Gary Barnett is out to change New York's Diamond District, but it's not clear the Diamond District wants to change.
The former diamond dealer and now chief executive officer of Extell Development, a national real estate firm, has gained attention in recent years by challenging Forest City Ratner's plans for an arena and mixed-use development in the Atlantic Yards in Brooklyn.
Now Barnett is at the center of a debate at the 47th Street Diamond District, where almost half the diamonds sold in the world are said to be traded. Barnett has bought several buildings on the south side of 47th Street and the north side of 46th Street and is demolishing them to build the New York Diamond Tower, a skyscraper with 725,000 square feet devoted to an upscale, modern, global diamond exchange. Details about the project were not available, and Barnett declined to comment.
With Barnett's proposal tower, the Diamond District is at a possible crossroads. Although New York is considered the jewelry capital of the world, the district has been dominated primarily by the more than two thousand mom-and-pop businesses crammed onto the one-block stretch of 47th Street between Fifth and Sixth Avenues.
The street announces itself with pairs of stanchions capped by diamond-shaped lights at either end. Its tradition-bound ways, honed for generations, are often cloaked in secrecy and resistant to change. Most transactions are written on paper receipts, and many of the buildings are dilapidated.
The district, which attracts consumers looking for bargains as well as gem traders, has had a poor public image for years. Peddlers offer to buy and sell gold on the street, and there is a proliferation of knockoffs of designer jewelry like David Yurman's and Judith Ripka's. In May, federal marshals confiscated more than 100 allegedly counterfeit Judith Ripka jewelry pieces from four companies during a raid.
In fact, some jewelers set up shop away from 47th Street, on West 46th or 48th Streets, to disassociate their companies from the block. The district is also criticized for its lack of innovation and archaic communications.
Still, 47th Street remains the historic home for many third- and fourth-generation businesses.
"The family-owned businesses are the backbone of the street," said Doreen Greenidge, executive director of the 47th Street Business Improvement District. "The blessing of the street is the generations of labor and the tradition. It's the people on the street that are important, not the bricks and mortar."The culture, along with the bricks and mortar, is likely to change with a new diamond exchange, much to the chagrin — and confusion — of some of the block's longtime tenants.
"We aren't being informed," said one second-generation jeweler, who spoke on condition of anonymity. Although a new, modern structure would be good for the dingy street, he said he feared that "if there's a big building, then there won't be any foot traffic."
Many vendors in the large jewelry marts, which sell items ranging from $75 gold earrings to mega-carat $100,000 diamond collars, were not aware of Barnett's plan for a state-of-the-art, high-security jewelry exchange.
Lenny Krol, president and co-owner of K.C. Designs, a 17-year-old jewelry firm on 46th Street, said he learned of the development in June in a poker game with Barnett during the jewelry trade shows in Las Vegas.
"I always found that a 47th Street address had a bad cachet," Kroll said. "The new building is supposedly modern and technologically advanced. I think it's a good thing."
But, like some, Krol was concerned about the street losing its identity. "The block does have a lot of character," he said, "but our industry is slow to change. We were the last to have computers, so anything that can modernize the street is a good thing."
Daniel Koren, a third-generation jeweler and founder of diamond firm Daniel K, got his start on 47th Street along with Jacob Arabov, the so-called King of Bling who is also known as Jacob the Jeweler. Although the building sounds appealing to him (Koren knows some of the developers), this year he moved into a renovated headquarters on Madison Avenue at 55th Street.
"The world is evolving, the times are changing," Koren said. "Diamond companies have to become more advanced, and from what I understand, the building will be the next generation of diamond buildings. Most of the buildings now [on 47th Street] don't have the best amenities and are 10 floors, at the most. The buildings weren't originally built for so much traffic. We're now advancing and going to the next generation."Some people, however, are unhappy. Jeffrey Levin, chairman of the 47th Street Business Improvement District and owner of Firenze Jewels, told The New York Times this year that the tower would create a ghost town in the district. Greenidge maintains that the BID is "not enemies at all with'' Barnett.
From a real estate investment perspective, the Diamond Tower makes sense. Brokers from Robert K. Futterman & Associates, Cushman & Wakefield and Newmark Knight Frank all laud Barnett as one of the city's most innovative and smart developers and note the Diamond District's prime location, just blocks from Rockefeller Center and Times Square.
"If he's successful, a new diamond building will open the Diamond District up to the world," said Gene Spiegelman, executive director of Cushman & Wakefield. "It will reposition 47th Street in a physical way and open it up to a new customer that might not otherwise venture there. It's a material gain to everyone."
Everyone, perhaps, but the small family firms that might be priced out of the real estate they've been operating in for years. As small vendors, most are tenants, not owners.
"Those diamond vendors don't pay big rents," said Andrew Pittel, president and chief executive officer of Andrew A. Pittel & Co., a New York City real estate brokerage firm."The Diamond District has never been pretty to look at, but you have to assume that if you put in a gorgeous new development that the rents are going to have to increase. Not everybody is going to be able to afford it."
Benny Shabtai, the president and ceo of fine jewelry firm DiModolo and watch brand Raymond Weil who has worked in the industry for more than 30 years, said Barnett's plan could revolutionize the industry in New York.
"I'm very pleased that someone took the initiative to lift the diamond and jewelry industry," said Shabtai. "It will contribute to the industry's image. More power to the industry."
The full details of Barnett's plan for the Diamond Tower will be unveiled at a Nov. 9 hearing of the NYC Economic Development Corp., which will review the plans and determine if the developer will receive any tax abatements for the property.
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