Extell plans Theater District hotel, avoiding special permit

UPDATED Jan. 13, 2022, 5:40 p.m.: When the City Council approved new restrictions on hotel development, it all but ensured that Gary Barnett’s Midtown project would remain unscathed.

Barnett’s Extell Development last week received permits for a more than 541,000-square-foot, 1,350-key hotel tower at 740 Eighth Avenue in the Theater Subdistrict, an area in which certain projects are exempt from the recently enacted requirement that developers must obtain a special permit for new hotels.

Extell originally planned a 10-story office building for the site and filed a permit application for that project in June 2020, but new plans calling for a 51-story hotel were filed in April 2021. Pincus Co. was first to report the change in plans for the project, and that the city’s Department of Buildings issued a permit for it on Jan. 7.

“We wanted to do an office building at 740 8th Ave but there were holdouts on 8th Ave that wouldn’t sell for a reasonable price,” an Extell spokesperson said. “The project was grandfathered since we were far along with the hotel, as were other hotel projects around the city.”

In December, the City Council approved a zoning text amendment that requires developers to obtain special permits to construct new hotels or expand existing ones by at least 20 percent. The measure exempted hotels that shelter homeless individuals and grandfathered in projects approved by the DOB before the City Council’s vote.

Applications filed prior to the City Council vote that were not approved by the DOB have a year to get their new building or foundation permits approved in order to be exempted.

The measure also allowed certain new hotels in the Theater Subdistrict to avoid the requirement. Developers can keep filing plans for hotels in the subdistrict as long as they are located on lots of at least 20,000 square feet and at least half of the space is clear of any buildings or otherwise mostly vacant, as is the case with most of the lots in Extell’s assemblage.

The subdistrict is defined as an area bounded by Eighth Avenue to the west and Sixth Avenue to the east, between West 40th and West 57th streets. Given the lot specifications and Extell’s assemblage at the district’s core, Barnett’s firm is a major beneficiary of the carveout.

Projects that meet the measure’s parameters are exempt if the DOB issues a new building or foundation permit on or before Dec. 9, 2023. The projects that are exempt must receive a temporary or permanent certificate of occupancy within six years. But Extell’s project and those qualifying in the subdistrict would have until 2031.

Extell’s project is exempt for its location, and likely for its timing, given that the DOB just issued permits for the hotel. The developer hired Fried Frank last year to lobby the Department of City Planning on issues related to the hotel special permit, as well as unnamed projects, according to city lobbyist records.

From July 20, 2021, through the end of the year, Extell paid the law firm $6,665 for such efforts, according to records filed for last year that list Extell as a client. Fried Frank’s David Karnovsky did not immediately return a message seeking comment.

“The administration did not change the hotel special permit in response to Extell’s requests,” a spokesperson for the Department of City Planning told The Real Deal.

When the City Council’s Land Use Committee proposed and approved the carveout for the theater subdistrict in November, little was said about the rationale for the change. In October, the Real Estate Board of New York testified in favor of an exemption for hotels in the subdistrict, as well as in Times Square, Lower Manhattan, Flushing, Jamaica, Downtown Brooklyn and Long Island City. The trade group argued that there was no land use rationale for the text amendment citywide, but that the change made even less sense in those central business districts.

Extell has been piecing together the development site since 2014, and a critical chunk of it was acquired this past summer. The developer bought two properties at 738 and 740 Eighth Avenue, along development rights, for $51 million, paving the way for a development exceeding 500,000 square feet. Extell had previously acquired part of the site from Related Companies, which had also planned an office building there, according to Pincus Co. Extell has spent at least $186 million assembling the 11 lots over the past seven years.

A few weeks after the City Council approved the text amendment, Extell filed plans for a supertall at 570 Fifth Avenue in the nearby Diamond District. The developer has put forward two options for the site: A 1.5 million-square-foot office project or a 1.4 million-square-foot residential and hotel tower. The latter will require a special permit for hotel use, but the project will require other approvals either way, including two other special permits as well as a text amendment.

This article was updated with a statement from the Department of City Planning.