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By: Ellen Cans
The Flatiron Building, which sold at auction to simplify its complicated ownership structure and help resolve disputes, is back in the news.
As reported by Crain’s NY, Jeff Gural’s GFP Real Estate has sued Abraham Trust for allegedly failing to make the initial payment after winning the Flatiron Building at Broadway and East 23rd Street, in an auction. At a March 22 auction in Lower Manhattan, Abraham Trust, a small Virginia company who did not previously own a stake in the building, had won the auction, bidding $190 million, beating out another close offer of $189.5 million from the GFP-aligned group.
The complaint says that winner, led by low-profile investor Jacob Garlick, never followed up with the necessary $19 million deposit within two days as per the agreement, thereby making the deal void. The plaintiffs in the case are seeking the promised $19 million down payment, plus damages and fees for the botched purchase. “Defendants’ failure to pay the down payment and move forward with the purchase of the Flatiron Building was contrary to the multiple representations they made by participating in the auction,” the suit says, adding that Garlick’s maneuvers were a “fraudulent bid.”
The plaintiffs allege in court documents that Abraham Trust and its managing partner had led them on for weeks after the auction, insisting that they were serious players and had access to major capital with which the payment would be made. The suit filed on Friday in Manhattan’s Supreme Court, alleges that Abraham Trust and its managing partner perpetuated a “fraud” possibly just to gain “15 minutes of fame,” as per the complaint.
Earlier this year, the structure was put up for sale by a Supreme court judge because for years, the GFP-aligned group of owners have been at odds with another investor Nathan Silverstein, over how to renovate the empty office building. As per Crain’s, the terracotta Flatiron building, completed in 1902 and located across from Madison Square Park, is collectively owned by five parties– four of them, including GFP, control a 75% stake, while the other 25% is owned by Silverstein, who inherited the stake which his family had acquired around World War II.
A second auction has been scheduled for May 23rd, at New York County Courthouse for the court-appointed referee in the case to resell the wedge-shaped tower. The lawsuit will not affect the upcoming auction, said the referee, attorney Peter Axelrod. The next round, however, will have stricter rules. Bidders will need to bring in a check for $100,000 made out to the referee, and will be required to provide documents showing they have the money to pay at closing.
As of Monday, Abraham Trust and Mr. Garlick have not yet filed a legal response to the allegations. The defendants did not immediately respond to Crain’s request for comment.
