A former joint venture partner of developer Jeff Sutton claims in a new lawsuit that the owners of a Soho co-op building refused to sell them the retail space for an agreed-upon $14 million, allegedly nearly doubling the asking price at the 11th hour.
Investor Joseph Edery joined with Sutton earlier this year to buy the retail portion of the five-story, residential and retail building at 119 Spring Street, but Sutton abandoned the purchase in recent weeks when the sellers sought to raise the price, and assigned his ownership interest to Edery when it appeared the dispute would head to the courts, a source close to the deal said.
In the lawsuit, Edery, through a special purpose company called 119 Spring LLC, said that six individuals who own the 25-foot wide property, between Greene and Mercer Streets, agreed in a letter of intent in May to sell the property, but then in July upped the price to $26 million.
The suit, against the individual owners as well as a property ownership company called Tar Beach Club, was filed yesterday in New York State Supreme Court. Edery is asking for a judge to enforce the provisions of the letter of intent, and to block the owners from selling the property to anyone else, or alternatively awarding him $12 million in compensatory damages and additional punitive damages.
“On the eve of the expiration date, defendants demanded payment of $26 million, $12 million more than the agreed upon purchase price,” the complaint said.
Sutton, Edery, Tar Beach Club and their attorney did not respond to a request for comment.
Edery, along with Morris Missry, leads the Midtown-based real estate investment firm TriState Equities. Sutton has an ownership interest in approximately 100 retail properties in New York City, including high-profile locations like the Prada store at 724 Fifth Avenue, and the future Express location at 1552 Broadway in Times Square.
Sutton has left at least one other deal after it became bogged down in litigation. He was a partner with SL Green Realty at 1604 Broadway, but dropped out of that venture, after lawsuits continued to pile up at that location.
In December, he was part of a group of buyers who paid $147.9 million for 529 Broadway at Spring Street in Soho. This most recent attempted purchase demonstrates his continued interest in the retail district.
The 10,875-square-foot building has 2,175 square feet on the ground floor, occupied by the Kardashian sisters’ store Dash, which signed a lease in 2010.
The court filing includes a letter of intent, dated May 21, which gave July 17 as the deadline for hashing out a final purchase-and-sale agreement for a $14 million transaction. The letter also included a strict confidentiality clause that expired last week, which precluded the property owners from soliciting rival bids. One of the letter’s provisions required Sutton and Edery to put a $700,000 deposit in escrow, which they did, according to the complaint.
Then, on June 26, the sellers notified Sutton and Edery that “there had been a change in the thinking of the co-op,” court filings show.
On July 2, the sellers upped their asking price to $41 million, leading the buyers to believe they had solicited other offers for the space. On July 15, the sellers dropped the price down to $26 million. Edery and Sutton responded that they would buy it at the agreed $14 million price. At a loggerhead, the deal did not proceed, and last Friday, an attorney for the sellers called the letter of intent “null and void.” Five days later, Edery filed suit, after Sutton left as a partner.
The brokerage Marshall Real Estate, headed by Matthew Marshall, and based in the Meatpacking District, was the sole broker on the deal, the court filings say. He did not respond to a request for comment.