DC Firm Outbids GFP for NYC's Flatiron Building

We imagine the movie version of the fate of NYC’s iconic Flatiron Building will date this transaction a couple of years after the turn of the century—that would be the 20^th century—when the unique triangular landmark was brand new, the first skyscraper in Manhattan built north of 14^th Street.

Horse-drawn carriages will clop past the instantly famous vertical Renaissance palazzo structure adorned with Beaux-Arts styling, leaving manure piles at the intersection of Broadway and Fifth Avenue.

Gents in top hats will walk past the new tower on cobblestone streets—cinematic vistas that will be built on soundstages at the new Netflix studio in Red Bank, NJ—plying the trades of the day.

The movie version will be called Be Careful What You Wish For.

Daniel Day-Lewis will come out of retirement to play a mustachioed real estate broker who dresses like Cornelius Vanderbilt, the railroad tycoon who built what was then known as Grand Central Depot in 1871. He’ll endeavor to resolve a simmering dispute between partners who are co-owners of Manhattan’s most important edifice.

Things get out of hand and—Spoiler Alert!—this leads to an old-fashioned duel with pistols (and seconds) on Fifth Avenue. The bullets hit at the same time, climaxing in an unexpected twist: Daniel Day-Lewis becomes the owner of the building.

But we digress. What actually happened this week to resolve a festering dispute between the owners of the Flatiron Building was not quite as cinematic, but it had an ironic twist of its own.

On Wednesday, a court-ordered auction of the 22-story building at 175 Fifth Avenue was undertaken at the behest of three partners who owned 75% of the building—Sorgente Group, GFP Real Estate and ABS Real Estate Partners—who wanted a divorce from the owner of the remaining 25%, Nathan Silverstein.

As a result of the auction, known as a partition sale—Spoiler Alert!—now none of them owns the historic triangular trophy tower.

That’s right, the winning bidder—at a purchase price of $190M—was Washington DC-based Abraham Trust, a self-described multifamily, office and growth equity venture fund.

The DC firm outbid GFP—which was widely expected to emerge as the owner of the Flatiron Building in the partition sale because owners are permitted to use their stakes as part of what is known as a “credit bid.”

Mannion Auctions gaveled the auction into action at a starting bid of $50M, increasing it in $500K increments. GFP bowed out with a bid of $189.5M, which it said it didn’t want to exceed because the 204K SF building needs a renovation expected to cost another $200M.

According to statements filed in court by the former owners, the falling-out began in 2017 after MacMillan Publishers, which occupied the entire building, said they would move out in 2019. The partners developed a business plan for the vacated building, but Silverstein—who, like each of the other owners, had a veto over the plans—refused to sign off.

According to the other partners, Silverstein wanted to replace McMillan without upgrading the 120-year-old structure, which because it only has one exit no longer meets NYC fire safety codes. The partners also said in court filings that Silverstein wanted to divide the property in five separate parcels, which can’t be done because the building is landmarked.

Silverstein alleged in his court filings that the partners were negotiating separately from him with prospective tenants on a lease priced at what he called “an extraordinarily low cost per square foot” and a term of nearly 50 years.

The partners initiated an $80M renovation of the Flatiron Building, but immediately began squabbling about the construction costs, eventually deciding it was time to separate.

Okay, we’ll say it: now they’re separated from the building.

The Flatiron Building originally was developed as the headquarters for the Fuller Co., a construction company that acquired the site—then occupied by two-story offices shared by the Erie Railroad and the Wells Fargo Co.—from the Newhouse family in 1901. The Equitable Life Assurance Society took over the building in a Depression-era foreclosure auction in 1933.

The building was designated a National Historic Landmark in 1989.