The Real Deal New York

Sitt Asset Management faces complaint from investor at several NYC properties


March 31, 2011 06:23PM
By David Jones

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From left: 1370 Broadway, 6 Times Square, 180 Madison

Sitt Asset Management, led by company president Ralph Sitt, is facing allegations that
it committed a multi-million dollar fraud by investors who claim the firm misappropriated
millions of dollars that were invested in several major New York real estate properties.

Investor David Zeitoune, in a recently filed complaint with the New York state attorney
general’s office, alleged he invested more than $2.9 million in five of Sitt’s investment
properties over a three-year period. He alleges Sitt charged excessive management fees,
received illegal commissions and may have misappropriated more than $6.3 million.

Attorney Adam Leitman Bailey, who is representing Zeitoune, said when his client asked
for an accounting of the funds, he was repeatedly stonewalled.

“He basically was just pushed to the side and told we’re not telling you anything,” Bailey
said.

Zeitoune has been investing millions of dollars with Sitt over the years, and has
repeatedly responded to capital calls, which are requests for additional funds on the
various buildings. According to the complaint, Zeitoune made investments in Manhattan
at 1370 Broadway, 6 Times Square, 180 Madison Avenue and in Brooklyn at 431
Avenue P in the Midwood section, and 1826 Ocean Parkway in Sheepshead Bay.

At 1370 Broadway, a 240,000-square-foot, Class A office building, for example,
Zeitoune allegedly initially invested $550,000 and later responded to two additional
capital calls, for a total investment of more than $707,000. While the offering
memorandum called for a 1.5 percent management fee at the property, Sitt is accused of
improperly charging fees of up to 11.6 percent at the property, and taking commissions
on re-leasing space at the building, when the management fee was supposed to cover the
cost.

Sitt said he could not comment on the matter as it has been in litigation for more than a
year, but added that he was unaware of the filed complaint.

Zeitoune said he was misled into investing with a company he thought he could trust.

“We felt we were dealing with honest reputable people and feel it was all a big scam,”
Zeitoune said.

The AG’s office was not immediately available for comment.

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