The Real Deal New York

Gary Barnett reveals how he won the Ring portfolio

Extell’s chief offers an inside look at his purchase of F.M. Ring’s prized Midtown South package

October 21, 2014 09:28AM
By Hiten Samtani

From left: Gary Barnett (Credit: STUDIO SCRIVO), 251 Park Avenue South and Frank Ring

From left: Gary Barnett (Credit: STUDIO SCRIVO), 251 Park Avenue South and Frank Ring

In a market where rents are on the upswing and demand is strong, an
empty building is a rare prize. In the case of the F.M. Ring
portfolio, there were 14 of them. Brothers Frank and Michael Ring,
long at odds, left about a million square feet vacant for years in
Midtown South – a neighborhood where average asking rents are now
north of $65 a foot. Not surprisingly, many of the city’s top
developers tried in vain to get their hands on the properties. The one
to finally pull it off was Extell Development’s Gary Barnett.

Last month, as part of a larger interview for a profile,
the developer offered details on the complex transaction for The Real
Deal
. He described how he was able to outmaneuver the hostile sellers
as well as industry rivals to take control of the portfolio.

Barnett has already cashed in, selling ground leases for four of the buildings for about $175 million and selling 212 Fifth Avenue to a partnership between Robert Gladstone’s Madison Equities, Joseph Sitt’s Thor Equities and real estate investment firm Building and Land Technology for about $260 million.

Below, in Barnett’s own words, is the saga of the Ring portfolio
acquisition. (The interview has been edited and condensed for
clarity.)

Drawing blood
“We started with this seven years ago, when we were assembling the
site for the International Gem Tower [at 50 West 47th Street]. The
Ring family owned one of the buildings on 47th Street [20 West 47th
Street], but they only owned 25 percent of it, while another family
owned 75 percent.

People used to always say ‘Ring, Ring, you can never do a deal with
them,’ so we never got anywhere. Then that building came to us — the
other family wanted to sell. They wanted somebody that would actually
transact and was prepared to go into a situation in which they’d only
have a 75 percent interest, which is difficult to finance, and could
turn into a fight with the Rings.

Since we had an interest in that block, we said, ‘OK, we’re ready to
go and do that.’ We did purchase it. We spoke to Frank Ring, who
controlled the portfolio. We could never do a deal with him, as
professed, so we filed for partition [selling the entire property and
dividing up the proceeds among the owners].

That took us a couple years, we went through the court process. The
court agreed that it should be sold at auction. And at auction we
bought the whole building. That was transaction number one.”

Digging in
“The market continues to go up. Transaction number two comes to us,
which is a 50 percent interest in 251 Park Avenue South [16-story,
120,000 square feet). It’s the same family — they owned 50 percent of
251 Park Avenue South, the Rings owned the other 50 percent. Then it’s
the same discussion [file for partition in court], but this time, the
judge acts much more quickly. They [the courts] have no patience for
the Rings, they know the story. They set a partition sale for less
than a year away. At that point, Frank realizes he’s in trouble. We
spoke to him about buying the whole portfolio, but again their numbers
were impossible to deal with.

Meanwhile, we’re going through this lawsuit on 251 Park Avenue South.
He starts getting nervous, Frank. The first property, [20 West 47th
St.] when it goes up for auction, a few people showed up looking to
buy, but we bought it. Obviously, we’re playing with funny money here.
Because we own 75 percent of it we’re paying ourselves — no one’s
going to outbid us.

When we go to auction on 251, he knows very well we’re going to buy it
too. He starts getting nervous about that.”

Enter Michael
“While we’re going through this process, Michael Ring decides he wants
to do something with the portfolio. He enters into the transaction
with Tabak [Princeton Holdings’ Joseph Tabak] and some other smaller
players and into a very, very unfavorable transaction. He’s in with
Tabak but he’s not getting that much cash. It was a transaction he
regretted pretty shortly after going into it. He wants to try and get
out of it, so he files a lawsuit, which is winding its way through the
courts. But he’s nervous about it, so he comes to us. He knows that we
are honorable businessmen, so to speak. Someone, frankly, that he can
trust in a world in which it’s very difficult to trust anyone. We also
transact with Tabak and the others — they agreed to take a large
check to walk away from the deal. Michael gets a very reasonable
transaction for himself. He’s still in the deal, to a small extent.”

Game, set, match
“Once we do that [make a deal with Michael], we instantly file for
partition for all of the other Ring properties with Frank. I think at
this point, Frank, who’s a very smart guy, realizes that the jig is
up. It’s not just that with the partition that he’s going to lose
control of the properties anyhow, but he also runs the risk that
nobody shows up at these auctions. Because auction number one, we
bought it out, auction number two is coming up — we’ll buy that too.
Well, who’s going to bother showing up for auctions 3,4,5,6,7 and 8?
He could actually lose it a relatively low price. So he realizes that
it’s time to make a deal.

To give him credit, he charged us a high price. We paid through the
nose. He gets a very big check. And we kind of end up with a whole
portfolio under our control.

Overall, an interesting transaction, a truly New York transaction.”

  • Tyrannosaurus Rex

    Say what you will, but Gary Barnett is one sharp businessman. Not only that, he is very patient without blowing his cool when dealing with strong-willed people.

    • Bullied and Damaged by Rent Re

      what stress would he have? He’s not the one in pain or in trouble. But it sounds like Mr. Ring shouldn’t have been suffering either.

  • Bullied and Damaged by Rent Re

    Why were the courts unsympathetic to the Rings?

    • Monica McLaughlin

      I believe they were forced to sell by their partners weren’t they?

      • Bullied and Damaged by Rent Re

        But why were the courts against them? Did they say that defensive stuff like my time is worth 5k per hour? Judges tolerate eccentric and offensive tenants so they should be equally understanding if the Rings haven’t actually hurt anyone.

        I disagree about charging Gay Men’s Health Crisis for all that stuff when GMHC was leaving his building though. Not because they are GMHC but because it sounds like it wasn’t supposed to be charged but I could be wrong because the article didn’t go into enough detail. That’s the only thing I noticed about the Rings possibly being not too Golden Rule in their dealings. Otherwise … they sound beleagured.

        • Monica McLaughlin

          The guy who forced the sale bought into the buildings and so had standing to force the sale. At the auction, he bought the buildings that he already owned partially.

          • Bullied and Damaged by Rent Re

            Okay but why were the courts against the Rings? How did the Rings actually hurt people ever? They didn’t know David Young would store scarves in the drop ceiling and Mr. Kim would fall retrieving a box of those scarves.

          • Monica McLaughlin

            There were 95 violations on the building. Some of them may have been regarding scaffolding.

  • Bullied and Damaged by Rent Re

    Why didn’t the Rings trade one of their partner owned properties to wholly own the other one?

  • Bullied and Damaged by Rent Re

    If their numbers were impossible to deal with, how far off was it from the number they finally got? And how much went into legal fees?

  • Bullied and Damaged by Rent Re

    http://www.nytimes.com/2014/06/25/realestate/commercial/long-neglected-fm-ring-properties-in-nomad-being-revived-for-tech-tenants.html?_r=0

    We’ve had a long vacancy.

    But all our phone calls go to a third party answering service so we never rejected interested tenants but we got calls mostly from prospective sellers/brokers for sellers and our lawyer very meanly said oh people want to rent over the years but I told them you are picky which really hurt my mother’s feelings

    but I think if someone really wanted to rent, they would rent and there is only so much you can do on your part

    I wouldn’t accept anyone describing my mother like they are describing Mr. Ring

    • Bullied and Damaged by Rent Re

      Maybe Mr. Ring had been trying to rent out his vacancies. I made a lot of phone calls over the years (all documented) to retailers local, national and international.

    • Monica McLaughlin

      I believe you are smaller real estate owners. People like the Rings have teams of lawyers who work for them. Money isn’t an object and neither are morals.

      • Bullied and Damaged by Rent Re

        I think Mr. Ring must be traumatized or something because how does David Young Inc not have insurance or the intellect to not put a box of scarves in the drop ceiling. That case is so weird. No one puts stuff in their drop ceiling.

        • Monica McLaughlin

          Where is that story?

          • Bullied and Damaged by Rent Re

            I found the case on google but I don’t really understand what I am reading – Mr. Ring got sued by the employee of the store tenant because the store tenant told the employee to go up into the drop ceiling (!) and retrieve a box of scarves and the employee fell and hit his head and shoulder on a dolly. The case went on for at least 8 years but I don’t understand it at all.

          • Monica McLaughlin

            You are only reading pieces of the case and not the complaints so you don’t have details. Here are more details that tell that the employee went into a vestibule and fell through a drop ceiling. It doesn’t say that stuff was stored in a drop ceiling only that the employee fell through. https://casetext.com/case/kim-v-ring

          • Bullied and Damaged by Rent Re

            SO the vestibule is on top of a drop ceiling? that crawlspace sounds huge – why didn’t they just build a legal mezzanine with proper supports?

          • Bullied and Damaged by Rent Re

            Thanks for translating.

  • Bruce B.

    Gary Barnett really does know how to close a deal once he wants it.

  • Oouch

    How many brokers were tortured by the Rings over the years? They were one of those building owners that seem to thrive in NY where morons are allowed to buy and hold properties for generations, running them into the ground, abusing good tenants, and putting nothing back in only to be rewarded at the end with a bucket of cash, if not the extra billions they dreamed about in their grandiosity. Those of us owners who are next to the Ring buildings are at once hopeful and apprehensive as many of those buildings are already disasters facing the wrecker’s ball. But, in the long run it will be good for values, just don’t expect your real estate taxes to go down.

    • Bullied and Damaged by Rent Re

      Did they turn down brokers’ tenants? What did they do to good tenants?

      It’s kind of none of our business if someone is a silver spoon. One nice man asked my dad if he wanted to buy anything else for the store and said he had some puppies in the back of the delivery van. When he opened the back of the van, it was his three little kids asleep in the back while their parents made their deliveries personally.

      Dad’s old landlord’s wife had trench feet from standing in puddles while she stirred food on the stove every day while their baby slept on the counter. Her husband gave up his father’s inheritance and worked his way up with his wife at his side because he was working for free for his dad and his wife was considered not good enough for him but she got trench feet from marrying above herself.

      I think they earned the right to have their kids and grandkids inherit something.

      • Monica McLaughlin

        These slumlords suck every dime out of a building. They make repairs only when they receive violations. They take the money and put it into developing luxury housing. This is how the building I live in operates.

        • Bullied and Damaged by Rent Re

          It looks like none of the luxury housing developers come from rent regulated housing roots. It’s garment industry or commercial real estate. Mr. Rich looks like he was a commercial real estate owner.

          • Monica McLaughlin

            They buy up all the rent regulated properties as tear downs. The Stahl Organization which owns lots of commercial real estate and lots of luxury housing, bought this city block of tenements in which I live (First Avenue Estate) in 1976 as tear downs — they suck every dime from the property to use on other luxury development and when the property is a run-down fully mortgaged slum, they tear them down and put up luxury housing.

          • Bullied and Damaged by Rent Re

            so why is pro tenant government most damaging to small regulated owners?

            I’m willing to trust the government knows what it is doing for the greater good but if they can get anti landlord laws passed so quickly, why can’t they just as quickly deal with tenant issues in legislation?

          • Monica McLaughlin

            Rent regulated tenants have to be protected by the Government from predatory landlords particularly those who are determined to flip apartments to increase revenues and those, like mine, who refuse to make repairs despite being literally worth billions of dollars. The laws protecting tenants are not that strong at least not when the landlord has a team of attorneys working for them like the big time developers do. You seem to be a small time land owner whose buildings are in marginal neighborhoods and so some of your tenants are the type who vandalize the buildings in which they live. Have you considered selling for your own sanity?

            I live in a tenement on the Upper East Side of Manhattan and have never heard of those kinds of tenants who destroy things. While I think my landlord is a slumlord, I would never destroy the apartment and the building I live in. I want it to look nice and be a safe place to live. Unfortunately, the only way to get repairs is through 311 calls and violations so after a decade of neglect, I began making the calls and getting the violations.

          • Bullied and Damaged by Rent Re

            are those violations $300 each to wipe? Do you justify that by reporting the repair issue first to the landlord through the proper channels?

          • Monica McLaughlin

            There are no proper channels to go through. We have a rental / Superintendent office where one can make calls or stop in. All calls and requests are answered with a “We will put in a ticket” and then ignored. We have a management company, Charles H. Greenthal, and they also ignore all calls and letters. The owner, The Stahl Organization (run by Co-Presidents, Richard Czaja and Gregg Wolpert) are the ones who pay these people and they pay them to ignore the tenants. The owners keep 3 Rottweiler dogs in the basement and hire “security guards” to walk around the block with these dogs to intimidate tenants. These dogs bark non-stop while in the basement. Twice these dogs tried to attack me and my small dogs as we exited our building. The only thing the owner will respond to is a violation from the City and they don’t seem to mind the fines. They have so much money that out of 190 apartments, they refuse to rent 130 of them for years, because they were claiming that they could only get $600 a month for them after putting in $40,000 worth of renovations — this was the basis for their Hardship Application filed with the Landmark Preservation Commission that was denied in May. There are another 17 buildings on the city block that they keep about 30% vacant. http://ny.curbed.com/tags/430-east-65th-street

          • Bullied and Damaged by Rent Re

            Contact the same reporters in the Post and Daily News who covered bad landlords in the past. Can you afford a video camera to wear so you can record everything even if it is dog barking. I think if you are a tenant and violence is threatened, government and press will help you but no dice if you are an owner.

            A tenant sicced his german shepherd on the tenant who floods and she went bananas understandably – screaming on the telephone repeatedly in the middle of the night and I don’t remember if she came up to the office that time – but siccing dogs on people is like Japanese siccing Alsatians on Chinese women in Hong Kong during the Occupation. It’s unacceptable. On dogs hurting people, that should be a big felon upon the owner – because historically, dogs have been used to hurt and kill people on purpose by their handlers.

            How bad are your repair issues? Have you considered contacting the CIty Council? They are many tenant advocates on that council. You might get some satisfaction.

          • Monica McLaughlin

            The big real estate developers are the biggest donors to the Governor. Their lobby group The Real Estate Board of New York (REBNY) is a very powerful organization. Politicians stand down.

          • Bullied and Damaged by Rent Re

            Then they must be behind how pro-tenant government is as well as blind eyes to tenant malfeasance and overempowerment e.g. airbnb.

          • Monica McLaughlin

            The owner put up a sidewalk shed in 2006 and just left it there since. It surrounds 3 sides of the building and was designed with an open plenum to encourage pigeon roosting. After several years, plants began to grow in the plenum from nest debris. The poles holding up the sidewalk shed rusted and rotted almost through and the wooden blocks used to hold it even also rotted. Fire escape drop ladders were prevented from being able to lower through the scaffolding by plywood boxes intentionally put over the openings by the owner. I said as much in my harassment claim and in a legal answer, the owner stated that I was not telling the truth and that the sidewalk shed was inspected regularly and was in perfect condition. They also stated as much at the court conference for my harassment claim on July 15 despite the fact that I have pictures with me proving otherwise. The lawyer for the State told me to call 311. I left the conference and called 311. The Stahl Organization was slapped with 2 serious violations for which they had to go to court and were fined about $4,000.

          • Bullied and Damaged by Rent Re

            Did The Ring Brothers ever put up scaffolding for years and not remove them to disturb their neighbors and lower the quality of the block?

          • Bullied and Damaged by Rent Re

            Focus on getting them to stop using dogs against you first because that is a very bad sign.

            Then make a timeline of all your repair issues and post them somewhere. And try to get the other tenants to do the same so the general public can get an idea of what is going on because that curbed post is vague. And post the contact numbers of the city agencies. But you should always be better than your enemy and give notice to the landlord about the repair issues so it is not eye for an eye where they see you as that $300 violation tenant.

          • Monica McLaughlin

            It is very hard to get rid of those dogs. It is almost impossible to prove harassment. My claim was kicked out, but I did learn about the power of 311 and next is to file the Rent Reduction forms with the HPD. All this is time consuming. I am learning the law as I go along. These wealthy real estate developers are the number one donors to the Governor. http://therealdeal.com/blog/2014/07/24/rebnys-influence-over-cuomo-laid-bare/

          • Bullied and Damaged by Rent Re

            You need a body camera.

          • Monica McLaughlin

            I had to buy one, because after I complained about the dog attacks, 3 of the security guards began to harass me. They can see when I leave my apartment and I must walk through the courtyard. They began following me with the dogs and saying nasty things.

          • Bullied and Damaged by Rent Re

            Awesome. I hope you get proof.

          • Bullied and Damaged by Rent Re

            I have repeated phone messages for two tenants on their machine and cell phone responded to with both tenants claiming that I was making crazy calls.

          • Bullied and Damaged by Rent Re

            So they have the deep pockets to create a terrible image of greedy slumlords to force even more draconian legislation across the board upon small regulated owners!

          • Monica McLaughlin

            Yes, this is what happens. Laws are passed to stop these greedy slumlords and the smaller land owners are the ones who suffer.

          • Bullied and Damaged by Rent Re

            No. that’s not what I meant.

          • Bullied and Damaged by Rent Re

            Rosario Dawson’s family was gifted an entire building for one dollar and all they had to do was make repairs and this was AFTER she got famous. I remember the news at the time.

            http://thevillager.com/2014/10/20/rosario-dawsons-cousin-arrested-for-stuy-town-attempted-rape/

            If a tenant creates repair issues that the landlord can’t afford and they are not paying rent or paying very little rent, they could conceivably be personally far wealthier than the landlord and be able to make the repairs on the damage they may have created. Do you see the blind eye that government persists on applying to the issue of tenants?

          • Bullied and Damaged by Rent Re

            Whenever I see Rosario Dawson or Cyndi Lauper on screen, I think about what they got away with because they technically/legally could not what they SHOULD have.

          • Bullied and Damaged by Rent Re

            I just realized that Rosario Dawson’s uncle probably overcharged and illegally rented basement storage in that building to his own son for $700. Let’s get on THAT, shall we?

            http://thevillager.com/2014/10/21/breaking-more-sexual-abuse-charges-filed-against-rosario-dawson-cousin/

            This and ABC No Rio is why tenants are encouraged in sabotaging their apartments and the building so the landlord can’t afford repairs and then the government participates by raising property taxes on rent regulated property.

          • Bullied and Damaged by Rent Re

            Adam Leitman Bailey is iirc $650 an hour and he is representing the Dawsons and it sounds like he has lots of pull with developers and government so it’s not true that government and developers are anti-tenants or anti-squatters or anti-formersquatters now future codevelopers:

            “More than half of the squats have already gone through that process and are now low-income co-ops. But 544 E. 13th St. has lagged way behind, and, in fact — a full dozen years later — almost no work has been done to fix up the building to bring it into line with the city’s building code.

            The tenement is sharply divided between two factions: the Dawson clan and its allies on one side versus another group that claims some longtime tenants. The non-Dawson faction charges that Celeste and her family members basically run the building as if they own it, and have aggressively taken over units, and have also impeded efforts to fix up the building.

            In June 2013, Celeste — without permits — drilled a hole in her first-floor apartment’s floor, then installed a spiral staircase down to a basement room to create a duplex for herself. Alerted by other tenants who were concerned about vibrations from the construction, firefighters arrived, leading to a partial vacate being ordered after unsafe conditions were found, including a partially detached rear fire escape and a leaning parapet.

            Former common spaces, like the basement bicycle-storage room, for example, have been taken over and are being rented out for profit.

            Tenants also complain that essential services — including heat, gas and hot water — have been nonexistent. Tenants use hot plates to cook and to heat up water for bathing, and electrical space heaters in the winter to keep warm.

            Celeste did not respond to a request for comment.

            Attorney Adam Leitman Bailey was retained by Celeste and her faction sometime ago. He had recently told The Villager he is fighting a tax-lien foreclosure on the property, which he assured they will defeat.

            Speaking on Monday, he said the foreclosure effort has temporarily been put on hold.

            Stressing that he is a real estate lawyer, Bailey said he isn’t representing Juan Scott. He said he met him at a meeting of what the attorney called the “homesteaders” — they’re not technically squatters anymore, he noted — over this past summer.

            “I met him once,” he said. “I saw no predilections toward someone who would disrespect a female. Nice guy. Respectful. Quiet. But then again, I only saw him once.”

            Bailey said he is currently working with the city’s Department of Housing Preservation and Development and the Urban Homesteading Assistance Board, or UHAB, on a way to get the building fixed up and put into one of Mayor de Blasio’s new affordable housing programs.

            Bailey said UHAB never paid any taxes on the building, which is what triggered the foreclosure effort.

            “The City Council appointed them the owner until our clients were deemed ready to take ownership,” he noted of UHAB.

            According to Bailey, basically the new plan would involve a “white knight developer” who would invest money into the building — to the tune of $108,000 per unit — in return for which the developer would get a bonus of floor-area ratio (F.A.R.) — basically additional square footage — that he could use at another site to develop market-rate units. This would be done through creating a “comprehensive zoning lot,” with the market-rate portion possibly located nearby or elsewhere within the neighborhood.

            The details are still being hashed out, and the developers’ investment might wind up being less than $108,000 per unit by the time negotiations end, since otherwise that would be a pretty high sum, and possibly more investment than the building needs, Bailey said. There would be a covenant running with the land, so that the units would be permanently affordable. The deal could be finalized in as soon as a month from now, Bailey said.

            According to a source, BFC Partners, led by managing partner Don Cappocia, is the developer trying to swing this “inclusionary zoning” deal involving 544 E. 13th St. But Bailey said he could not confirm that.

            Actually, this program could work out better in terms of affordable housing than what was done with the other squats. Namely, those other legalized squats actually could convert to market-rate status in 30 to 40 years, once their mortgages are paid off, Bailey noted. He should know since he was the lawyer that represented the 11 squats in their original negotiations with the Giuliani administration. On the other hand, 544 E. 13th St. would be affordable in perpetuity.

            About two weeks ago, a UHAB representative toured the building. It’s been hard to get answers from UHAB, though, on exactly what is going on with 544 E. 13th St. and if it will ever become a low-income co-op.”

          • Bullied and Damaged by Rent Re

            The windfall to the four buildings including to the Dawsons is like that big red bike in the prize catalogue. It MOTIVATES every tenant in NYC to sabotage their premises and try to get someone else’s real estate for themselves … for a dollar.

            But you don’t see too many former tenants and squatters actually getting those big red bikes but it forments such dissent and creates such difficulty for small owners, that they end up selling.

          • Bullied and Damaged by Rent Re

            If Celeste was the owner and did all this stuff … NO WAY would this get the same reaction.

          • Bullied and Damaged by Rent Re

            They have to make repairs!

            My old property manager was mentioned in youtube videos by a tenant who posted video of conditions in his building.

            Put your stuff on youtube!

            I understand you must be feeling very sad if your landlord won’t make repairs. My tenants are not like you.

          • Monica McLaughlin

            They do have to make repairs, but only after receiving a violation. Without a violation, they don’t have to do anything. There are so many violations that tenants do not even realize are violations. I am in the process of learning of all of them now.

          • Bullied and Damaged by Rent Re

            That’s weird because if government wanted to protect affordable housing, they wouldn’t have hiked property taxes encouraging small owners to relinquish their hold on their property.

  • Bullied and Damaged by Rent Re
    • Bullied and Damaged by Rent Re

      Is this an insurance defense case? Wasn’t the retailer AND the building owner supposed to have insurance? Even a sublease tenant has to have insurance. Is that why this dragged on for so long? Is it still going on?

  • JJ

    very interesting

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