I say, he could possibly go down as the most astute real estate mogul in history. If you have watched any bubbles in any US cities, you know if you want to track it's potential or progress, you watch the developers. As, they go, so goes the bubble. So I have closely tracked many developers in NYC -- but most of them are publicly traded entities doing business for decades. Extell keeps coming up in my posts because there is no transparency. I know that they finance each project separately which builds in safety but no one has any idea about how much if any of their own money is involved.

As for affect. Consider that IStar, a financial entity which now holds NY RE by default might affect the macro market place as they prepare to declare bankruptcy. Btw, something every market watcher on this site should track . And they hold significantly less that 11 million sq. ft. http://www.crainsnewyork.com/article/20100922/REAL_ESTATE/100929938

My problem with Extell is a problem with the press. No one is getting close to this story because it is difficult to do -- he is purposefully press resistant. Every piece, including the above, is a puff piece -- diamond biz, orthodox, etc. No one has tried to estimate whether the company might be over extended. If he is as smart as everyone says, no problem. But the press should have some well deserved egg on face if it is ever discovered that the company is involved in more risk than they can handle.

So please note that you chose to defend the company without any research or any knowledge about them at all. I track the macro movements of the market not the price of any one apt. And btw, you failed to note that the current sales price at Rushmore is almost half of their projected price. I wonder how that affects their spreadsheets. And this is before the AG finally weighs in.

Why is there even a discussion of the government in this?

What is the relevance of the square footage, the relative newness of the developer, the relationship among parties on the developer's side, the speculative nature of the development, the risk profile of this developer vs. other developers, or the relationship of the developer with it's lenders?

And how is the AG involved in anything but how units within the development are sold pursuant to the condo prospectuses?

How is it expected (or wished) that big mommy will help us in this situation?

Why does the private developer have any obligation to share information with the press? Why does the press, or the public, have rights to private information?

How could someone with no dealings with Extell have any problem with Extell?

genio: I have zero holdings in NY RE at present. Though I would like to buy in Manhattan again. I have never had interaction with an Extell property except to view apts and try and determine the status on a construction loan in an area I have an interest in.

But, just as it would be foolish to buy a condo at the MGM in Vegas -- or anywhere on the strip-- unless you have an informed opinion on whether MGM will go bankrupt and flood the strip with underpriced condos, you should know about Extell and every large developer before you buy in Manhattan. The momentum of the bubbles in most distressed cities in the last decade has been propelled by developers being seriously over leveraged and ultimately dumping apts onto the market.

"So please note that you chose to defend the company without any research or any knowledge about them at all." Not true on two counts. First, my posts above demonstrate knowledge, although admittedly less knowledge than you have, about them. Second, I was not defending Extell but rather asking you to put some facts behind the hyperbole, which you have now done.

"And btw, you failed to note that the current sales price at Rushmore is almost half of their projected price." I don't want to start any more of a screaming match than I have already done, but is this true? Did they initially go out at $2,000-ish psf for the small, low floor units that are closing around $1,000 or so psf and $6,000 psf for the large, high floor layouts that have been closing for $3,000 psf? Plaza and 15 CPW pre-crash prices on the post-crash far west side?

Sorry, $4,000 and $2,000 in the previous post, not $6,000 and $3,000.

SLS: I said "almost half" and here is what I was referring to. The Rushmore was marketing apts in 2007 -- and holding on to their pricing for over $2300 psf in 2006 ( eg. 17A was asking $2600 psf - a 3 bedroom) and now the larger sized apts are ASKING in the range of $1300- $1400 psf. I'm sure savvy buyers will continue to offer below ask as the lawsuit continues to hang over the building. It was also widely rumored that they were paying concessions -- maybe closing costs or mansion tax, etc so throw in another few percentage points. And so,yes, almost half. I would do detailed research but why bother when they just dropped all their prices this week by 10 - 20%. It is OBVIOUS they are in extremis.
Now:
Condo
Lincoln Square
4,375 ft²
$1,394 per ft²
10 rooms
5 beds
6 baths
Common Charges: $3,270
Taxes: $141

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Price reduced $800,000 3 days ago
193 days on market in StreetEasy

http://streeteasy.com/nyc/talk/discussion/15387-extell-again