TRD Friday Feature:When Gary Barnett finally won a 14-building portfolio of properties owned by brothers Frank and Michael Ring in late 2013 – after much maneuvering and legal wrangling – it was viewed as a coup for one of New York’s savviest dealmakers.
Behind the story:
Though his Extell Development reportedly paid close to $450 million for control, Barnett was expected to reap serious profits from the 1 million-square-foot-plus portfolio, which the Ring brothers left dilapidated and largely vacant. But just how big a cash cow it was is only now beginning to come to light.
Extell declined to comment for this story. But less than two years after acquiring the portfolio, it has offloaded 10 of the properties for more than $700 million, according to an analysis of property records by The Real Deal.
With most of the commercial properties holding the potential for lucrative residential conversions, the buildings received much interest from developers – and Barnett set about capitalizing on that interest.
In November, Extell entered contract to sell a 120,000-square-foot property at 251 Park Avenue South to the Feil Organization, as TRD reported. The sale deed is yet to hit property records, but sources said the building was likely to trade for between $100 million and $120 million. Feil recently took out a $70 million loan on the property.
In January, Extell sold the portfolio’s crown jewel, a 223,500-square-foot property at 212 Fifth Avenue, for $260 million. The buyers, a partnership led by Robert Gladstone’s Madison Equities and Building and Land Technologies, are converting the building into residential condominiums.
Barnett also sold two of the buildings, at 331 Park Avenue South and 114 East 25th Street, to Nathan Berman’s MetroLoft for a combined $76 million. MetroLoft entered contract several months later to sell both properties to real estate crowdfunding firm Prodigy Network for $100 million.
And earlier this year, Extell sold 34 West 17th Street to Lower East Side-based real estate firm Atkins & Breskin for $20 million.
Meanwhile, Extell entered negotiations with the Kaufman Organization for four of the properties not ripe for residential conversion. Those talks eventually evolved into Kaufman securing long-term ground leases at the four properties earlier this year, after Barnett decided he “wanted to retain the ground” at the buildings, Kaufman president Fredric Leffel said at a conference this week. The two sides also recently closed an additional ground lease deal for another of the properties, 155 West 23rd Street; together, the five ground leases are valued at around $193 million, according to property records.
Barnett performed an about-face on the five buildings, however. HLP Properties, which is controlled by Edison Properties and its equity partners, was flush with cash after selling a massive development site to Ziel Feldman’s HFZ Capital Group for $870 million, and sought a 1031 exchange. Earlier this month, Barnett sold HLP the five buildings for $268 million, as TRD reported.
“Because of the redevelopment taking place there, the amount of money that Gary made selling the land to [HLP] was extraordinary,” Leffel said, noting that Kaufman was able to “extract some additional benefits” from Extell as a result and describing it as “a fantastic transaction” for both sides.
To date, Extell has sold nine of the 14 Ring portfolio buildings for a recorded amount of $624 million. The deal with Feil for 251 Park Avenue South could push that to over $740 million for 10 buildings.
As for the four buildings Extell retains: It is looking to raze 142 West 24th Street, and Leffel believes that Barnett’s plan “is to ultimately build a hotel” at the site. It ground-leased the one-story property at 23 West 24th Street to real estate investor Oz Levi in a deal worth $6.1 million, according to property records, while the New York Times reported last year that a demolition clause at 30 East 23rd Street forced out the building’s sole tenant, popular speakeasy Milk & Honey. And property records indicate little movement at 17 West 60th Street – the only building in the portfolio outside of the Midtown South district.
Kyna Doles and Konrad Putzier contributed reporting.