In one of its first buys on the block since the bust, Extell, led by Gary Barnett, just purchased 9 West 46th Street for $10.2 million, city records show. The deal for the five-story building includes air rights, according to the seller's broker from First Atlantic Realty Company, who was clearly baffled by the sudden interest in what he called "a regular apartment building with a retail component." He declined to discuss the buyer's plans.

The property is part of an assemblage, according to two sources. The developer already owns a smattering of buildings on that side of the block, at 13, 19, 29 and 53 West 46th Street. Extell also owns 2 to 8 West 47th Street, adjacent to 9 West 46th Street. That gives it a good start on assembling a large enough lot for a new tower, if it were decide to build one, although there are at least a few properties it would still need to acquire.

Similarly, in the middle part of the last decade, Extell plucked a number such modest properties in preparation for building its International Gem Tower at Fifth Avenue and 46th Street. The Gem Tower has already started to go vertical, and Extell is likewise in the process of building a hotel at 30 West 46th Street. Last year, Extell sold an office tower at 31 and 33 West 46th Street, which it stripped of air rights for the  International Gem Tower.

Extell personnel are off for Passover week, and could not be reached for comment.

lkusisto@observer.com

The development is the last piece of Riverside South, the giant string of apartment towers along the West Side Highway that were started by Donald Trump in the 1990s (it was once called, affectionately, "Trump City.") The site has a long and contentious history, and now the developer of the final segment, Extell Development, is proposing to change the zoning to residential (it was intended to be a television studio for NBC), and add more density.

Mr. Stringer, a onetime assemblyman from the Upper West Side, took issue with a number of points, but principally focused on the density (he wants 480,000 square feet less), the open space (he wants it to be more open and inviting), and the schools (he wants Extell to fund a bigger school).

Specifically, on the density issue, Mr. Stringer's recommendation was critical of Extell for essentially seeking more density than it should be entitled to, given that Extell is leaving 60^th Street closed off, getting more development rights as a result (allowable density is based on the size of the site; with a street closed off, the site is significantly larger).

From the recommendation:

[T]he proposed project will result in unmitigatable traffic impacts associated with the project's density Consequently, this finding cannot be met unless there is a reduction in proposed on-site density. The reduction should reflect an amount that is, at minimum, equivalent to the density gained from not mapping West 60th Street - approximately 480,000 SF.

...

It is not sound public policy to encourage development with unmitigated impacts that strain existing infrastructure and reduce the quality of life of all residents in the neighborhood.  Consequently, the density increase remains unwarranted.  

While this is a common argument to be made by any elected official on any development, the question of density seems particularly relevant at Riverside Center. Extell, as Mr. Stringer points out, is asking for 600,000 square feet, more than a hard-fought mid-1990s agreement with the community and Upper West Side elected officials allows. Extell's argument is that it is both giving more to the community than envisioned a decade ago (it's planning to spend tens of millions to help pay for a school), and it would not be economically viable with a smaller project. As for the latter point, perhaps that is true given the amount Extell paid for the site, but no one forced Extell to spend such a high sum.

A spokesman for Extell, George Arzt, said the firm is "disappointed that the recommendations by Borough President Stringer do not adequately recognize these continuing difficult economic times.

"The proposed reduction in density, along with some of the Borough President's other recommendations, threaten the economic viability of Riverside Center," he said, adding that Extell would continue a dialogue with Mr. Stringer throughout the process.

The community board also recommended "no" on the project, with conditions that included removing one of the five towers, and it now heads to the City Planning Commission.

The final step is the City Council, which is expected to vote by December.

Late last month, Extell bumped up the amount of below-market rate housing in the project to 20 percent. 

Mr. Stringer's full recommendation is here. 

RiversideCenterULURP

Based on Extell submissions to the Department of City Planning filed last week, the developer apparently intends to increase the level to 20 percent of the units, up from 12 percent. The paperwork filed shows that Extell plans to rezone the area, by the West Side Highway and 59^th Street to qualify for the city's inclusionary zoning program, which gives an extra density bonus in exchange for low- or moderate-income housing.

The move is all part of the negotiating dance toward an approval. Extell is in the midst of the city's seven-month review process, and the community board recently weighed in with a large number of criticisms over density and other issues (notably, they want one of the towers to be removed).

The housing issue is one that was expected, given that 12 percent is rather low for developments these days (but was more customary back when the larger Riverside South area was initially planned). In addition, it was urged by City Planning director Amanda Burden.

ebrown@observer.com

Late last month, Lela Goren, a business partner of Extell's who does extensive work with the company, held a fundraiser in the West Village for Council Speaker Christine Quinn that was attended by many executives from Extell. Ms. Quinn is eyeing a run for mayor in 2013.

A spokesman for Extell, George Arzt, said the event was Ms. Goren's, and it also included her friends and other supporters outside of the real estate industry.

"This wasn't an Extell event," he said, although he did acknowledge that numerous Extell executives and others from the real estate industry attended.

Real estate donations are nothing novel in campaigns, but this fundraiser happened at the very time that Extell is seeking zoning approval from the City Council for its mega-Riverside Center residential development, which is envisioned to hold 2,500 apartments.

Of course, this act—real estate developers holding fundraisers as their projects need Council approval—is also customary in the political world, and, indeed, Ms. Quinn has received large bundles of donations from real estate firms like the Related Cos. or Two Trees Management when they have been up for various approvals. Still, it's notable given that the speaker, who reported $2.7 million on hand in mid-July, has made a priority of campaign finance reform. In 2007, she pushed through legislation that limits the amount that those who do business with the city (or seek zoning changes) can give to candidates. 

ebrown@observer.com

Elected officials and others in the community have called on the developer, Extell Development, to raise the number of such apartments in the planned 2,500-unit project by 59^th Street and the West Side Highway. (Extell is currently required to reserve 12 percent of the apartments for below-market rate rents.)

And in an unusual display of a position this early in the process, this is also the view of the Department of City Planning.

At a meeting of the City Planning Commission (which oversees the planning department) on May 24, commission chairwoman Amanda Burden signaled that she wanted to see the housing level move closer to that of the city's inclusionary housing program, which calls for 20 percent below-market rate apartments. A city planning official said the department would work to "bridge the gap" between Riverside South and the inclusionary program.

"Before we go into any details of the building form, we might as well just hit head on the issue of affordability," Ms. Burden said after a lengthy presentation and before a question session. "The applicant [Extell] is complying with the Riverside South agreement on affordability and what the obligations are, but Riverside South has parameters that are different from our inclusionary housing program."

She asked for an explanation of how the Planning Commission would work to "perhaps bring these two concepts more closely together."

Howard Slatkin, deputy director of strategic planning for City Planning, went on to explain some of the key discrepancies between Extell's plans for affordable housing and the inclusionary housing program that the city has typically supported for these kinds of developments.

First, he said, "The inclusionary housing program is the department's preferred approach for incorporating affordable housing into these types of large development proposals."

Outlining major differences, Mr. Slatkin explained how Extell's plan essentially includes less affordable housing. 

Inclusionary housing requires units to be permanently affordable (in exchange for the permanent floor area bonus provided through zoning), while the proposed term by Extell is 20 years, he said. 

Also, compare a 20 percent affordable housing provision, in order to maximize the bonus, under inclusionary housing, to the 12 percent component outlined by Extell—drawn from an agreement struck in the 1990s.

Finally, the way in which affordability is actually measured is also different, he said. Inclusionary housing bases its definition as a percentage of residential floor area, whereas the applicant bases affordability counts on actual unit counts, he said. 

"The department will be continuing to work ... in an effort to bridge the gap between the project as proposed and the policies that the department and the commission have adhered to on recent large-scale development projects," he added.

Ms. Burden has said she expects to come to an agreement by early August before the September hearing.

(With reporting by Eliot Brown)

Gary Barnett, CEO of Extell, said that financing had not been secured for the 3 million-square-foot proposal, which would span 59th Street to 61st Street between West End Avenue and the West Side Highway. Mr. Barnett repeatedly cited the economic downturn as a damper for Extell's expected profits from the development, and was resistant in the face of opposition from local residents.

>> SEE A SLIDESHOW OF THE PRESENTATION

"Putting too much burden on the project will cause nothing to move forward," he said, referring to the community's numerous desired changes that he said would damage the project's economic viability.

"There's only so much we can give up," said Mr. Barnett. "The construction costs are extraordinarily high because of infrastructure."

For instance, local residents oppose the opening of an automobile dealership, which Extell contends is one of the crucial profitable parts of the development, which will cost millions to build. Extell representatives said there has been strong interest from carmakers to lease the showcase space.

The company has not received commitments from retail tenants, but said that it is seeking local businesses that provide basic amenities to residents, such as clothing and food stores. Extell originally had interest from Costco to run a big box retail store, but locals were against a large store and the idea was scrapped. 

Residents also oppose the 1,800 parking spaces that are planned as part of the development and want an outdoor play area for students of the school that will be built as part of the project; currently there are two rooftop terraces planned for play areas.

In addition to financial concerns, Extell needs a number of modifications to the 1992 agreement for the development, which was originally conceived as a site for a large office tower with television studios. These include transit permits for the garage space and zoning changes for the automobile showroom.

Securing these approvals will likely be a process of give and take, and Extell might have to give in to some local demands. Mel Wymore, chair of Community Board 7, which covers the Upper West Side, is pushing for 20 percent affordable housing throughout the project, an increase of the 12 percent in the 1992 agreement. Currently Extell is obliged to have approximately 264 of the planned 2,200 total apartment units as affordable units, but is allowed to convert them to market rate after 20 years.

Community Board 7 also wants a school large enough to accommodate six classes of kindergarten through 8th grade students, in order to ease the overcrowded local school district. The board also wants a sustainable, environmentally-friendly project.

"These same issues will be concerns for us," said Jesse Bodine, director of constituent services for Councilwoman Gale Brewer, who will vote with the City Council in the fall and ultimately approve, reject or modify the project.

Community Board 7 will issue an advisory recommendation for the project by the first week of August. Manhattan Borough President Scott Stringer's office will also issue an opinion before the City Council votes.

The board will hold at least two more meetings during the next four weeks before issuing an opinion.

Its name: Carnegie 57.

ebrown@observer.com

The LPC on Tuesday voted 6-3 to remove the building, 225 West 57th Street, from consideration as a landmark, just four months after the same board voted to consider it.

Typically, the LPC agrees to consider only those properties it expects to approve as landmarks, but, as became clear in recent months, this property was different. An eight-story office building that was built in conjunction with another B.F. Goodrich building at 1780 Broadway (that one was approved Tuesday as a landmark), Extell was vigorously opposed to its designation, as the firm said it would ruin its prime development site on the block. (Claiming no knowledge of the landmarks issue, Extell assembled at considerable cost: the mortgage on the site alone is for $265 million.)

The firm, which has worked with Landmarks in the past, enlisted unions and industry groups to help it fight the action, and it successfully urged four key Council members, including Council Speaker Christine Quinn, to send a letter tacitly urging the LPC to act the way it did Tuesday.

In his remarks on the vote at the commission's meeting, LPC chairman Robert Tierney suggested the Council resistance was a major factor.

"I do not believe this building rises to the level of New York City individual landmark, particularly when compared to the exceptional buildings that already have been designated on Automobile Row," he said. "In light of opposition to this designation from the City Council, and certain members of the City Council, the likelihood that that body will overturn any designation of 225 West 57th, I believe that in this case ... the Commission should make its priority the designation of the building for which there is a consensus of support."

THE SAGA SURROUNDING THIS site is a bit of a curious one. It's rare for the LPC to begin the landmarking process on a building--an act known as calendaring--over the owner's objections. But here, seemingly emboldened, the LPC started to landmark the building of one of the city's largest, and rather well connected, developers, against its will.

The bold action came not over a particularly notable or high-profile building. The building at 225 West 57th Street is arguably unremarkable at first glance--certainly no stunning sight or great architectural feat. Nor was it ever a priority for preservation groups until Extell began to fight back against the designation, though some had been recommending its designation in recent years.  (The New York Times wrote an article on the buildings in late December, a bit before the LPC informed Extell it was considering landmarking the buildings. The paper has run a number of disparaging articles and editorials criticizing the LPC for what it labels an arbitrary and often developer-friendly approach).

But once the LPC preliminarily acknowledged that the 57th Street building, along with the Broadway building, were worthy of landmark designation, preservation groups contend, it would be improper for the agency to back down in the face of political pressure.

Needless to say, the preservationists were not pleased by the LPC's action on Tuesday.

"I am appalled," Simeon Bankoff, executive director of the Historic Districts Council, said after the vote. "I don't think that the Landmarks Commission should be considering such political features in the landmarking. This opens the door to being an owner-consent situation. The law as it stands has nothing to do with owner consent."

Extell, however, seemed relieved, and Raizy Haas, a senior vice president at the company, started to talk about the next steps. "We're talking to a couple of architects," she said. "We were very focused on this phase of the project, so now we're going to start planning the real building. Obviously, the design will be slightly modified due to the preservation of 1780."

And what of the LPC action?

"I think this is a good compromise that serves the purpose," she said.

The compromise, of course, spares the City Council members on the issue, leaving the LPC to take all the heat from the preservationists. The Council has the right to overturn a landmarking decision by the LPC, though such an action is very rare and would subject the members there--who, unlike the LPC members, are elected--to criticism of their own.

-With reporting by Matt Frassica

“Even someone with a good job today is afraid to spend, because he is afraid he will not have a job a few months down the road.”

Mr. Barnett, the prolific president of development concern Extell, then offered a policy prescription for encouraging business amid what was just starting to be called the Great Recession. It was a business philosophy that sought to encourage activity rather than mere survival: a three-year extension on all current mortgages; federal subsidies for 30-year mortgages; a law forbidding firms with more than 500 employees from lay-offs they could show an urgent need. “This is just not the time to do it. A) Have a heart, b) be a patriot," he later said. "The wave of firings breeds more firings, and more firings, and we could spiral into an extremely serious depression."

“It really was just one man’s opinion, so to speak,” Mr. Barnett told The Observer on Monday evening, by cell phone. “We’re seeing it from the real estate side, the banking side, from the housing side. So we had a decent perspective from which to form an opinion.

“I’ve gotten calls on it, but I don’t see anyone doing it,” continued Mr. Barnett, before launching into a critique of the current federal stimulus plan.  

The man is himself something of a stimulus plan for New York City’s catatonic development market.

“He’s probably the biggest developer right now in New York,” said Eric Michael Anton, an investment sales broker at Eastern Consolidated, who has worked with Mr. Barnett in the past.

Or, as Deputy Mayor Robert Lieber put it, “You can see Gary’s fingerprints all over the city in what has been done and will be done.”

Much has been done: The 37-story Ariel East and 31-story Ariel West condos at 100th Street and Broadway, which prompted the creation of groups like Stop Extell and Westsiders for Responsible Development, and spurred the city to downzone a chunk of the Upper West Side; the Ariels are nearly all sold and carry no debt, Mr. Barnett said. There are also the Lucida condos on East 85th Street; the sold-out Orion at 350 West 42nd Street; and the Avery at 100 Riverside Boulevard, among others.

What will be done: Quite a lot, something all the more striking given the anemic real estate financing market; the skittishness of Mr. Barnett’s peers; and the nature of some of Extell’s developments in the pipeline – office towers, hotels – which clearly fall outside Mr. Barnett’s residential comfort zone.

These include industry-specific giants like the $750 million, 750,000-square-foot Gem Tower at 50 West 47th Street; and the 1.5 million-square-foot World Product Centre at 555 West 33rd Street, the site of the old Copacabana.

Also, in the four months leading up to the city’s new building code, instituted on July 1, Mr. Barnett filed plans for no fewer than six projects totaling 1.45 million square feet, including an 830,000-square-foot, Costas Kondylis-designed tower for 157 West 57th Street; a 13-story, 54-unit residential building at 147 West 21st Street; an 18-story, 58-unit building at 225 West 85th Street; a 29-story hotel at 112 West 25th Street, the site of the Antiques Garage flea market; a 24-story, 175-unit hotel at 30 West 46th Street; and a 35-story hotel at 68 Charlton Street, between Hudson and Varick.

“We’re not going ahead with every single project yet,” Mr. Barnett said Monday. “But we think hotels are going to come back first when the cycle starts again, because New York is still New York.”

UNLIKE MANY OF HIS big real estate peers, Mr. Barnett does not come from a real estate background. Born in New York City, he began his career in Antwerp trading diamonds, according to a report filed by New York’s Office of the Inspector General in 2007, related to Mr. Barnett’s bid to operate the racetracks at Aqueduct, Belmont and Saratoga.

Given the diamond industry’s reputation for all manner of savagery in Africa, one has to wonder how Mr. Barnett, an apparently civic-minded guy, overcame his moral qualms.

“If you look back at that time, Africa wasn’t going through the same turmoil; it was much more stable, much less bloodshed,” Mr. Barnett said. “Some of the diamonds in some of these countries, like Zaire and Congo and Liberia and Sierra Leone, probably could be called blood diamonds. But anything we had to do with it then was not involved at all in that kind of stuff. ... If you were giving a diamond to someone you love, you would want to make sure it was not the cause of bloodshed or someone’s harm.”

In the early 1990s, Mr. Barnett began to make U.S. real estate purchases, says the report, though he didn’t move full-time to the country until around 1995, a year after he and partners purchased the Belnord apartment house.

In 1995, Extell was first incorporated as Diamond Heritage Properties. In 1998, it changed its name to Intell Management and Investment Company. After Intel, the tech company, sued him, Mr. Barnett renamed his firm Extell. The report defined Mr. Barnett as the “sole owner” of a firm that in 1998, “sold properties totaling approximately 3.5 million square feet...”—less than a decade after he began his U.S. real estate spree.

This pace has led many to label Mr. Barnett’s American—and, more specifically, New York—rise as meteoric, but he has an exceedingly methodical approach to the business.

“He does his homework, and he does his homework well,” said Marc Shaw, a former deputy mayor who for the Bloomberg administration who worked for Mr. Barnett for nearly three years. “The fact that some of the best parcels he has are on 57th Street in Manhattan, that allow him to build as-of-right buildings, with views of Central Park… that took a lot of foresight.”

Mr. Barnett puts it another way. “I find that when we make mistakes, it was when we weren’t methodical enough.”

METHOD EXTENDS TO THE developer’s private life.

Before speaking with The Observer, his assistant called to warn that Mr. Barnett would not be answering personal questions. Indeed, he declined to confirm his age (early 50s supposedly); his borough of residence (reportedly Queens); or the size of his family (quite large, it’s understood).

“This is not about me,” Mr. Barnett said later. “Some people have big egos and it’s all about them; and they like that. I don’t care about that. That’s not what I’m about. ...Private is private.”

At least one facet of his life is public knowledge, however. Extell seems to virtually shut down during every Jewish holiday, no matter how obscure. “He’s obviously a very serious, observant Jew who takes that part of his life enormously seriously,” Mr. Shaw said. “That’s where he also gets all of his satisfaction.

“His job as a real estate developer is just to make money,” he added. “It’s not to play in the ego world of New York real estate.”

Mr. Barnett later agreed—to an extent.

“It’s not only about making money,” Mr. Barnett said. “Certainly, that’s what real estate people are interested in, but I do get a tremendous amount of joy and satisfaction from putting together a project, all the different pieces.” He compared it to a puzzle.

And the solver, at times, has exhibited chutzpah. He once financed a small landowner’s lawsuit against the state over its use of eminent domain to build The New York Times building. And he bid against Bruce Ratner for the rights to Atlantic Yards, even though it was accepted wisdom that Mr. Ratner was going to win.  

Now, through his frenetic investing amid the Great Recession, Mr. Barnett is taking one big gamble—perhaps of a professional lifetime —on the resurgence of New York real estate, particularly commercial.

He does not yet have construction financing for either the Gem Tower or the World Product Centre, which he is developing with Israel Green and the Greater New York Hospital Association. He and his partners are reportedly investing as much as $175 million in the Gem Tower, including the building of its three basement floors, which began last year and is to be completed by the end of 2009. Once they sell most of the industrial condos, Mr. Barnett’s staff has said it should be able to attain a construction loan.

“The one thing that Gary is doing that is somewhat unique as compared to others is that he is beginning construction in this market when there is no real construction financing available,” Mr. Lieber, the deputy mayor, said.

Mr. Barnett will not try to get a construction loan for the World Product Centre until about one-third of the exhibition space (which comprises about half of the building) is pre-sold. “We think we’re right on target,” said Michael Resnick, executive vice president of the World Product Centre. “We’ve announced the 11 [licensees], and we plan to announce more in the near future.” Mr. Resnick expects excavation to begin in November, and construction to be completed in 2013.

DESPITE THE ENORMOUS RISKS involved, there’s some question whether such towers are needed for the respective industries, diamond and medical. “In today’s atmosphere, I think it would be pretty difficult to bring in new people from Europe,” said Kenneth Kahn, a Diamond District landlord who has opposed the Gem Tower. “People are not moving around. A lot of people are concerned. The whole industry is on edge.”

So, too, is the healthcare industry, which is awaiting the fallout of President Obama’s health care plan, and which, according to some industry experts, isn’t in any particular need of a 1.5 million-square-foot, New York-based merchandise-and-education mart.

“My impression of the way that people buy products in this field is that they learn about them through colleagues or at meetings where people who develop products present or go to places and see them work,” said Jeff Goldsmith, president of Health Futures Inc. and a public health science faculty member at the University of Virginia, who declared himself “a little baffled” by the project. “The crucial question is do these products work? You’re not going to find that out in a building.”

James Unland, president of the Chicago-based Health Capital Group, called the World Product Centre “a long play, but a very interesting play.”

“In this day and age, though, getting people to physically go somewhere is a lot more difficult than it used to be,” he said.

Still, Mr. Barnett’s recent moves have fans.

“Gary is one of the sharpest guys out there and he sees trends often before they happen,” said Robert Knakal, chairman of investment sales firm Massey Knakal, who sometimes works with Mr. Barnett. “You look back to when he became transparently active in the real estate business--he bought the Belnord at a time when people weren’t really looking for assets like that and it had significant issues to overcome and he took a big chance, but he saw the value in that property and that was probably one of the best acquisitions in the last 40 years.”

“He’s a bit of a visionary,” Mr. Lieber said. “He thinks outside of the box. I think he also recognizes the cycles of the market. The time to be building is when no one else is. Gary is not bound by convention.”

The elusive Mr. Barnett, age unknown and future plans deliberately vague, laughed off any such notions of superior intellect. “If I understand the market cycles, I wouldn’t have as much property as I have,” he said. “I would have sold it off.”

drubinstein@observer.com