Extell signs $85.9M ground lease with Feil Org. for 363-unit dev site in Downtown Brooklyn

Gary Barnett’s Extell Development through the entity Fulton Rh LLC as tenant signed a ground lease valued at $85.9 million with the Feil Organization through the entity Feil Fulton Owner LLC as landlord for the development site at 356 Fulton Street in Downtown Brooklyn. Feil filed plans for a 363-unit development in November 2021.
The deal closed on May 20, 2022 and was recorded on June 7, 2022. The seven parcels have a total buildable of 374,240 square feet according to PincusCo analysis of city data. The transaction price per buildable square foot is $229 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 price per square foot for the 443,418 square feet planned for in the Feil permit application is $194.
The signatory for Feil Organization was Jeffrey J. Feil. The signatory for Extell Development was Gary Barnett. Extell signed a long-term ground lease, that started May 20, 2022 and runs, according to the memorandum of lease, for 199 years until May 31, 2221. (Most ground leases are for 99 years, it’s unclear if the year should be written 2121, which would be 99 years. The memorandum does not explicitly state the years the lease runs for.) Feil Organization on November 17, 2021 filed plans for a 363-unit, 443,418-square-foot building at this site.

This acquisition adds to a series of trades Extell has executed recently, including paying $931 million to Silverstein Properties for a Lincoln Square development site and Extell partnering with Bluestone Group as the lender on a defaulted loan to Robert Gans secured by a 1-million-square-foot portfolio that includes potential development sites on the West Side. Jeffrey J. Feil is the CEO of the Feil Organization.

The Feil Organization was represented by a JLL team including Bob Knakal, Stephen Palmese, Ethan Stanton and Jonathan Hageman.

Prior sales and revenue

Prior to this transaction, PincusCo has records that the buyer Extell Development purchased 27 properties in five transactions for a total of $979.4 million and sold 69 properties in 55 transactions including residential condos for a total of $1 billion over the past 24 months.
The seller Feil Organization purchased seven properties in three transactions for a total of $42.3 million and sold 170 properties in two transactions for a total of $22.2 million over the same time period. The seven properties that make up the development site with a total of 110,124 square feet of built space generated revenue of $5.8 million per year or $52 per square foot. The sale price per built square foot was $780.

Violations and lawsuits

There were no lawsuits or bankruptcies filed against the properties since September of 2020. In addition, according to city public data, the properties have received one DOB violation, $6,250 in ECB penalties, and $16,250 in OATH penalties in the last year.

Development

On these lots, there is one active new building construction project for a 363-unit, 475,474-square-foot R-2 building. The project was developed by the Feil Organization with plans filed November 17, 2021 and it has not been permitted yet.

The neighborhood

In Downtown Brooklyn, the bulk, or 36 percent of the 26.8 million square feet of commercial built space are office buildings, with residential elevator buildings next occupying 29 percent of the space. In sales, Downtown Brooklyn has 1.3 times the average sales volume among other neighborhoods with $365.7 million in sales volume in the last two years and is the 10th highest in Brooklyn. For development, Downtown Brooklyn has 2.9 times the average amount of major developments relative to other neighborhoods and is the 7th highest in Brooklyn. It had 2.6 million square feet of commercial and multi-family construction under development in the last two years, which represents 10 percent of the neighborhood’s built space.

The block

On the tax block of 380 Fulton Street, PincusCo has identified the owners of nine of the 15 commercial properties representing 405,941 square feet of the 535,648 square feet. The largest owner is Clipper Equity, followed by Feil Organization and then City of New York.

The majority, or 70 percent of the 420,032 square feet of built space are office buildings, with mixed-use buildings next occupying 25 percent of the space.

The seller

The PincusCo database currently indicates that Feil Organization owned at least 45 commercial properties with 7,745,456 square feet and a city-determined market value of $1.6 billion. (Market value is typically about 50% of actual value.) The portfolio has $246.6 million in debt, with top three lenders as Capital One, Granite Point Mortgage Trust, and M&T Bank respectively. Within the portfolio, the bulk, or 47 percent of the 7,745,456 square feet of built space are office properties, with elevator properties next occupying 24 percent of the space. The bulk, or 60 percent of the built space, is in Manhattan, with Queens next at 20 percent of the space.

The buyer

The PincusCo database currently indicates that Extell Development owned at least 73 commercial properties with 3,993,680 square feet and a city-determined market value of $1.1 billion. (Market value is typically about 50% of actual value.) The portfolio has $4.7 billion in debt, with top three lenders as Guggenheim Partners, Blackstone Group, and Prudential Credit Opportunities respectively. Within the portfolio, the bulk, or 31 percent of the 3,993,680 square feet of built space are rental condo properties, with specialty properties next occupying 28 percent of the space. They are all located in Manhattan.

Surrounding

Within a 400-foot radius of 380 Fulton Street, Pincusco identified 14 commercial real estate items of interests occurred over the past 24 months.
Of those 14 items, one was in new building development. It was a new building permit application filed on November 17, 2021 for a 443,418-square-foot R-2 building with 363 residential units at 356 Fulton Street.
Of those 14 items, one was for major renovation including a certificate of occupancy change. It was a permit application filed on December 15, 2021 for the $271,250 renovation of 3,875-square-foot M building with zero residential units at 453 Fulton Street.
Of those 14 items, five were sales above $5 million totaling $56.8 million. The most recent of the five was Feil Organization which bought the 11,208-square-foot, one-unit retail building (K1) on 360 Fulton Street for $12.5 million from Weinstein Enterprises on June 2, 2021.
Of those 14 items, seven were loans above $5 million totaling $365.3 million. The most recent of the seven was Avery Hall Investments which borrowed $176 million from QuadReal Property Group secured by the 233,431-square-foot, 126-unit rental (D6) on 1 Boerum Place on October 19, 2021.

UPDATED: With broker information.
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