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
“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.”
“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.”
“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.”