hollywood billionaire

Chapter 526 Come prepared
Gary Barnett and his Extell development company have been the most prominent real estate developers in the New York metropolitan area over the past five years, bar none.

The reason is none other than the One57 building they are in, and the billionaire street that has sprung up around it.

The first supertall residential building in New York City to exceed 1000 feet.

When it was completed in 2014, it was the fourth tallest building in New York City, after One World Trade Center, the Empire State Building, and the Chrysler Building.

Central Park, the Upper East Side, the Upper West Side, Times Square, and even Wall Street—living here offers panoramic views of the world's capital.

The cheapest low-floor unit was listed for resale at $735 million, the most expensive at $1.15 million, and the highest sale price was $1 million.

Bill Ackman, Michael Dell, Lawrence Stroll, Mark Brode, Cao Qifeng, Cai Mingxing... Every wealthy person living here is truly 0.0001% of human society.

The street is named after the billionaires.

These concepts are just so sexy.

It is precisely because of these concepts that One57 has redefined the standard of modern luxury living. It has had a profound impact not only on the architecture itself, but also on the market, design, and socio-cultural levels. It is not just an apartment building, but a product of the times that accurately captures and defines the global standard of top luxury residences in the second decade of the 21st century, a "final residence" voted for by the ultimate super-rich with their hard-earned money.

Never before in human history has such a level of wealth accumulation occurred.

Even Monaco, a city overflowing with gold and teeming with millionaires, pales in comparison.

After all, even Monaco, though small, has 510 acres. But Gary Barnett used less than 20 acres to house a fortune far exceeding hundreds of billions of dollars.

As a result, he appeared in The New York Times, Business Insider, and The Economist more often than any other real estate developer in Manhattan, the greater New York area, or even the United States. Whenever the media discussed the U.S. real estate market and luxury apartments, his face and magnificent photos of One57 were always on the front page.

But does this mean he is the richest and most powerful person in the industry?

No.

Not even close.

In fact, prior to the completion of One57, Gary Barnett had only completed five large-scale real estate projects.

First, in 1994, while working at Kevin P. Maloney’s Real Estate Markets Group, he served as the lead negotiator for the acquisition of the historic Bernard Apartments on West 86th Street in the Upper West Side for $1800 million.

Secondly, in 1998, as an engineering contractor, he assisted in the construction of the W Hotel in Times Square.

The third is a parking lot at 620 Eighth Avenue… yes, you read that right, a parking lot. It's considered a major project because another real estate developer, Bruce Ratner, wanted to buy the land to build an office building. Gary Barnett was unwilling to sell, wanting to hold onto the land until he found investors and built his own building. However, after a lengthy lawsuit, Gary Barnett lost and could only watch helplessly as the New York State government forcibly repurchased the land, which was later transformed into the New York Times Building four years later.

The fourth is The Orion, a 58-story luxury apartment building located in Manhattan's Hell's Kitchen district. However, Extell was only the contractor; the true owner was the Carlyle Group, David Rubenstein's Carlyle Group, which provided all the funding.

The fifth is the International Jewelry Building, located at 50 West 47th Street. It is a 36-story building with only 103 residential units.

Of the five major projects, one was acquired on behalf of someone else, two were built by someone else as a contractor, one was driven out by the local government and business tycoons, and only one truly belonged to him.

Of course, in addition to large projects, Extell also has some small and medium-sized assets, such as 330 East 72nd Street, 212 East 47th Street, 31 West 11th Street, 995 Fifth Avenue, and Ariel East and Ariel West on the Upper West Side... But these assets are not enough to make Gary Barnett a true real estate giant.

What are the real real estate giants like?
Stephen Ross, chairman of Riesling, had a net worth of $120 billion in 2016. The company's real estate holdings are valued at over $600 billion. It is the largest private supplier of affordable housing in the United States and a leader in the Hudson Yards redevelopment project in New York City.

Richard LeFrak, chairman and CEO of the privately held family business LeFrak, had a net worth of $59 billion in 2016. Together with his father, he built a 600-acre satellite city in Newport, New Jersey, from scratch, overlooking Manhattan across the river. His family business is one of the largest landlords in the tri-state New York area.

Jerry Speyer, one of the two co-founders of high-end real estate developer Tischman Speyer, had a net worth of $40 billion in 2016. His company owns numerous New York landmarks, including Rockefeller Center, Chrysler Building, Yankee Stadium, and Metropolitan Life Building. Even the UTA Plaza, currently leased by UTA, is a wholly-owned office park under their umbrella.

Of course, above Jerry, there is another prominent figure: DT, who was just elected the 45th President of the United States. With a net worth of $45 billion in 2016, he proudly stands third on the list of New York's richest real estate tycoons.

No matter how many casinos he's ruined, as long as 1 West Central Park is still there, as long as 725 Fifth Avenue isn't closed, and as long as 327 East 47th Street remains a top-tier luxury residence in New York City, then this Republican star politician who's about to move into the White House will forever be an unyielding banner of wealth in Manhattan.

Compared to them, Gary Barnett, whose company's total assets are less than two billion dollars and whose personal wealth barely exceeds one hundred million dollars, still has a very long way to go.

But Gary Barnett wasn't one to "walk the walk." He knew perfectly well that on this island, honesty wouldn't get you anywhere, nor would hard work. Being down-to-earth would only lead to poverty, and staying true to yourself was just empty platitudes printed on food stamps. If you wanted to make a name for yourself in this concrete jungle, there was only one way:
Lie, beg, borrow and steal.

And he did all these in the said order.

Lie, he lied. He changed his name from "Gerson-Swatitzki," which had a strong Eastern European Jewish flavor and was hard to remember and trust, to "Gary Barnett," which sounded more like an Anglo-Saxon white elite.

Beg and borrow. Almost all of Gary Barnett's development funds were pieced together from various financial institutions through various means.

For example, in 2007, Gary Barnett received $650 million in funding from Mubadala's subsidiary, Abar Investments, while Extell itself only contributed $50 million. In October 2011, Extell secured a $700 million project construction loan from a consortium led by Bank of America, with participants including Santander Bank, Abu Dhabi International Bank, and Capital One.

$5000 million leveraged a total of $14 billion – this is the Jewish blood flowing through Gary Barnett's veins, with its distinct speculative characteristics.

Gary knew very well that as the son of a powerless rabbi from a middle-class family in the Lower East Side, he could only rely on his remaining racial advantage to maximize his leverage in order to stand out in the increasingly fierce real estate competition of the 2010s and become a winner in the new era.

However, this high-leverage strategy can only be sustained when the market is booming. One57's success, the rapid availability of 14 billion yuan in funding, and its ability to successfully repay the $3.75 million loan from the consortium before the opening of the Park Hyatt Hotel, the building's largest owner, were all due to its strategic positioning at the right time.

The myth of earning $345 million by reselling a five-month holding unit was a wealth myth Extell painted for ultra-high-net-worth buyers around the world, but this myth lasted less than a year. On December 23, 2015, another Jewish developer, Harry B. McCloskey, successfully completed 432 Park Avenue. At 1397 feet tall, it exceeded One57 by nearly 40%, and the average total price per unit was lower than One57. The influx of 125 units brought One57 sales to a near standstill, making it impossible for Extell to continue providing a steady positive cash flow.

In other words, the remaining $3.25 million loan from the consortium is at risk of default at any time.

Even more devastatingly, just as the supply and demand relationship of the luxury apartments on Billionaires Street was undergoing a fundamental shift from a seller's market to a buyer's market, Gary Barnett's larger and more ambitious real estate project was under construction at a rapid pace.

This is the Central Park Tower that Han Yi mentioned.

In 2005, when One57 was still in its infancy, the incredibly aggressive Gary Barnett had already begun accumulating land for the Central Park Tower project. Extell spent $6750 million to buy 221 West 57th Street and its adjacent lots. In early 2006, Extell purchased the rights to 136000 square feet of space from the Art Students League of New York for $2310 million.

接下来的两年里，加里从汇丰银行借来2.5亿美元的贷款，购买了更多空间权，包括2006年1月购买的位于西57街205号奥斯本公寓上空100000平方英尺的空间权；2006年11月圣托马斯唱诗班学校上空12000平方英尺的空间权；以及2007年1月从西58街200号的13层公寓楼处获得的14290平方英尺的空间权。

In addition, in two separate acquisitions in 2006, Extell acquired development rights to 156000 square feet by purchasing 1780 Broadway and two adjacent properties, and to 20000 square feet by purchasing a lot on 58th Street. Combined, the building's gross floor area reached 56.3 square feet.

In July 2013, Extell paid another $25 million to acquire the site at 232 West 58th Street, adding 20750 square feet of development rights, thus completing the preliminary preparations for construction on the site.

Although the purchase of the land and air rights was nearing completion, and a magnificent skyscraper could rise here without legal hindrance, Gary Barnett was embroiled in a lengthy administrative lawsuit for the next five years.

First, the New York City Landmarks Preservation Commission attempted to prevent Extell from demolishing the existing buildings on the site. Later, several organizations, including the Manhattan Community Board and the New York City Arts Association, filed a joint lawsuit against Extell for installing a cantilever to enhance the view of the Central Park Tower. After countless back-and-forths, Gary Barnett finally settled things with these troublesome third parties in March 2016.

After such a prolonged tug-of-war, the project's construction funds naturally began to become increasingly strained. To raise more money, Gary Barnett started to torment his already receding hairline again—in mid-2012, Extell reached an agreement with the American retail department store company Nordstrom, under which the latter would open a flagship store with a total area of ​​over 30 square feet. In exchange, Nordstrom would directly purchase the commercial space on the seventh floor of the building. This transaction was expected to bring Extell $4 million in cash.

Around the same time the agreement was signed, Extell secured a $3 million land-backed loan from Blackstone Group. Gary Barnett used this loan to repay a $2.5 million debt due at HSBC. Then, leveraging his Jewish identity, Barnett raised another $3 million by issuing bonds on the Tel Aviv Stock Exchange.

Nordstrom successfully made its initial payment of $1.025 million in August 2013. Combined with the remaining $350 million from loans and financing, Central Park Tower had $4.525 million in cash at its disposal. However, this cash reserve was still insufficient for such a massive project. More importantly, Blackstone's loan was due before the apartments themselves could be sold, and buyers on the Tel Aviv Stock Exchange were looking to receive their annual returns.

Therefore, Gary Barney had no other choice but to continue borrowing money.

His next fundraising target is 11 billion. Gary originally pinned his hopes on the Tel Aviv Stock Exchange, but the sluggish luxury housing market has made Israeli investors increasingly stingy.

The interest rates on the last batch of bonds are still rising, and you're already borrowing a second wave of money? What are you thinking?

Desperate, Extell announced it would seek $1.9 million in investment from overseas investors through its EB-5 visa program. These "overseas investors" primarily refer to Chinese citizens seeking green cards through investment immigration.

In 2016, the Chinese had no shortage of money. Soon, 380 investors each contributed $50, which not only granted them permanent residency in the United States but also helped Extell fill its funding gap. Both parties were happy.

In addition, Gary Barnett rushed to the Far East to negotiate, leveraging the high profile of One57 to bring in Shanghai Municipal Investment Group as an equity investor, with a total investment of $3 million.

The $4.9 million from the great Eastern power finally allowed Gary, who had been working tirelessly, to catch his breath... no, to be precise, only half a breath.

Back in New York, he used the $490 million injection as leverage to reach a new agreement with Blackstone Group—Extell only needed to repay $50 million of the $300 million land mortgage loan that was due in August 2016, and the remaining $250 million could be extended to December 9 of the same year at the original interest rate of 8%.

“I… haha, I wouldn’t describe myself as short of money, Mr. Han.”

Han Yi's overly direct question made Gary Barnett somewhat embarrassed. He pushed up his glasses and chuckled awkwardly.

"So how would you describe it, Mr. Barnett?" Han Yi had no intention of simply glossing over the matter.

“I would describe it as a liquidity shortage, Mr. Han.”

"Liquidity shortage." Han Yi nodded thoughtfully. "I understand... Is there a solution?"

"Yes, we are in discussions with a new consortium regarding a financing deal totaling $2.35 million."

"A new conglomerate."

"That's right, it was jointly launched by Fortress Investment Group, Bopster Group and JPMorgan Chase."

"To repay the $2.35 million that's due tomorrow with Blackstone, right?"

"It's not due tomorrow."

"Not tomorrow?" Han Yi pressed, "When is it?"

“Mr…” Gary Barnett opened and closed his mouth, and after a long while, he finally decided to continue the conversation in a frank manner, “Blackstone Group has agreed to extend this loan.”

"That's great for you."

"One week."

“Wow, then… it’s not so great.” Han Yi touched his cheek and sighed. “So what JPMorgan Chase is offering you is actually a bridge loan, not financing.”

"Why are you so sure this is a bridge loan?" Gary forced a smile. "It's also possible that we've been negotiating with the new consortium for months and are just waiting for the signing."

“Because if it were about financing, you wouldn’t have answered my question like that.” Han Yi’s index finger twitched rapidly between the two of them. “To put it another way, even if you’ve been in contact for several months, under the current circumstances, they would only offer you a bridge loan. The Extell bond rate on the Tel Aviv Stock Exchange has risen from 6% to 16%, effectively turning it into a junk bond. It’s said that most Israeli investors are worried that you will abandon the Central Park Tower project altogether, leaving it an unfinished project. And Blackstone is only willing to give you a one-week extension; after that, their loan rate will rise from 8% to 14%.”

Han Yi originally lacked the time and energy to learn about this information, and also lacked the channels to do so.

Fortunately, he had Antoine Gashe, a very dedicated investment manager who diligently followed up on work even during his vacation.

"Mr. Han, it seems you have prepared very well for this dinner."

Gary pursed his lips, and his tone gradually returned to his usual calm and indifferent state, which was initially overly deliberate and enthusiastic.

In the real estate development field, Gary Barnett has absolute confidence in himself, sometimes to the point of being arrogant. He believes that no one can surpass him in building a commercial model for luxury apartments, and that he personally reshaped the Manhattan skyline. So even when sitting next to a potential financier he was preparing to "beg and borrow," Gary almost lost his temper.

Anyone would lose face if their past was so ruthlessly exposed by a young man who doesn't even look like he graduated from college.

“I’m always well-prepared, no matter where I go.” Han Yi spread his hands. “Isn’t that a good thing? Because it can better facilitate our conversations about loans… or investments.”

"So you already know?" Gary looked slightly taken aback. "The reason I wanted to meet with you."

"To be honest, it's not hard to guess."

"Right."

Gary Barnett paused for a moment, then relaxed his furrowed brow, laughed twice, and scooped the last bit of soup from his plate into his mouth.

“I must admit that before tonight, I underestimated you in many, many ways, Mr. Han.”

"Do you think I'm just a rich kid in America who spends money like water and wants to have fun in the fields that interest him?"

"I don't think I misread this part."

“You’re right, you’re right!” Han Yi and Gary looked at each other, burst into laughter, and almost simultaneously raised their glasses to clink against each other. “I must admit, your portrait of me in this regard is perfect. Yes, I’m a rich kid. Yes, I do spend money like water in America. Yes, I really want to have fun in areas that interest me… but not the kind of blind, foolish, reckless fun. Because that’s not real happiness, just pure excitement.”

“What truly brings me joy is understanding the chessboard, calculating every move, and then making the right choice at the right time, with the right people. Do you understand what I mean, Mr. Barnett?”

“I understand what you mean, Mr. Han.”

As the waiter removed the tray, Gary Barnett adjusted the napkin on his lap and nodded solemnly in response.

“That’s great. Once you understand that, you’ll understand why I’ve been carefully reading every news article about you and Extell over the past five years.”

I did study it, but it was Antoine Gachet who studied it.

After studying it, I wrote a brief report for him.

“If you understand this, you’ll understand why I asked the question so thoroughly, to the point of being ruthless.”

"Because this career has piqued your interest."

“Absolutely right.” Han Yi nodded heavily. “So I hope you will promise me one thing: from now on, you must answer every single one of my questions. Don’t resist passively; be honest and truthful. Only in this way can I understand the situation, and only in this way can I ultimately decide whether or not to participate.”

“I promise you.” Gary looked up at the ceiling, let out a long sigh of relief, “Fire.”

"Alright."

Han Yi took a sip of the Yi Yun drink that was placed to the side, pondered for a moment, and then slowly spoke.

“Tell me…”

"How bad is it?"

(End of this chapter)