Flatiron Building owners sue Jacob Garlick over auction debacle

Jacob Garlick is feeling the heat.

The millennial who came out of nowhere to win a bidding war for the iconic Flatiron Building, then thrust the property into limbo days later by failing to put down a deposit for it, is now being sued by the man he outbid.

The building’s majority owners, a group led by Jeffrey Gural that had hoped to come away with the property at the auction, sued Garlick on Friday, claiming his winning $190 million bid was “fraudulent.” 

Garlick never had the money for the $19 million deposit, despite his claims to the contrary, the plaintiffs allege. Now they’re asking the court to award them that amount plus additional damages from Garlick and his investment firm, Abraham Trust.

“He has to pay for the charade that he pulled, and that is the point of the lawsuit,” said Richard Dolan, co-founder of the law firm Schlam Stone & Dolan, which represents the plaintiffs.   

The suit alleges Garlick defaulted on a contract that required a 10 percent down payment within two days. It also provides more details on the strange sequence of events that followed the auction, when Garlick’s attorneys made repeated assurances that he had the money to close the deal.

“Garlick’s high bid for the Flatiron Building earned him and Abraham Trust their 15 minutes of fame,” the complaint states, pointing to two news articles, including one in The Real Deal. 

Moments after winning the dramatic live auction in March, Garlick, his paddle still in hand, addressed a small group of people in front of the New York County Courthouse in Lower Manhattan.

According to the complaint, he told those around him that he’d spent several hours the day before with Nathan Silverstein — his “distant relative” and the building’s minority owner, whose disputes with Gural resulted in the property being put up for auction. (Silverstein, who holds a 25 percent stake in the Flatiron Building, is neither a plaintiff nor a defendant in the lawsuit.)

During the next two days, Garlick’s attorneys from Cooley, the Palo Alto-based law firm known for its ties to tech and venture capital, assured the building’s owners that Garlick had the $19 million deposit and a wire transfer was on the way. The March 24 deadline passed. The money never appeared.

Not to worry, said Garlick’s attorneys. The transfer never made it because of unspecified problems with two different banks, Truist Bank and then PNC Bank. Abraham Trust sought a one-day extension, the complaint alleges, promising that the money would be wired to the referee on March 27. But the Gural group said Garlick first needed to prove he had the funds to begin with.

“Defendants’ representations, to the effect that they had the funds available to pay the required down payment, were false,” the complaint states.

Gural previously told TRD that Garlick asked him if he could put up the $19 million deposit in exchange for a 10 percent stake in the vacant building.

“It was such a ridiculous proposal,” Gural said. “It concerned me. It was a red flag that he didn’t have the money.”

On March 30, the Gural group was given the option to acquire the property at its final bid of $189.5 million, which it declined. Garlick saw a chance to get back in. The same day, according to the complaint, he sought a 30-day extension on his down payment.

In early April, Garlick’s attorneys provided a redacted bank statement from Byline Bank in Chicago, which showed a closing balance of around $12 million but failed to identify the account holder, according to the suit.

The attorneys then provided a redacted inventory of property in Aspen, Colorado, and Napa, California, valued at $50 million and $75 million, respectively. The attorneys claimed both could be used by Abraham Trust for the purchase, but the material similarly failed to identify the properties’ owners. 

The court-appointed referee decided to reschedule the auction. It’s set for May 23, with the added stipulation that a winning bidder must put down a $100,000 deposit on the spot. Given that low barrier to entry, there’s been speculation that Garlick could show up again. 

Garlick and Abraham Trust did not return a request for comment.