Behind the battles at Sitt Asset
In its pomp in 2012, Sitt Asset Management, the family firm led by brothers Ralph, Eddie, Jack and David Sitt, made Manhattan’s third most profitable building sale of the year and nabbed marquee tenants for its flagship property at 2 Herald Square. But behind closed doors, the brothers were embroiled in bitter disputes over who was calling the shots of when to buy and sell, and whose hands the firm’s funds were passing through.
In November, Jack Sitt — a former principal at Sitt Asset Management — sued the company as well as Ralph Sitt, alleging that he was deprived of millions of dollars in distributions and commission. Jack still owns a fifth of the company. Marilyn Sitt — the family’s matriarch, and brothers Ralph, Eddie and David own the remaining 80 percent. Ralph filed a counterclaim against Jack’s suit late last month.
Earlier this month, Eddie Sitt — after being tipped off by his brother Jack to take a peek into the company’s records, according to court documents — filed a suit against Sitt Asset, Sitt Leasing, and Ralph and David, also claiming he lost out on money that David and Ralph allegedly took from the company’s leasing division.
Adam Leitman Bailey, a real estate attorney who represented Ralph and Sitt Asset in the November suit, declined to comment for this article. Stephen Meister, who is listed as Ralph’s defense lawyer on his counterclaim, did not respond to requests for comment.
The real estate industry is no stranger to family feuds. At the Feil Organization, a dispute pitted Jeffrey Feil against his three sisters who accused him of buying them out of the company at a discounted rate. Brothers Henry, Thomas and Frederick Elghanayan split their firm Rockrose Development in 2009, creating two separate companies to try to divvy up the assets among the children.
Sitt Asset Management currently owns 11 Manhattan properties, including six SoHo retail locations. The Real Deal took a look at some of the most prominent properties in the Sitt lawsuits and what the brothers are saying about them.
Sitt Asset sold this 56,000-square-foot office and retail building for $94 million to Ponte Gadea Group in December 2013. The sale may have netted Sitt Asset and its partner the Carlyle Group $24 million, but Eddie and Jack question the need for selling and why Ralph cashed out on it first.
Eddie alleges that Ralph secretly sold his interest in the property in 2009, netting him a big profit. When Carlyle — which had taken full control of the building — and Sitt Asset Management sold the property in 2013, Ralph didn’t notify his brothers about his alleged prior actions and his $400,000 windfall, Eddie claims in court documents.
Jack, in his own lawsuit, also claims that Ralph sold the family’s shares in the property without notifying any of the other family members at the company. Jack further claims that he never received his share of the profit on this sale.
Ralph countered that Jack “mismanaged” the property, which delayed a planned renovation of the building. Instead, Ralph says, Sitt Asset and the Carlyle Group had to put up capital. Because the Sitts didn’t put up their share of the money, the Carlyle Group took full control of the property and as a result, Sitt Asset lost the right to oppose a sale of the property, Ralph said in court documents.
Eddie alleges that 450 Broadway is one of the properties that Ralph bought with money he allegedly withdrew,unbeknown to his brothers, from the family’s bank account. Ralph bought the building for $11 million in 2012, city records show.
Jack further claims that Ralph not only withdrew the funds surreptitiously, but that he went on to buy seven more Manhattan properties with the $4 million profit he made.
Ralph countered that he never secretly took out money from the company’s account to buy the property. Instead, he says that he — together with brothers David and Eddie — took out a total of $900,000 to pay off a loan on another property, in which Jack didn’t invest capital. Ralph also claims that the money was returned in full and that he wasn’t the only family member who owned the seven Manhattan properties.
Sitt Asset sold the building to Normandy Real Estate in 2012 for $125 million,on behalf of themselves and Carlton Associates, the investment arm of the Cohen family, the founders of Duane Reade. According to court papers, Sitt Leasing — the division of the company that manages the leasing for the building’s tenants — earned a $4.9 million sales fee on that transaction that, according to Jack’s suit, made it directly into Ralph’s pockets.
Jack accuses Ralph of taking the entire $4.9 million chunk, rather than giving the brothers the $1 million each they were allegedly entitled to.
In his counterclaim, Ralph says that Jack borrowed $2.4 million from his parents Barry and Marilyn (Marilyn owns a fifth of the Sitt Asset Management). Ralph says that Jack didn’t pay his parents back, but rather simply paid the monthly interest on the loan for six months, after which he said he couldn’t afford it anymore. When the company sold 1370 Broadway, Jack agreed to relinquish his proceeds to his parents to reduce his outstanding debt.
2 Herald Square
In 2007, Sitt Asset bought the building — where H&M will be vacating more than 60,000 square feet soon — for $500 million. One of the brothers claims the other may be responsible for driving out tenants.
Eddie claims that Ralph and David denied him the chance to refinance the building at a “historically low rate,” according to court documents. He also alleges Ralph didn’t make any efforts to renew leases for the property’s anchor tenants. Jack even claims that Ralph took out a $30 million loan from the Paramount Group for the property without informing him or any of the other members of Sitt Asset.
34 Gansevoort Street
Sitt Asset purchased this five-story retail building in November 2007 for $9.9 million. Disputes arose after the property was refinanced and payouts weren’t given to all the investors.
Jack, in his lawsuit, claimed that Ralph refinanced this property and walked away with $1.7 million in proceeds from the loan. Ralph allegedly never told his brothers about this.
Eddie doesn’t mention this property in his lawsuit against the company.
Ralph claims that this property fell into distress in 2009 because the family owed a nearly $10 million loan on the property to Wells Fargo. Ralph claims that he lowered the company’s debt to the bank down to $4.75 million. While the other family members signed the papers for the new loan, Jack refused to sign the papers. This would have jeopardized the family, Ralph says. As a result, Ralph signed the documents for the new loan together with his brothers Eddie and David as well as his mother Marilyn. They refinanced the building again in 2013 after which the investors received a $1.3 million payout.