The second-highest bidder for the Flatiron Building in New York has officially declined to exercise an option to purchase the Manhattan landmark after the surprise outside bidder who won a $190 million public auction failed to come through with the scheduled 10% down payment.
Jeffrey Gural, chairman of GFP Real Estate, who came in second with a $189.5 million bid on behalf of GFP and its partners, told CoStar News the group has declined to pay $47.4 million, or 25% of the bid, for the stake it doesn’t already own. Together GFP and its partners hold a 75% interest in the building.
“We didn’t think it was worth that much,” Gural said in an interview on Tuesday, adding the building still needs $100 million in upgrades. “We are considering all of our options. We didn’t expect to be in the position. It’s disappointing.”
Jacob Garlick, managing partner of Reston, Virginia-based Abraham Trust, surprised New York’s real estate industry and Gural himself last month after he, standing next to Gural in front of about 100 people, emerged as a surprise winner in an intense last-round, back-and-forth public auction hosted on the portico at the front entrance of the New York County Courthouse in lower Manhattan.
Garlick, his spokesperson and Abraham Trust didn’t respond to CoStar News requests seeking comments.
The public auction came after lawsuits arising from various disputes between Gural’s GFP and the Flatiron’s minority owner, Nathan Silverstein, over renovations, leasing plans and possibly dividing up the building.
As to what’s next for the 255,000-square-foot, 22-story building, a second public auction is the most likely outcome unless the owners of the building can come to an agreement right up to the day of the planned bidding, auctioneer Matthew Mannion of Mannion Auctions said in an interview with CoStar News.
“It’s pretty likely a second public auction will happen,” Mannion said. The dispute among the owners is “so many years in the making it’s unlikely” that the parties will come to an agreement.
Gural acknowledged an agreement with Silverstein is “questionable.”
“Ideally it would be preferable to make a deal without going through the auction process,” Gural told CoStar News. “We’ve been trying that for a while without any success. I’m not optimistic that’s going to happen. ... It’s been frustrating.”
Should the building head for another auction, Gural said measures will be taken to make sure there won’t be a repeat of what he described as a “stunt” after Garlick failed to come through with the down payment. Potential bidders would be required to “have skin in the game” and put down a $1 million deposit to show “they have the financial ability to do this,” Gural said.
Gural said he’s “not sure” what the parties involved may want to do with Garlick.
According to the original terms of the sale, Garlick is liable for the $19 million down payment plus any expenses and fees associated with a second public auction.
Opened in 1902 and designed by Chicago architect Daniel Burnham as one of New York’s first skyscrapers, the building, located at 175 Fifth Ave. at the intersection of Fifth Avenue and Broadway south of 23rd Street, was designated a landmark by the NYC Landmarks Preservation Commission in 1966.