GFP, Sorgente, ABS sue Abraham Trust for $19M over failed Flatiron purchase

The owners of a 75 percent stake in the Flatiron Building at 175 Fifth Avenue, in Manhattan, including GFP Real Estate, Sorgente Group and ABS Real Estate Partners, sued the highest bidder for the building, Jacob Garlick’s Virginia-based Abraham Trust. The plaintiffs are seeking $19 million from the trust which defaulted on closing on the court-directed partition sale by not providing a $19 million, 10% deposit within the required 48 hours.

The complaint does not suggest a reason why Garlick would bid without apparently having the means to close, other than stating, “to perpetrate a fraud designed to further their own interest…” and later the complaint says, “Garlick’s high bid for the Flatiron Building earned him and Abraham Trust their 15 minutes of fame.” Garlick is reportedly a distant relative of Nathan Silverstein, who was recently submitting court papers asking for a delay in the March 20 auction.

With Garlick’s default, the referee in the partition action notified the GFP-Sorgente-ABS group they as the second bidder at $189.5 million, could purchase the property, in effect paying Nathan Silverstein $47 million.

The complaint says, “Garlick addressed a small crowd of people. 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.

“On March 23 and 24, Garlick by his attorneys repeatedly represented that Defendants had the funds available to wire the required down payment to the Referee. By Friday evening (March 24), however, Defendants had defaulted on their obligation to pay the $19 million required under the Interlocutory Judgment as the 10% down payment.”

In a related situation, Silverstein in the partition case, had been battling with the GFP-Sorgente-ABS group, because Silverstein wanted an approximately one-month delay in the auction because the auctioneer had been telling prospective buyers they could not not tour the vacant building.

The current complaint continues, “On March 30, 2023, the Referee issued a written notice to the next highest bidder (the “Second Highest Bidder”)[GFP] that the Auction’s high bidder had defaulted… On the same day, [March 30, 2023] Defendants’ attorneys sought yet another extension for Defendants to pay the down payment—this time requesting a 30-day extension—claiming Defendants needed that time to “raise the money”… Defendants nevertheless continued to seek an extension of time to post the down payment for the purchase of the Flatiron Building. In that context, on April 10, 2023, Cooley provided what appeared to be (1) a redacted November 2022 bank statement from Byline Bank, in Chicago, showing a closing balance of just under $12 million, but not identifying the owner of that bank account; and (2) a redacted inventory of real estate in Aspen, CO and a property in Napa, CA, supposedly having a present market value between $50 million and $75 million, respectively. Cooley declined to identify the owner of the bank account or the real estate, but indicated that both were available to Defendants to move forward with the purchase of the Flatiron Building… Referee to re-notice the Flatiron Building for sale at auction. The auction has been re-noticed to take place on May 23, 2023.”