Ask most people in the industry today and they’ll tell you Gary Barnett is the most aggressive of the large real estate developers in Manhattan. His appetite for risk among his peers is second to none.
But given how many projects he has in the works — his firm, Extell Development Company, is currently working on roughly a dozen, including building two of the tallest residential buildings in the Western Hemisphere — and with the level of media attention he gets, you might think he would be more frenetic and in-your-face.
But in a rare sit-down interview last month, there was no media handler on hand at Extell’s Midtown office where Barnett talked to The Real Deal for nearly an hour. He was relaxed, and wasn’t frantically checking his e-mail or phone messages. It was a departure from Barnett’s usual media policy — although he will generally talk about projects, he rarely grants lengthy interviews.
“My father always told me, the less you say, the better it is,” said Barnett, who declined to have a fresh photo taken for this article.
Barnett’s most highly publicized project, One57
Still, Barnett has become harder and harder to ignore these days. Though that’s been true for several years, he’s currently pursuing more projects in Manhattan than any other developer.
The standout is, of course, One57, the Christian de Portzamparc–designed, 1,050-foot-tall überluxury hotel and condo he’s building at 157 West 57th Street. That project has garnered most of the media attention he’s received lately, with its record pricing and a recent crane mishap (see related story, “Battling skyscrapers on 57th Street”).
However, there are at least 11 projects with a total of nearly 6 million square feet that he’s currently working on in New York City, including his “other” 57th Street project : a 1,550-foot- tower at 225 West 57th Street, between Broadway and Seventh Avenue. Barnett filed plans with the city’s Department of Buildings in November 2012 that call for 233 residential units at the 1.2 million-square-foot structure. The building will also include the city’s first Nordstrom at its base.
In addition, he’s expected to close this quarter on a $150 million to $200 million purchase of a 1 million-square-foot residential site formerly occupied by a Pathmark grocery store on the Lower East Side.
“I don’t know how he can manage so much at once. We could never do that,” said Thomas Elghanayan, CEO of TF Cornerstone, who has been an active developer of residential and commercial properties for decades.
Driving all of that activity is, of course, Barnett, who’s known as a steel-nerved risk-chaser.
“His risk tolerance is off the charts,” said one executive at a rival development firm, noting that Barnett began building One57 with no construction loan in place, which insiders say is almost unheard of.
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Puzzle pieces
Jeff Blau, CEO of the Related Companies, Extell’s main rival
Barnett, a rabbi’s son who grew up on the Lower East Side, worked in the diamond industry in Belgium before getting into New York City real estate.
He founded the firm in 1989, and partnered with developer Ziel Feldman in the early ’90s to buy apartment buildings and convert them to condos. Part of Barnett’s job was to bring the money, tapping into his overseas connections — a skill that still comes in handy today.
But Barnett said he doesn’t aspire to turn his midsize firm, now with between 125 and 150 employees, into a behemoth development company — at least in terms of the number of employees and geographic scope of the firm.
“I think that it is unlikely that we would ever get as big as, [for example], Tishman Speyer. I don’t aspire to get to that kind of size,” Barnett said, noting that he’s wary of “the headaches” that come with a much larger firm.
“Right now, we are not really looking outside of New York. We live here, and it is a nice place to be focused,” he added.
In recent years, however, he’s followed in the footsteps of his main rival, Midtown-based Related Companies, by broadening Extell’s expertise. For example, he snagged Dan Tubb and Jeannie Woodbrey, two former residential sales agents from the Corcoran Sunshine Marketing Group, to run sales at One57. Barnett said he did that, in part, to scale back on commission payments to an outside marketing firm, but also to maintain more oversight on transactions.
Steven Roth, the head of Vornado, which is fighting with Extell at 220 Central Park South.
“We wanted a little better control of the team,” he said, noting that when he’s worked with outside sales teams in the past they’ve sometimes lost focus after the bulk of the sales have been made and the building becomes increasingly sold out.
Barnett’s stance is, perhaps, not surprising. He’s never taken a standard approach to real estate.
In fact, he prides himself on going after sites and deals that his rivals are either unwilling to pursue or simply not aware of.
His two large 57th Street towers — One57 and 225 West 57th Street — both sit on properties assembled over the years, many by company executive vice president Dov Hertz, who joined the firm in 2003. For example, the first property acquired for One57, at 157 West 57th Street, was a 49-year lease inked on behalf of Extell by Feldman.
220 Central Park South
“I always liked doing puzzles,” said Barnett. “It’s kind of fun to sort out the pieces and put it together.” Just buying a property and developing it, “what’s exciting [about that?]” he asked.
In addition, Barnett said that if his firm had not assembled the 20 parcels that make up the One57 site, he doesn’t think anyone else would have.
“If we had not gotten it done, no one else would have,” he said. “It never would have gotten done.”
He said the assemblage strategy provides a leg up because it widens the options of potential development sites to choose from. In order to acquire contiguous sites, however, Barnett sometimes offers a property seller a stake in the development.
While Barnett is far from the only developer to successfully assemble Manhattan parcels, developer Douglas Durst, whose company, the Durst Organization has historically been a leading assemblage firm, called his rival “one of the best” at it.
Barnett contrasted the complexity of putting a site together with other types of acquisitions in the city.
“If you look at the run-of-the-mill sites in Midtown or the Upper East Side, they pop up almost like ready-made parcels that you can buy and build. It is much easier,” he said.
A different league
225 West 57th Street
Real estate pros regularly compare Extell to firms such as Related, Durst and Silverstein Properties in both the number and variety of deals in New York.
While each of those firms is developing approximately the same number of square feet as Extell in Manhattan, what sets Extell apart is the sheer number of deals it’s working on at the moment, including sites that have taken him years to assemble. Barnett’s rivals are each working on, at most, eight projects in the borough, while Extell is working on almost a dozen. In addition, Extell is one of the city’s most active sellers, unloading $550 million in potential development sites and projects over the past 12 months, an analysis of data on Real Capital Analytics showed.
The firm’s currently under-construction or in-active-development projects total at least 6.2 million square feet, which does not include its 1.7 million-square-foot One Hudson Yards, which is waiting to score a tenant before moving forward.
By comparison, it’s closest rival in terms of square feet and number of deals is Related, which currently has eight active developments in Manhattan totaling 4.6 million square feet. Although Related expects to develop millions of additional square feet in the coming years at Hudson Yards, TRD did not include many of those buildings in its tally because those towers are not likely to get underway in 2013. (And while Extell is focused almost entirely on Manhattan, Related is also heavily invested in the outer boroughs with projects like the housing development Hunter’s Point South in Queens and the megamall Gateway II in Brooklyn, and around the world.)
The under-construction International Gem Tower at 50 West 47th Street
Meanwhile, Durst and Silverstein each have more square footage in development than Related, according to TRD’s tally, but the bulk of their projects are at the World Trade Center site. Those towers have been going on for years and do not signal a significant uptick in development plans.
Still, while Extell’s large 57th Street projects have been widely reported, the company has other significant deals all over Manhattan.
Barnett’s 34-story, 748,000-square-foot International Gem Tower at 50 West 47th Street in the Diamond District was one of the few developments to move forward in the downturn. The building has a base of commercial condominiums and office space for lease above that.
Barnett said the firm is talking with a company that might lease the entire rental space, but he declined to disclose further details.
Extell has not made an announcement about a condo sale in the building since late 2011, when the firm reported that it was 65 percent in contract. But Barnett said sales have continued, and he expects the condo portion of the building to be sold out by the end of the year.
While backed by city and state financial assistance, the development has generated criticism from some other Diamond District landlords. Despite Barnett’s promise of attracting new office tenants, they feared that he would poach their office tenants on 47th Street
The Carlton House hotel at 680 Madison Avenue, which Extell is redeveloping with Angelo, Gordon & Co.
“If you can’t bring in new people, and that’s what you were promising, it’s disappointing,” said Kenneth Kahn, executive manager of the World Diamond Tower at 580 Fifth Avenue and 47th Street. “I don’t know that it’s disappointing because he didn’t try … but it didn’t happen.” Barnett disputed that, saying he did land condo buyers who will bring new jobs to the city, which he noted was a condition of his receiving city assistance.
Elsewhere, Extell is partnering with private equity firm Angelo, Gordon & Co. to redevelop the Carlton House hotel at 680 Madison Avenue into condominiums and is marketing a garage building at 10 West 48th Street to lease to a retail tenant for redevelopment.
There’s also an approximately 725,000-square-foot development site at 547 10th Avenue, where in 2011 Barnett signed a 99-year ground lease with the estate of Sol Goldman, and last summer he bought air rights from the neighboring Roman Catholic Church. And the firm is assembling a smaller site at 1687–1693 Third Avenue between 94th and 95th streets.
The roster doesn’t end there. There’s another megadeal coming down the pike on the Lower East Side.
Extell — a long-rumored buyer — is in contract to acquire a 1.1 million-square-foot development site at 227 Cherry Street for approximately $150 million to $200 million, insiders confirmed. The seller was advised by Eastern Consolidated. Extell had been in contract to buy the site for $87 million in 2007, but backed out when the market collapsed and, according to court records, sacrificed its $6 million down payment. (The site is blocks from Barnett’s childhood home at 1 Pike Street.)
The firm also has a number of development sites in mothballs.
At One Hudson Yards, a site at 560 West 34th Street on 11th Avenue with 1.7 million square feet, Extell has hired commercial firm Jones Lang LaSalle to secure an office tenant before construction begins.
Barnett also bought a collection of garages from Central Parking System in 2011. Insiders believe those are potential seeds for assemblage or simple development sites.
Not one-upmanship
While Barnett is still looking to buy more properties, he also was one of the city’s biggest sellers. And he has more sites on the market to sell, which could net him millions more.
“We sold stuff last year for a combination of several reasons. One is to raise cash; two is it was a good time to sell because of the tax treatment; and three, they are just nonstrategic,” Barnett said.
While he often buys properties as quietly as possible, he’s also been known to bite into a project — especially a strategic purchase or legal filing — and hold on, causing headaches and delays for rival developers.
In 2001, Barnett began an unsuccessful fight with Bruce Ratner to develop the New York Times headquarters tower at 620 Eighth Avenue. He also very publicly tussled with Donald Trump when he purchased a parcel on the Upper West Side from Trump’s Chinese investment partners. And he fought with Forest City Ratner again over the Atlantic Yards project in 2005 in Brooklyn, where Extell submitted what was considered by some to be a spoiler bid.
More recently, he scored a victory against Related, which is headed by Jeff Blau and Stephen Ross, when he landed the Nordstrom deal. (Related, which declined to comment on Extell for this story, and others had spent years wooing the department store as an anchor tenant for the retail mall at its massive Hudson Yards project.)
But Barnett denies that besting other developers in the pursuit of deals is personal.
“It’s not really about competition. I imagine some people have that feeling, that it is one-upmanship. But I totally don’t think like that, and people who know me, I think, realize that,” he said.
For example, at 220 Central Park South he’s engaged in an ongoing dispute with Steven Roth’s Vornado Realty Trust, which owns the building and wants to demolish it and construct a new tower. (Barnett, whose 1780 Broadway is directly across the street, controls the building’s garage and has refused to relinquish the leasehold.)
When pressed later on what would happen with the standoff, he scrunched up his face and mischievously said: “Who knows? I cannot predict the future. … I have no clue. I truly do not know what will happen.”
Then after further reflection, he said, “No one would say real estate in New York is not a competitive field.”