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.”