Flatiron Building Owners Sue Auction Winner Jacob Garlick Over $19M Deposit He Never Paid
The current owners of the Flatiron Building have filed a lawsuit against the Virginia-based investor who outbid them at auction in March in the latest twist of the ownership saga of one of New York City’s best-known buildings.
The Sorgente Group and GFP Real Estate, whose venture owns a majority of the landmark tower, are suing Abraham Trust and its managing partner, Jacob Garlick, for entering a “fraudulent bid for the purchase of the Flatiron Building,” according to a complaint filed Friday in New York County Supreme Court.
Garlick’s winning $190M bid took the auction room by surprise in late March, narrowly outbidding the existing ownership group of GFP Real Estate, ABS Real Estate Partners and Sorgente Group, which bid $189.5M.
But the Abraham Trust failed to put down the 10% down payment by deadline the following week, resulting in the building heading back to auction, scheduled for later this month.
Now, the ownership coalition is suing the Abraham Trust for the $19M deposit as well as damages and fees, accusing Garlick and the firm of using the bid to get “their 15 minutes of fame.”
In the weeks following the bid, lawyers for Garlick and Abraham Trust sought an extension of the down payment deadline, submitting a bank account with a $12M balance and an inventory of real estate in Aspen and Napa, respectively worth between $50M and $75M. But they redacted the names on the bank account and the identities of the real estate owners, “but indicated that both were available to Defendants to move forward with the purchase of the Flatiron Building,” per the legal complaint.
The complaint also reveals that Garlick had personal ties to the Flatiron Building's minority owner, who GFP, Sorgente and ABS Real Estate Partners previously sued in order to force a partition sale, resulting in March’s auction, following years of disagreement over the cost of capital improvements to attract new tenants.
“After the Auction—with his bidding paddle still in hand—Garlick addressed a small crowd of people,” the complaint reads. “During that address, which was recorded on video, he stated that on the day before the Auction, he had spent several hours with his relative, Nathan Silverstein—the owner of the NRS Flatiron LLC, the defendant in the Partition Action holding a 25% minority interest in the Flatiron Building.”
Silverstein told Crain’s New York Business, which first reported the suit, that he had never spoken to Garlick until just before the auction and said that they were not working together.
Garlick and the Abraham Trust had yet to respond to the suit as of Tuesday afternoon. The auction’s referee, attorney Peter Axelrod, told Crain’s New York Business that the suit won't affect the upcoming auction, scheduled for May 23. That proceeding will have stricter rules for the next round: Bidders must have a $100K check made out to Axelrod at the auction, and will also have to provide documents proving they have the cash to close the sale.
CORRECTION, MAY 10, 1:30 PM E.T.: A previous version of this story misstated the co-plaintiffs in the suit against the Abraham Trust. This article has been updated.
