The Real Deal New York

Gary Barnett adds to Diamond District assemblage

Sitt's Thor Equities flipped contracts to Extell at 562, 564 Fifth: sources

January 11, 2016 08:00AM
By Rich Bockmann

562-564 Fifth Avenue and Gary Barnett

562-564 Fifth Avenue in Midtown and Gary Barnett

Gary Barnett struck a pair of deals that will allow him to move forward with plans to develop another building near his International Gem Tower in the Diamond District.

The Extell Development chief negotiated with Joseph Sitt’s Thor Equities and SL Green Realty to take control of a pair of properties at the northwest corner of Fifth Avenue and 46th Street nearby where Barnett has spent the past few years assembling properties and cutting deals to pave way for a new tower.

Extell, Thor and SL Green declined to comment.

Thor went in contract back in August 2013 with the Israeli-based Bank Leumi to buy the remaining 12 years on the ground lease at 562 Fifth Avenue and to purchase outright the property next door at 564 Fifth Avenue. Public records show that Bank Leumi finalized the sale of the latter property in December. At the same time, it executed the sale of the ground lease for 562 Fifth on the corner. Together, the two deals totaled $109.5 million, records show.

Sitt went ahead and flipped the contracts to Barnett, sources said, who negotiated with SL Green for long-term control of the corner property, No. 562, which has a complex ownership structure.

SL Green owns the fee interest, and paid $67.5 million in 2013 to buy the 42,000-square-foot office and retail building on the site. But Extell, known to be one of the savviest assemblers in the business, paid $11.7 million for the air rights above the property.

Public records show SL Green modified the ground lease to extend the term through 2064, at which point Extell has the option to purchase the land outright for $100 million.

Barnett owns a number of properties further west on 46th Street and struck a deal with SL Green to construct a building that cantilevers over the property.

The site sits on the 46th Street side of the block  between Fifth and Sixth Avenues opposite Jewelry Way, where in 2013 Extell developed its 34-story, 750,000 square-foot International Gem Tower at 50 West 47th Street. Extell sold the upper floors, about 319,000 square feet of office space, at the building to SL Green in September 2014.

In August, Barnett picked up an office building on 47th Street that, combined with a previously purchased property, gave him over 205,000 square feet of development rights.