Small investor in Kaufman Astoria Studios fights $600M sale

Kaufman Astoria Studios (Credit: Google)

An unidentified investor who owns a tiny stake in Kaufman Astoria Studios real estate, filed a lawsuit last month claiming company insiders were undervaluing the investor’s asset in order to increase their own, as part of the $600 million sale of the movie production facility, which includes properties such as 34-12 36th Street, in Astoria, Queens.

The contract to sell the property was signed on July 27, 2021, with Kaufman Astoria Studios Holdings, LLC, and a vote to approve the sale was held on August 30, 2021. The unidentified investor, through the entity Dapesa 460 LLC, claims it objected in a timely manner to the vote.

The investor owns a 1.263503 percent stake in Astoria Studios Limited Partnership II, which at the current structure would be worth $1.67 million in the $600 million sale. The investor says the limited partnership should be worth more than the $132 million allocated to it, and alleges the reason it was “undervalued” was because insiders have interests in the other entities, which are outlined below. It alleges the city, which will get a 25 percent share, is also being harmed by the valuation.

A court filing is the position of one party and it is not necessarily accurate or complete. The respondent parties have not submitted reply papers. It is not unusual for complex sale transactions with many parties to include litigation. For example the move to transfer the Empire State Building into an asset of Empire State Realty Trust, saw years of litigation about valuations, though ultimately the building was added to the the trust.

The Astoria Studios Limited Partnership is one of several entities being sold for a total of $600 million. The LP is valued at $132 million, or 22 percent of the purchase price.

The plaintiff alleges that is “undervalued” and the reason it was undervalued was because “insiders” have “undisclosed financial interests” in other entities being sold, and so they want to increase the relative value of those interests to get a larger share of the $600 million.

According to a letter the investor’s attorney, Stephen Meister, sent to the Astoria controlling interests, “It has recently come to our Client’s attention that the General Partner, the Kaufman estate, Mr. Rosenbluth, other controlling persons of the Partnership, and their respective affiliates (collectively, “Control Parties”) have material ownership interests in other “Group Companies” (as such term is defined in the Purchase Agreement) and other financial interests in the Transactions. Those ownership and other financial interest create conflicts of interests for the Control Parties relating to the Transactions and the Allocation of Proceeds (the “Conflicts of Interests”), yet the Meeting Materials neither disclose those Conflicts or Interests nor describe any efforts that were made to
ensure that.”

The suit claims, that “In addition, upon information and belief the terms of ASLP’s lease require 25% of the share allocated to ASLP to be paid to the NYC EDC, meaning that the General Partner and Insiders are defrauding not only their partners, but NYC EDC and the people of the City of New York. This payment obligation, which the other entities affiliated with the General Partner and Insiders do not share, is a likely motive behind the fraudulent scheme to minimize the amount ofthe Purchase Price allocated to the Partnership. The NYC EDC will receive only 25% of $132,066,033, or $33,016,508.25, when it should stand to receive at least $100 million more than that if ASLP were valued properly.

“the Petitioner respectfully seeks a declaratory judgment that it is a dissenting limited partner from a proposed merger entitled to fair value for its limited partnership interest in ASLP under Section 121-1102 of the Partnership Law.”

Lawsuit LINK

-Adam Pincus

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