The 121-year-old Flatiron building, known for its iconic silhouette on 23rd Street and Fifth Avenue, is set to be sold at auction on March 22, The Real Deal first reported. The sale is a result of an ongoing dispute between the landmark’s four majority owners,–who collectively own 75% of the building–and a fifth owner, Nathan Royce Silverstein, who owns the remaining 25%.
The iconic office building currently stands vacant, after its previous inhabitants, Macmillan Publishers, left the 21 floors they occupied in 2019 after officially announcing their move to a cheaper building downtown in 2017. The current ownership structure, which requires unanimous consent from owners in respect to decisions on the operation of the building, left them unable to agree to move forward with leasing the building after Macmillan left, according to complaints from both parties. The majority owners, GFP Real Estate, the Sorgente Group, Newmark Group, and ABS Partners, launched into a years-long dispute with Silverstein, leading to multiple lawsuits filed by both Silverstein and the majority owners, and a complete stalemate of progress.
Built in 1902, the nearly 300-foot tall steel framed building was designed by Daniel Burnham and first named the Fuller Building, before the public coined it the Flatiron Building after its triangular shape, which resembles a cast-iron clothes iron. The building became famous shortly after its construction, flocking tourists and appearing on post-cards and merchandise as an icon of the city. The New York City Landmarks Preservation Commission designated the building as a landmark in 1966, making it one of the first skyscrapers in the city to be protected as a historical landmark, according to a New York Times article.
The ownership of the building has switched hands quite a few times over its 121-year history. First owned and built by the Fuller Company, many have come to share a stake in the property. The building was eventually sold to a group of investors headed by Max Silverstein, Nathan Silverstien’s father, in October of 1945. The Sorgente Group, who had previously owned less than 20% of the building, gained majority ownership in 2008, with a 52% stake.
According to an affidavit, part-owner and managing member of the majority owners, Jeffery Gural, Silverstein demanded the stalemate between the two parties continue indefinitely and without reason. “Because each tenant-in-common effectively exercises a veto over any plan of action with respect to the refinancing, redevelopment, management, leasing or other actions impacting the Property, nothing can be done while the stalemate continues,” said Gural.
Gural stated that Silverstein’s proposed ideas for the building was a “preposterous ‘plan’.” The majority owners alleged Silverstein proposed physically dividing the building into separate properties, which cannot be done to a landmarked property like the Flatiron. They alleged Silverstein also resisted much of the renovations. The majority owners said Silverstein suggested they not renovate the building for new tenants, despite the renovations being required and necessary before any new tenants moved in.
“We have tried for years to work out these differences with Mr. Silverstein, but the Defendant has delayed, resisted and ultimately refused to agree with Plaintiffs’ proposed business plan.” Gural said in the affidavit.
Silverstein on the other hand, says Gural and the building’s managing agent, Newmark Group, are to blame. In his 2021 lawsuit against the group, he alleged that they failed to properly market the property despite Macmillan Publishers giving a two year notice that they would be leaving. In his official complaint, Silverstein said that Gural instead entered private negotiations to rent the space to Knotel, a network of private offices and work clubs, for under $44 per square foot. An “exceptionally low cost,” according to Silverstein. He also said Newmark had a large stake in the company. The Knotel deal fell through however, with the company filing for bankruptcy in 2021 and eventually being bought by Newmark.
“The proposed rental agreement would have locked the property into an unprofitable lease for a long period of time,” Silverstein said in the complaint.
All owners eventually agreed to renovating the building, but Silverstein alleged that Gural had inflated the $80 million renovation costs. Silverstein said that despite necessary renovations being completed, Gural pushed “for unnecessarily costly repairs, totaling in excess of $85 million, that far exceed the original, approximately $25-30 million, estimate for renovations.”
Silverstein’s lawsuit was dismissed 3 months after it was filed.
In the case against Silverstein, a New York State Supreme court judgment, signed on Jan 6, 2023 and officially filed Jan 19, sided with the 75% owners, and ruled to allow the auction of the historic building.
According to Gural’s affidavit, he and the majority owners plan to buy the building back during the auction, which would allow them to end their relationship with Silverstein. “Plaintiffs are unwilling to remain as co-owners with a party who for too long has stymied their business plans and objectives for this Property as those losses pile up, while he insists on unrealistic and, in Plaintiffs’ view, harmful alternative,” Gural said.
According to the case ruling, any of the owning parties may purchase the property at its March 22 auction, either jointly or separately. The building’s last estimated value was between $250 million to $300 million, according to Dan Fusolo at Real Capital Analysis for The Wall Street Journal. The current owning parties could be outbid, however, leaving the future of the building in new hands.