Auction set for Flatiron Building

Sorgente, GFP, ABS at odds with co-owner Nathan Silverstein

From left: GFP Real Estate's Jeff Gural and Sorgente Group's Veronica Mainetti with the Flatiron Building
From left: GFP Real Estate's Jeff Gural and Sorgente Group's Veronica Mainetti with the Flatiron Building (Flatiron Building, GFP Real Estate, Sorgente Group)

The iconic but vacant Flatiron Building is heading to an auction to end a long-standing dispute among its owners.

Sorgente Group, Jeffrey Gural’s GFP Real Estate and ABS Real Estate Partners, who own 75 percent of the building at 175 Fifth Avenue, sued in 2021 to seek a partition sale after the owners said they could not see eye to eye with the 25 percent owner, Nathan Silverstein.

A New York state judge issued an order in January allowing the sale to go forward. An auction, to be conducted by Matthew Mannion of Mannion Auctions, has been set for March 22.

A partition auction occurs when multiple owners have a stake in a property. The proceeds from the sale will be based on the ownership interests. The owners can also bid on the property through a “credit bid” using their existing ownership stake.

In a past filing, Gural said the Sorgente-GFP-ABS group will likely bid at the auction.

The building’s shared ownership structure gives each owner veto power over any major decision at the property. This led to a stalemate that cost the owners hundreds of thousands of dollars a month, according to one filing.

The spat began shortly after the building’s long-time anchor tenant MacMillan Publishers announced in 2017 that it would move out in two years, according to court records. At the time, the book publisher occupied all 21 floors of the building.

“We have tried for years to work out these differences with Mr. Silverstein, but the defendant has delayed, resisted and ultimately refused to agree with plaintiffs’ proposed business plan,” Gural said in an affidavit.

By Gural’s account, Silverstein’s ideas were “preposterous.” He first sought to replace the departed MacMillan without upgrading the building. Gural said upgrades were required and, for fire safety reasons, the property could not legally be re-rented with only one means of egress.

Silverstein also proposed physically dividing the building into separate properties. But Gural said this was impossible for many reasons, including that the building is landmarked.

“It boggles the mind to suggest that we could nevertheless agree on a plan to physically divide this building into five smaller, independent properties, none of which would be marketable — and then agree on a plan as to how that work would be financed,” Gural said.

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Silverstein, for his part, blames Gural and Newmark. Despite advance notice that MacMillan was leaving, Newmark never marketed the property, Silverstein alleged. He said once MacMillan left, Gural entered into negotiations to rent the office space to Knotel for an “exceptionally low cost per square foot” — under $44 — with renewal periods of close to 50 years.

He also claimed that Newmark’s Barry Gossin had a large stake in Knotel, and that Gural entered into negotiations with WeWork, according to a court filing.

“The proposed rental agreement would have locked the property into an unprofitable lease for a long period of time,” Silverstein said in an affidavit. The Knotel deal never came to fruition, and the startup filed for bankruptcy in 2021 and was bought by Newmark.

Eventually the building owners decided to proceed with an $80 million renovation of the 120-year-old property, including façade restoration, new elevators and an updated lobby.

But Silverstein alleged that Gural inflated construction costs. He claimed, for example, that he could obtain “very high-quality marble” from local sources at a fraction of what was paid. He also said he could find union construction labor for $35 per hour instead of the normal rate of $100. (Construction wages vary greatly; there is not a single rate.)

Gural ultimately said the parties found themselves at loggerheads with no end in sight. The building remains empty.

“Plaintiffs have reluctantly concluded that there is no alternative but to end their relationship with defendant as co-owners of this historic property,” Gural said in a filing.

The Flatiron Building — the first Manhattan skyscraper north of 14th Street — is one of the city’s most famous towers. PincusCo first reported news of the auction.

An attorney for Silverstein did not immediately return a request for comment. 

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