Extell Development pays $40M to Starrett for Two Bridges dev site, additional earnout expected

Extell Development through the entity 259 Clinton LLC paid $40 million to Starrett Companies through the entity Le1sub LLC for the development site at 259 Clinton Street in Two Bridges, in Manhattan. The site has plans for a 706 unit development. The sale includes additional earnout payments.
The deal closed on December 28, 2022 and was recorded on January 3, 2023. The property has zero square feet of built space and 201,770 square feet of additional air rights for a total buildable of 201,770 square feet according to PincusCo analysis of city data. The sale price per buildable square foot is $198 per the PincusCo analysis. (The price per square foot analysis is the transaction price divided by square feet as reported in public records and assumes no air rights have been sold.)
The signatory for Starrett Companies was David Goldban. The signatory for Extell Development was Marc Kwestel. The contract date was March 10, 2022. The Real Deal reported in September the sale price was expected to be about $100 million. for the parcel being marketed by Eastdil Secured’s Gary Phillips and Will Silverman. The DOB plan Starrett submitted initially had 1,021 units, but the current figure in the DOB is 706 units.

The initial plans called for the construction of a 710-foot-tall, 62-story building and were filed with the New York City Department of Buildings under job number M00522293.

It was not clear why the sale price was $40 million and the expected price was $100 million, but this additional agreement filed in property records notes there can be earnouts. “Purchaser has an obligation to make certain payments to seller in connection with the premises pursuant to the terms of the Earnout Agreement” which mentions a Mitigation Earnout and a 421-a Earnout. This purchase was financed with a $29 million purchase money loan from Starrett.

Prior sales and revenue

Prior to this transaction, PincusCo has records that the buyer Extell Development purchased 35 properties in seven transactions for a total of $1.2 billion and sold 58 properties in 55 transactions for a total of $1 billion over the past 24 months.
The seller Starrett Companies had not purchased any other properties and had not sold any properties over the same time period.

Violations and lawsuits

There were no lawsuits or bankruptcies filed against the property since September of 2020. In addition, according to city public data, the property has not received any significant violations in the last year.

Development

On the lot, there is one active new building construction project for a 706-unit, 851,984 square-foot residential (R-2) building. The project was submitted by Joshua Siegel with plans filed July 28, 2021 and it has not been permitted yet.

The neighborhood

In Lower East Side, the bulk, or 50 percent of the 23.8 million square feet of commercial built space are elevator buildings, with walkup buildings next occupying 21 percent of the space. In sales, Lower East Side has 2.6 times the average sales volume among other neighborhoods with $917.2 million in sales volume in the last two years and is the 16th highest in Manhattan. For development, Lower East Side has 1.7 times the average amount of major developments relative to other neighborhoods and is the 16th highest in Manhattan. It had 1.8 million square feet of commercial and multi-family construction under development in the last two years, which represents 7 percent of the neighborhood’s built space.

The seller

The PincusCo database currently indicates that Starrett Companies owned at least two commercial properties in New York City with 4,786,701 square feet and a city-determined market value of $985.9 million. (Market value is typically about 50% of actual value.) The portfolio has $35.9 million in debt, borrowed from Capital One and Signature Bank. Within the portfolio, the bulk, or 100 percent of the 4,786,701 square feet of built space are D4 properties, with Q1 properties next occupying 0 percent of the space. They are all located in Manhattan.

The buyer

The PincusCo database currently indicates that Extell Development owned at least 67 commercial properties in New York City with 2,797,989 square feet and a city-determined market value of $669.5 million. (Market value is typically about 50% of actual value.) The portfolio has $5.3 billion in debt, with top three lenders as Guggenheim Partners, Blackstone Group, and Prudential Credit Opportunities respectively. Within the portfolio, the bulk, or 38 percent of the 2,797,989 square feet of built space are specialty properties, with elevator properties next occupying 20 percent of the space. The bulk, or 95 percent of the built space, is in Manhattan, with Brooklyn next at 4 percent of the space.

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