Extell in the First Quarter: Condo Sales Improve Cash, but Times Square Still Needs Funding

The first quarter of Extell Limited looks much better than the prior-year quarter, but the right conclusion is not that the company has left its funding tension behind. Condo deliveries lifted revenue to $102.6 million, produced gross profit of $26.3 million, and moved the company back to operating profit after an operating loss in the comparable quarter. Still, finance costs, currency losses, and actual debt payments left the company with a $17.8 million loss, and even after a good cash quarter it still shows an economic working-capital deficit over the next twelve months. The real value in the quarter is not the revenue line, but how much cash condo sales actually release after debt, interest, bonds, and inventory loans. Two events can change the read as early as the second quarter: a possible reduction of up to $308 million in the Central Park Tower PUT liability, and binding funding and hotel agreements for Times Square. The first can strengthen accounting equity and reduce the share of short-term liabilities, but it does not bring new cash. The second is the true cash and funding event, because without it the largest project is still tied to non-binding memoranda, a near-term land loan, and the company’s ability to refinance.

Company Setup

This is not a conventional TASE equity story. It is a foreign bond issuer, controlled by Gary Barnett, with New York real estate activity and part of its funding raised through the Israeli bond market. At the end of March 2026, the company had NIS 600 million par value of Series D bonds and NIS 782.9 million par value of Series E bonds outstanding, after Series C was fully repaid at the end of the quarter. That means the company should be read first through cash conversion and refinancing, not through an equity multiple.

The business has two engines: development and sale of condominium units, mainly in projects such as Central Park Tower, Brooklyn Point, and Kent, and investment property that either produces rent or is expected to create asset value. In this model, high debt, inventory loans, and refinancing are not abnormal by themselves. The abnormality starts when the maturity schedule, a large project still needing funding, or a major accounting liability turns an earnings quarter into a liquidity proof point.

There is also a working engine in this quarter. From January through March, the company completed 10 apartment sale transactions for about $90 million and repaid about $69 million of debt from those proceeds. After the balance-sheet date, it completed another 7 transactions for about $32 million, and at the end of March it had signed or near-signed apartment sale agreements for about $62 million. That short-cycle backlog explains the stronger operating cash flow.

The constraint remains funding. The company points to high reliance on bank financing, especially construction loans and inventory loans, and 42% of liabilities are due within less than one year under the current maturity schedules. After the possible cancellation of the PUT liability, that share is expected to fall to about 20%, but the decrease depends on an event that was not yet recognized in the first quarter. For bondholders, this separates accounting improvement from a real reduction in repayment pressure.

Sales and Cash Improved, Debt Still Took Most of the Result

Quarterly revenue was $102.6 million, up from $18.6 million in the comparable quarter. Almost the entire change came from condominium unit sales in Central Park Tower, Brooklyn Point, and Kent. Earnings quality also looks better: gross profit rose to $26.3 million from only $0.3 million in the prior-year quarter, with gross margin of about 25.6%.

The segment split matters more than the consolidated number. Development projects for sale generated $86.5 million of revenue and $15.7 million of gross profit, a gross margin of about 18.2%. Investment property contributed $16.1 million of revenue and $10.6 million of gross profit. The quarter proves that deliveries are returning to the income statement, but not that condo sales alone can carry the whole debt structure.

The company no longer lost money at the operating level, but $19.9 million of operating profit was not enough against $34.7 million of finance expenses and a $5.8 million currency loss. This is not just technical noise. The bonds are shekel-denominated while the business and assets are dollar-based, so shekel-dollar movement can change the bottom line even when the projects advance.

The controlling shareholder’s temporary management-fee waiver also matters. From January 2026, he is not charging management and administration fees under the services agreement until the planned Times Square hotel opens, and the company recorded a $3.1 million capital benefit from that waiver. That helps the quarter, but ties the saving to an asset that still needs funding and execution.

Two cash frames need to stay separate. Operating cash flow measures how much cash the activity brings in before financing and investing. All-in cash flexibility measures what remains after capital expenditures, new borrowings, debt repayments, bond repayments, interest, capital returns, and EB-5 payments. In the first quarter, both frames were positive, but for different reasons.

Operating cash flow was $84.4 million, up from $12.1 million in the comparable quarter. Most of the improvement came from a $62.8 million decline in condo inventory, meaning sales and deliveries converted inventory into cash. That is a positive signal, because in a development business unsold inventory is an asset on paper, while delivered inventory can reduce debt.

After all actual cash uses, cash and cash equivalents rose from $76.9 million to $97.8 million. This happened despite negative financing cash flow of $67.9 million, including $87.2 million of loan repayments, $127.2 million of bond repayments, and $36.4 million of interest and loan costs. The offset was $187.4 million of new loans and $39.0 million of equity contributions from non-controlling interests.

The positive cash number does not erase the working-capital flag. Consolidated working capital was positive by about $25 million, but the twelve-month view shows a consolidated deficit of about $494 million and a separate-company deficit of about $88 million. Including EB-5 investor adjustments would bring the economic deficit to about $444 million. The gap is mainly driven by loans classified as current liabilities, even when some are secured by inventory not expected to be sold within less than one year.

That is why the quarter is not only a sales story. Condo deliveries release cash, but a large part of that cash immediately moves to lenders, bondholders, and interest cost. For the improvement to become a clearer balance-sheet-quality story, the company needs to keep selling units at prices that cover both inventory cost and funding cost, not merely report one strong quarter after a weak one.

Times Square and the PUT Set the Next Quarter

Times Square is the project that can change the company more than any single apartment sale. During the quarter, construction advanced materially above ground and reached the 29th floor out of 60 planned floors. Total construction budget is estimated at about $1.31 billion, substantial completion is expected in June 2029, and once stabilized during 2030 the company expects annual NOI of about $250 million to $270 million.

But that value is not accessible in the same way as a delivered condo sale. The project is expected to be funded through different types of loans and preferred equity partner investments. The company expects to complete agreements with an international hotel chain and funding providers by the end of the second quarter of 2026, but at the reporting point part of the foundation still rested on non-binding memoranda and negotiations.

The material-loans appendix makes this tighter. A $208.4 million loan on the 740 Eighth Avenue and 201 West 54th Street land parcels matures on July 31, 2026 and bears SOFR plus 4.85%. The company says it intends to refinance the loan as part of a construction loan for Times Square. Under that loan, the company, as guarantor, committed to maintain minimum liquidity and minimum net worth. At the end of March, liquid assets were about $34 million and net worth was about $287 million, so the company did not meet those covenants and received a waiver from the lender as of the report date.

The company is compliant with its bond covenants at the corporate level, but the project carrying the main growth option has a near-term loan, a high floating-rate spread, and dependence on construction financing. The lender waiver is not a crisis event by itself, but it makes the end of Q2 and the start of Q3 a clear checkpoint: binding funding structure, or continued dependence on extensions and refinancing.

The second event pulling the quarter forward is Central Park Tower. On March 31, 2026, the company completed a refinancing of the project’s inventory loan and entered into a $79.3 million inventory loan, of which about $61.3 million was drawn at closing and about $59.1 million was used to repay the existing loan. The loan bears SOFR plus 3.95%, matures in April 2028, and can be extended by one year.

The real importance is not only the loan itself. Following completion of the financing, the company expects to reduce in the second quarter the SMI PUT liability included in current liabilities, potentially by the full amount of about $308 million, with a matching increase in equity. If that happens, the share of liabilities due within less than one year is expected to fall from about 42% to about 20%.

Still, a PUT liability reduction is an equity and liability-structure improvement, not a cash receipt. It can improve balance-sheet ratios, help bondholder interpretation, and support the company’s position that warning signs are not present under the regulatory tests, but it does not fund Times Square capex or pay interest. It is very important, but it does not replace continued deliveries, refinancings, and completion of funding for the large project.

At the bond level, the picture is more comfortable than the economic working-capital deficit suggests. Consolidated equity attributable to shareholders, excluding minority interests, was $808.0 million versus thresholds of $500 million and $600 million. Adjusted net financial debt to net CAP was 49.38%, versus ceilings of 75% and 82.5%. Series E also meets an LTV ratio of 49.19% versus an 80% ceiling. In addition, Midroog affirmed the bond ratings in January 2026 and changed the outlook from negative to stable.

This is not an immediate stress picture under the bond indentures. Reading only the covenants misses that the improvement depends on two different paths: an accounting path in Central Park Tower and a real funding path in Times Square.

Conclusion

The first quarter is a positive transition quarter, not a quarter that clears all open issues. Condo sales are working again, operating cash flow improved, and cash rose even after repayments and investments. Against that, the company remains loss-making because of finance cost and currency, and still shows an economic working-capital deficit over the next twelve months. The current read is that the company improved its reaction time, but has not yet finished proving stable funding access.

Over the next 2 to 4 quarters, the market will measure whether the PUT liability reduction is recognized, whether the company signs binding funding and hotel agreements for Times Square, and whether deliveries keep converting inventory into cash without eroding profitability. The strongest counter-thesis is that this model has always relied on refinancing, and that covenants, ratings, and assets still provide enough room. That is legitimate. But this quarter’s proof is not only covenant compliance. It is the ability to turn luxury assets and a giant project into accessible cash before the maturity schedule becomes the central story again.