Gary Barnett’s Extell Development May Settle Dispute with Frank Ring And Buy His New York Property Inheritance

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Gary Barnett                                 251 Park Avenue South                               Frank Ring

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Extell Development is one of the most active developers in New York these days, including building the city’s tallest apartment building – One57 – at 157 West 57th Street. This new building will be over a thousand feet tall when it is completed soon, with 75 storeys. The project briefly achieved notoriety when its crane nearly fell down a year ago during Hurricane Sandy causing temporary evacuation of nearby buildings for over a week until it could be stabilized.

Last week the Real Estate Weekly reported that a court appointed lawyer, Mr. Joshua Stein, had postponed for the third time an auction ordered by the court of an office building at 251 Park Avenue South that is co-owned by Extell and one of the heirs of New York developer Leo Ring, his son Frank Ring. The two parties are currently in litigation over this property, which is 70% empty, and over several others too which are also seriously under-occupied. The price this building might fetch at auction has been variously reported to be as much as US$40 million or even more.

Even as the specialized real estate journal was going to print however, the New York Post reported sources who knew, but were not identified, as stating that a major deal had now actually been struck between Extell and Frank Ring for the purchase by Extell of his share of his father’s entire portfolio of 15 commercial office properties in key Manhattan locations.

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One57 – at 157 West 57th Street

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Extell is led by its founder and controlling shareholder Gary Barnett, who is 57. According to Wikipedia Gary Burnett was born as Gershon Swiatycki on the Lower East Side of Manhattan. His father was a Rabbi and Talmudic scholar. The family later moved to an orthodox community in Monsey New York where he grew up. At some point he chose the secular over the religious world and went to college, graduating in mathematics from Queens College and later receiving a Master of Economics degree from Hunter College.

Barnett began his career as a diamond trader in Antwerp Belgium in the 1980s. In the 1990s, he returned to the United States to diversify into real estate, purchasing shopping malls and office buildings in the Midwest. Barnett’s first major New York purchase came in 1994 and then his first major deal occurred in 1998 when he built what would become the W Times Square. In 2003, Barnett partnered with the Carlyle Group to build The Orion, a 60-story luxury tower on 42nd Street and he had basically arrived.

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One57 – at 157 West 57th Street

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To succeed in New York real estate you must enjoy complicated transactions, as simple deals rarely happen. As a result, when over time interests change interpretations often have plenty of scope to become challenged. Accordingly, you must be prepared to litigate, and sometimes you win and sometimes you don’t. It is in a way a mark of honour in the industry, and Gary Barnett has certainly engaged in his fair share.

For example in 2005 Barnett purchased the un-built portion of the Riverside South project on the upper West Side from Chinese investors, a 77 acre development which had initially been fronted by Donald Trump, for $1.76 billion. The purchase ultimately went through considerable litigation, with the courts eventually decided in Barnett’s favor. His financing came from the Carlyle Group as it had for earlier projects.
Also in 2005 Barnett and Bruce Ratner were both competing for the Atlantic Yards project and this also ended up in litigation, this time with Bruce Ratner prevailing.

So now with Frank Ring’s buildings’ litigation has again been an integral element in resolving a complex transaction, and if the parties have indeed come to a settlement, this will be a major feather in Extell’s cap. The background to the litigation is itself a fascinating story and one it frankly would be very difficult to make up.
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One57 – at 157 West 57th Street

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Leo Ring was yet another reclusive New York property developer, who amassed a portfolio of 15 office buildings together with a partner, Robert Eisner, in and around the Flatiron District of Manhattan. The portfolio is reportedly worth in total as much as US$600 million. Leo had two sons Frank and Michael Ring who each inherited half their father’s portion of the properties when he died. The brothers fought a lot with each other, and indeed apparently still do, but more importantly they neglected the portfolio and basically have left most of them substantially empty for many years, which few people have been able to understand.

After Robert Eisner died Extell saw an opportunity to profit from the some of the complexities arising out of the antagonisms between the two brothers, and he quickly bought the Eisner portion of the portfolio from his estate. After that he went to court accusing the brothers of mismanaging the portfolio and for negligence in leaving most of it empty to his disadvantage as a new partner.

When buildings are not owned corporately, or through an LLC form of partnership but through the older and more traditional form of partnership called “tenancy in common” there is no ready mechanism for resolving irreconcilable disputes other than for the courts to order the liquidation of a property, through an auction process, with the proceeds going to the partners. Here there are fifteen properties for which this procedure would be the only way to solve such disputes.

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Christian De Portzamparc and Signe Nielsen have Designed a major residential complex for Extell Development  – (far right ) Riverside South

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Tired of fighting one of the two Ring brother’s, Michael Ring, quickly sold his interest to a third party who then basically flipped it to Extell itself for US$74 million, which finally left Gary Barnett, the CEO of Extell, now litigating only with a single brother, Frank Ring. After a number of delays to the court ordered initial auction, we are led back to the notion that the New York Post has suggested, namely that Extell have now reached an agreement with Frank Ring to buy out his interest completely leaving them as 100% owners with a clear field to then re-merchandise, re-develop or re-purpose the properties. The lawyer appointed by the court, Joshua Stein, to sort through the mess said he was not aware of a settlement between the two parties, although he conceded with typical understatement completely worthy of his role, “it may be that they are trying to settle.ˮ

For sure there will be more to come to finally clear this picture up, and when announcements are made we will report them.

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