He bid $190 million for the Flatiron Building, then didn't pay up

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He bid $190 million for the Flatiron Building, then didn't pay up
The Flatiron building in Manhattan, Feb. 18, 2022. A little-known buyer won an auction on the courthouse steps and then went off the radar, failing to pay the $19 million deposit. Now the famous building’s fate is uncertain. (John Taggart/The New York Times)

by Corey Kilgannon

NEW YORK, NY.- The small auction held last week outside a Manhattan courthouse — 11 bidders holding white paddles gathered around a plastic folding table — seemed like the last-resort liquidation of some foreclosed house or deserted suburban office park.

But the property being sold on the courthouse steps was different.

It was the world-famous Flatiron Building, which became subject of a court-mandated sale after irreconcilable differences among its five owners stalled its renovation and muddied its future.

The building has remained almost completely vacant for four years, ever since its longtime tenant, Macmillan Publishers, which occupied all its office floors, moved out in 2019.

The situation was not helped by the pandemic, which imploded the office space market, leaving the building’s future in limbo.

Now the sale meant to right its course has itself turned into a fiasco, leaving the 121-year-old structure, one of the world’s most famous, without a clear buyer.

Wedged into an awkward space between Fifth Avenue and Broadway at 23rd Street by its architect, Daniel Burnham, the 22-story Flatiron Building was a pioneering skyscraper when it was completed in 1902.

Its detractors criticized its design as “Burnham’s Folly,” but it soon became iconic, and today the neighborhood is known as the Flatiron District.

The last time the building was up for auction was during the Great Depression. It sold for $100,000. Last week, outside the New York County Courthouse at 60 Centre Street, the bidding started at $50 million.

Attention quickly turned to a young man with a full beard and a dapper suit, a relative unknown named Jacob Garlick who kept bumping up the bidding in $2 million increments.

With bids passing the $120 million mark, the auction became a horse race between him and Jeff Gural, the Flatiron’s majority interest holder and a New York real estate institution. After a spirited 40 minutes, Garlick’s bloated bid of $190 million seemed to secure the famed triangular building.

“I was annoyed. I never thought he’d keep going to such a high price,” Gural said in an interview this week. “All he was doing was driving up the price.”

The building’s valuation, more than $200 million before the pandemic, has dropped considerably and it needs $100 million in renovations, according to Gural. Still, Garlick exulted.

Framed by the courthouse’s towering granite Corinthian columns, he knelt dramatically, wiped his eyes and gushed to a news camera that he was honored to be the building’s steward, that it would “be our life’s mission to preserve its integrity forever.”

And that was essentially the last anyone heard from Garlick.

Two days later, he missed the deadline to put down a $19 million deposit and made a feeble attempt for an extension.

“I suspect he didn’t have the money, or that he realized he overbid and decided not to proceed,” said Peter Axelrod, the court-appointed referee for the sale, who has now ruled Garlick out as a buyer.

The aborted bid was the buzz of New York real estate circles.

“It would seem odd that someone would bid that kind of number and not be able to deliver,” said Jonathan Miller, a Manhattan appraiser. “It was a bid that was shocking for the state of real estate today and as it turned out, it wasn’t real.”

As it turns out, Garlick may never have been much of a contender, to go by his scant web presence and the flimsy website of his venture capital firm, Abraham Trust, based in Virginia. It lists no phone number and provides little hard information.

Garlick did not return numerous messages. His default leaves Gural the option of buying the building for his final bid of $189.5 million, a decision he said he would reach by the end of the week. Otherwise, a second auction will be held in several weeks.

Gural, whose family firm, GFP Real Estate, owns and manages more than 50 office buildings in New York, said he had expected to win the auction and “this just drags out the process.”

The auction was a result of a long-standing disagreement between the building’s five stakeholders over its future, from renovations to tenant issues.

Four of the stakeholders are essentially in agreement but at odds with the fifth, Nathan Silverstein, who they claim has caused a deadlock over building decisions. In 2021, they sued him to force a so-called partition sale, leading to the auction.

Silverstein, who inherited his 25% ownership stake from his father, had suggested dividing the building into five separate properties, said Gural, who called the proposal preposterous, especially because of the building’s landmark status.

Gural said Silverstein declined his offer to buy him out to avoid the auction. Silverstein did not respond to requests for comment.

Gural said he suspected Garlick might have been doing Silverstein’s bidding in driving up the sale price.

“Maybe he was just trying to punish us,” Gural said. “I have no idea.”

This article originally appeared in The New York Times.

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