Massey, Gemstone sued for allegedly not upholding deal for West 37th Street parcels

New York /
Oct.October 29, 2010 05:30 PM

From left: Paul Massey, the sites at 431 W. 37th St. and 433-439 W. 37th St. (photo, right: PropertyShark)
 

Massey Knakal Realty Services and Gemstone Property Group, a New Jersey-based real estate firm, are facing an $81 million lawsuit from Dumann Realty alleging that Massey Knakal brokered the sale of two West 37th Street parcels to another investor, while Dumann was reviewing the first deal.

Manhattan-based Dumann, led by investor Richard Du, alleges in two New York State Supreme Court lawsuits, that Massey Knakal represented Gemstone in a deal to sell the adjacent sites at 431 West 37th Street and 433-439 West 37th Street, which Du’s lawyer says had been approved for multi-story development.

After reaching a $21 million deal for Dumann Realty to buy the property, Dumann claims it was allowed to perform a review of the agreement, allowing Du to line up additional investors, contact architects and perform other duties to get the deal done.

The lawsuit claims that the buyer, a Dumann affiliate company called 2004 Bowery, raised some objections to the deal in an Oct. 5 letter, and by Oct. 8, was informed by Massey Knakal that another buyer had signed a contract to buy the sites.

“We were shocked,” said attorney Richard Sarno, representing Du. “Nobody ever told us we had a competitor.”

Dumann said the $81 million figure is based on estimated profits once the site was developed. In addition to selling the property to another investor, Dumann alleges in a related suit that it was deprived of $210,000 in commission fees, part of a 50/50 split with Massey Knakal. The new buyer was not identified in the complaint.

Gemstone, led by investors Jacob Klein and Daniel Winschuh, acquired the sites for $7.25 million in 2007, according to Propertyshark.com records. There was a three-story vacant building at 431 West 37th Street and a parking lot at 433-439 West 37th Street, and buildings were scheduled to be demolished and developed into an 86,000-square-foot rental building, with 125 units.

The economic downturn halted much of the development in the Hudson Yards area, and Massey Knakal began marketing the lots, which were later approved for 98 units and 7,500 square feet of retail space.

Paul Massey, CEO of Massey Knakal, declined to provide any details on the deal, but called the suit “meritless.” Gemstone officials said they had not received the complaint and therefore had no comment.

 

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