Gary Barnett’s high-stakes game of real estate Tetris
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In March, Extell Development chief Gary Barnett went to Israel on a firefighting mission. On the Tel Aviv Stock Exchange, yields on Extell’s bonds had soared to 16 percent, effectively turning them into junk bonds, and Barnett’s Israeli investors were spooked by Manhattan’s struggling high-end condo market.
Of particular concern to Extell’s backers were two of the company’s most ambitious new developments, One Manhattan Square (1MS) on the Lower East Side and Central Park Tower (CPT) on Billionaires’ Row. Barnett was seeking more than $2 billion in debt and equity for the two projects — a lofty goal with condo prices slipping and banks wary of financing new luxury developments. And even if he could find the money to build his glitzy towers, where would the buyers come from?
Barnett needed to calm investors’ nerves when he landed in Tel Aviv. But according to multiple sources, he bungled the job with his usual blunt approach.
“He just put more fuel to the fire,” said Shahar Keinan of Brosh Capital, an Israeli hedge fund that deals in distressed corporate bonds and jumped in to buy some of Extell’s. “He didn’t say, ‘Everything is going to be okay, don’t worry.’ He said, ‘There are risks, I can’t guarantee anything.”