When their father’s estate sold an entire city block in Brooklyn for $19 million, brothers Grant and Scott Phillips got a $12.3 million cut.
Eight years later, they are in court, fighting for more.
The brothers, who stood to inherit the Gowanus property, sued for $130 million, alleging that an appraisal had valued the site at $40 million and that the deal was closed without their knowing the terms, which they claim voids the sale.
It’s worth a lot more now: Lightstone Group, which purchased the site in 2012, finished a 430-unit luxury rental building there in 2016. One of its two-bedroom units overlooking the famously putrid Gowanus Canal rented in January for $6,471 a month, according to StreetEasy.
The 2012 purchase price for the 89,300-square-foot lot was so far below market value that it amounted to a raiding of the family trust to which the property belonged, the brothers’ lawsuit claims.
Now Lightstone is fighting back. The firm has filed a lawsuit of its own, seeking $6 million in damages for what it calls “abusive, bad-faith, and frivolous litigation” brought by the siblings.
Lightstone charges that the brothers’ claim to ownership, which appeared during title searches of the property, signaled added risk to investors, forcing the firm to pay above-market interest rates on project loans, including those it received from Square Mile Capital and Goldman Sachs.
The brothers would have inherited much more than the Bond Street property except that their late father, Joseph Phillips, started moving assets out of the family trust they shared. He bequeathed them to his second wife, then to his second wife’s sister, then to the two sons of his second wife’s sister (his “step-nephews,” the suit notes), then to two medical charities, before finally specificing his own sons would receive nothing from his estate.
But 365 Bond Street was still in the family trust when it sold, entitling the Phillips brothers to 65 percent of the $19 million. Their father’s estate got the other 35 percent, which his sons allege he obtained from his mother by presenting her with a new will to sign after she suffered a stroke.
Attorneys for the brothers told The Real Deal that Joseph, as trustee of the family estate, “pushed a sale that was in his own self-interest instead of fulfilling his fiduciary duty to the trust and to his sons.” (If the sale price were a bargain, the father’s heirs were also shortchanged.)
Moreover, the lawyers say, the sale of 365 Bond Street never should have happened. Before it closed, Joseph died, at which point “the trust ended according to its own terms,” the attorneys said in a statement, “and the assets should have gone to the Phillips brothers.”
Instead, they allege that Lightstone, Citibank and Joseph’s attorney rushed to close the deal. The brothers are requesting that a federal court revert ownership of the property back to them.
“The smoking gun in this case is the $40 million appraisal of the property commissioned by Citibank” two years before the $19 million sale, said the brothers’ lawyers, who have filed an additional suit against Citibank alone.
“This single appraisal, hidden prior to the sale, was only revealed many years after the fact in the course of this litigation,” the attorneys said.
A representative of Lightstone declined to comment. Citibank did not reply to a request for comment.
Contact Orion Jones at orion.jones@therealdeal.com