Keller Williams Midtown claimed it was broke and on the verge of shutting down altogether to get out of paying more than $2 million in rent, according to a new lawsuit.
Dow Jones, which sublet the brokerage office space at 1155 Avenue of the Americas, said the cash-strapped firm defaulted on rental payments starting in the spring of 2018. The two parties ultimately reached a settlement when Keller Williams executives said they planned to wind down operations at the financially-troubled Midtown office.
“As it turns out, Keller Williams’ representation was false,” read the complaint, which Dow Jones filed Dec. 24 in New York.
According to the complaint, the publishing giant seeks $2.36 million in unpaid rent and damages after it claims Keller Williams breached its settlement by staying in business, albeit in a smaller space.
The franchise, owned by Ilan Bracha and Haim Binstock, relocated to a WeWork space at 575 Fifth Avenue this past summer in what one manager said was an attempt to minimize expenses. But according to the complaint: “It is easy for Keller Williams to minimize expenses when it does not pay rent.”
In a statement, a spokesperson for the firm said “the allegations have no merit and we will be vigorously defending the lawsuit.”
Bracha and Binstock acquired franchise rights from Keller Williams Realty International and launched the Midtown firm in 2011. In 2015, they inked a deal to sublease the entire sixth floor — or 29,000 square feet — at 1155 Avenue of the Americas for $110,625 per month plus taxes and electrical charges, according to the suit. The same year, the partners opened a Tribeca office, which is run separately from Midtown.
For several years, Keller Williams NYC was one of Austin-based KWRI’s most successful offices, with around $1 million in profits annually.
But rapid growth, followed by a slowdown in the residential market, took a toll and the firm cycled through several leaders amid an exodus of agents.
In April 2018, Keller Williams Realty International sent a letter of default to the Midtown brokerage, as The Real Deal previously reported. According to Dow Jones’ complaint, around that time the brokerage also began missing rent payments. In April 2019, Dow Jones served Keller Williams Midtown with a rent demand totaling $1.16 million. When Keller Williams didn’t answer the petition, Dow Jones obtained a warrant of eviction.
Before Keller was evicted, however, it reached a settlement with Dow Jones in July. Under terms of the settlement, Dow Jones agreed to accept “substantially less than it was owed” after Keller claimed to be insolvent. Keller also said it would be “discontinuing all operations of its business” within three months.
But that didn’t happen.
In addition to downsizing, Bracha and Binstock are said to be nearing a deal to sell the franchise to Richard Amato, who owns several other Keller Williams offices in Nassau County. Sources told TRD that KWRI had been pressuring them to sell.
Nationwide, the Gary Keller-led company is the country’s largest real estate franchise with more than 160,000 agents in the U.S.