A.C. Lawrence under fire for handling of its union with Manhattan Apartments

A.C. Lawrence Real Estate is facing criticism for the way it has handled its partial union with Manhattan Apartments, with some observers accusing the rental brokerage of unofficially acquiring the failed firm without assuming any of its liabilities.

When Manhattan Apartments ceased operations, A.C. Lawrence took over the firm’s lease at 729 Seventh Avenue, brought on nearly 50 of its agents, hired most of its staff, adopted its office equipment and enlisted the firm’s founder, Jerry Weinstein, as a consultant. 

To some, the firm’s actions are the equivalent of acquiring Manhattan Apartments, even though A.C. Lawrence is not covering any of the brokerage’s debts, including what could be hundreds of thousands of dollars allegedly owed to agents, sources said.

On Dec. 12, the day The Real Deal first reported the collapse of Manhattan Apartments, officials from A.C. Lawrence told a roomful of brokers they would be paid back in full without conditions, several sources said. About nine weeks earlier, Manhattan Apartments had stopped cutting commission checks and forwarding rent and security deposits to landlords, sources said.

However, two days later, A.C. Lawrence officials reversed course, and told broker team leaders that they would not be paid unless they agreed to stay at the firm for anywhere between three months and a year, sources said. In exchange for signing a multi-page agreement to stay, agents were given a “signing bonus” equivalent to the amount they were owed — in some cases $40,000 or $50,000, sources said.

Larry Friedman, a principal and co-founder of A.C. Lawrence, acknowledged that management offered signing bonuses to some experienced agents to entice them to join the firm. But he said that the bonuses were a recruiting strategy the firm employs on a regular basis, and added that the dollar amounts were based on the agents’ production levels — not what they were owed by Manhattan Apartments. He said he was unaware of how much the defunct brokerage owed to individuals. (Several sources have noted that Manhattan Apartments’ books were in disarray.)

“The way we did it is: What holistic package can we offer an agent that makes sense for both of us?” Friedman said.

Additionally, Friedman maintained that A.C. Lawrence did not acquire Manhattan Apartments, noting that his firm continues to use its own proprietary listings database, works with some of its own vendors, and brought in its own IT and accounting staff, among other employees.

Philip Greenberg, an attorney for A.C. Lawrence, said that the firm signed a direct lease with Manhattan Apartments’ former landlord, rather than assuming the other brokerage’s lease or subletting the space.

And for his part, Weinstein reiterated that A.C. Lawrence had not acquired his brokerage. Plus, some sources said that Weinstein was as much — if not more — to blame for the lack of transparency about the firm’s debts and its inability to pay agents and vendors.

Weinstein said that agents had been paid the commissions they were owed, or at least were in the process of getting paid. “Everybody’s into a situation that they were getting paid and will continue to get paid,” he said.

Yet, some see this as a pattern with A.C. Lawrence, pointing to the way the firm acquired some of the assets of the defunct brokerage Century 21 NY Real Estate in 2010, while denying that the tie-up was an acquisition. At the time, A.C. Lawrence picked up the firm’s office space, listing database, building keys and agents (including hiring founder Marc Lewis) without shouldering its liabilities. A.C. Lawrence also offered Century 21 agents signing bonuses, according to a source familiar with the situation.

This time around, A.C. Lawrence has an even closer relationship with the defunct firm, given that it shares a financier with Manhattan Apartments in the supermarket mogul Leonard Franzblau.

Franzblau invested $2.6 million in Manhattan Apartments, ultimately owning 70 percent of the company, according to court documents, and has lent money to A.C. Lawrence, Friedman said. (Franzblau does not own any part of A.C. Lawrence, nor has he invested or loaned money to Bellmarc Companies, the firm that recently acquired A.C. Lawrence, Friedman said.

Some observers see Franzblau as a culprit in the demise of Manhattan Apartments, accusing him of pushing the firm to the brink in order to snap up the valuable pieces for A.C. Lawrence. Indeed, Weinstein filed a lawsuit asserting similar claims, and questioning Franzblau’s decision to bring in executives from a competing firm as advisors.

However, Weinstein has since settled that lawsuit, and he told The Real Deal that he had resolved any outstanding disputes with Franzblau and A.C. Lawrence.

Sounding like the consummate optimist, Weinstein said he was ready to take advantage of A.C. Lawrence’s technology, listings and “new energy,” as well as the sales capabilities offered by Bellmarc. “If I’m not motivated, we got real problems here, and my wife wouldn’t be too happy about that,” he said, laughing.

Greenberg, who is also an attorney for Franzblau, said the octogenarian investor was not involved with A.C. Lawrence’s operations. “Mr. Franzblau has nothing to do with what A.C. Lawrence has done vis-à-vis taking over the space of Manhattan Apartments,” he said.

As for whether A.C. Lawrence or Franzblau could be legally liable for Manhattan Apartments’ debts, Greenberg acknowledged that it is possible for companies to face “successor liability”—that is, effectively being forced to take on the debts of a company if they acquire enough of its assets and employees. But he maintained that A.C. Lawrence is not in that position.

It’s also possible for companies to buy most of the assets of a failing firm while leaving the liabilities in a shell company — a process known as a bulk transfer, he said. But bulk transfers generally take place with companies that have substantial assets, such as manufacturing equipment or warehouses of inventory, and not real estate.