The Real Deal New York

Barnett faces new hurdle in nine-year quest for $11M purchase of two Noho buildings

February 03, 2011 06:34PM
By Adam Pincus

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Gary Barnett, 736 Broadway and 734 Broadway

A disgruntled brother battling his two siblings over their late father’s New York City real estate portfolio threw another wrench into Gary Barnett’s nine-year effort to buy two loft buildings in Noho for $11 million.

The brother, Aaron Muschel, was not satisfied with a settlement filed by a judge in Manhattan federal bankruptcy court in December that sought to close more than six years of litigation. A compromise between Barnett, president of Extell Development, and at least one of the Muschel brothers brought an end to three related bankruptcy proceedings and opened the door to Barnett buying the attached properties, 734 and 736 Broadway, south of Astor Place.

But this Tuesday, Muschel threw a wrench into the process, filing a series of objections to the decision including questioning whether the judge had the authority to approve a sale of the assets, as part of his appeal of the settlement, bankruptcy court records show.

For the past six years, the sale to Barnett has been stalled by infighting between brothers Aaron, Ruben and Mordechai Muschel, sons of the late William Muschel, who left the properties to the trio. They have battled over the modest Noho and Brooklyn real estate portfolio following the father’s death in 2001.

Barnett’s odyssey to acquire those buildings began years ago. In 2002 he signed a $13 million contract to buy the two loft buildings that have tenants whose rent is regulated by the interim multiple dwelling laws, brokers said. But later that year he sued to reduce the price, and in 2004, Barnett’s holding company Broadwall America filed for bankruptcy protection, court records show. In 2005, the two entities that own the buildings also filed for Chapter 11 bankruptcy protection, in part to hold off a foreclosure of a loan from a lender controlled by Barnett, court records show.

In the intervening years, the brothers took their dispute to a Jewish rabbinical court known as a Beth Din in an effort to resolve their issues.

The federal judge was not ruling on their internal disputes, but only ordered the bankruptcy cases closed, and confirmed a stipulation agreement that called for the sale of the property to Barnett, in accordance with an August 2010 contract, with a purchase price of $11 million.

Aaron Muschel has fought the process along the way, in October, noting in court records that higher offers were made on the property in June. One was for $13 million from David Shorenstein’s Silvershore Properties and another for $13.55 million from Aria Investment Group, an affiliate of the Manocherian Brothers.

Calls to the Muschel brothers and Barnett were not returned.

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