In order to prevent the U.S. government from selling a 1MDB scandal-linked penthouse at a steep discount, the condo board of Chelsea’s Walker Tower recently sought to exercise its right of first refusal on a proposed sale.
Unfortunately for them, a federal judge has decided that such a right no longer exists.
Judge Dale Fischer wrote in a decision last Monday that a May consent judgment wiped out the board’s right of first refusal — a ruling the board has already appealed. The judge made “a fundamental error” in finding that the board had waived its right of first refusal, the board said in a statement. “No such waiver was ever granted, nor should one be implied.”
The board also claims that the DOJ let the apartment “deteriorate,” left “its common charges unpaid for several years” and “ignored multiple efforts to sell the penthouse at a fair premium.”
“More importantly, the board is frustrated by the continued missteps the Justice Department has made in its handling of this incredible penthouse asset, worth tens of millions of dollars in recovery to victims of the 1MDB scandal,” the statement continues.
Although the May consent judgment does not explicitly mention the right of first refusal, it states broadly that “all right, title, and interest” of the board in the condo unit “shall be forfeited to the United States.” While the parties spent a lot of time debating whether the right of first refusal was attached to the unit, the judge found that this distinction “does not make any difference.”
“The ROFR is a right (or interest) in the Property, and the Judgment forfeits all of those rights,” she wrote.
The purported “low-ball” offer of $18.25 million comes from Ron Vinder, a financial advisor with Morgan Stanley Private Wealth Management. The proposed purchaser’s identity has not been previously reported. Vinder did not respond to a request for comment.
The unit at 212 West 18th Street previously sold for $50.9 million in 2014, setting a record for the Downtown market. The buyer was an LLC linked to Abu Dhabi businessman Khadem Al Qubaisi, and the Justice Department seized the property in 2016, alleging that the unit was bought with money stolen from Malaysia’s sovereign wealth fund, 1MDB.
Al-Qubaisi, who once headed Abu Dhabi’s International Petroleum Investment Company, received a 15-year prison sentence in the emirate last year.
The asking price on the full-floor, five-bedroom penthouse was most recently cut to $35 million last January. According to court filings, the highest offer on the unit as of March was $23 million, which was then reduced to $18 million “due to all of the uncertainty in the market and frankly in the world” caused by coronavirus, according to an email from the buyer’s agent.
The condo board’s plan, if it is able to exercise its right of first refusal, is to sell the unit to itself for the same price as the current offer and then to relist it for more, the Wall Street Journal previously reported.
In a declaration included in court filings, Vinder says that the condo board president at one point offered to “cease efforts to find another purchaser” if he were willing to pay an extra $1 million for the unit.
In its statement, the board says that its preferred buyer entity offered an additional $2.5 million for the unit, which “would expressly have been added to the compensation for 1MBD victims.” The Justice Department’s rejection of this offer, they say, further reflects that “the government is not acting in the best interests of the building or of victims of the fraud.”
Representatives for the Justice Department declined to comment. In court filings, the DOJ argues that the board’s move would force the U.S. government to breach the Vinder contract and potentially subject itself to liability. It also alleges that the board is seeking to extract a $2.5 million “side-payment” by exercising its right of first refusal.
The past month has been full of major developments in the 1MDB case, as former Malaysian prime minister Najib Razak was sentenced to up to 12 years in prison in connection with the scandal, while Goldman Sachs agreed to a $3.9 billion settlement with the Malaysian government.
Meanwhile, the scheme’s mastermind, Jho Low, may now be hiding in the Chinese territory of Macau, according to Malaysian police. Previous speculation indicated that he might be hiding in the United Arab Emirates or mainland China.
Contact Kevin Sun at [email protected].