Highest Bidder Appears to Have Backed Out of Sale of the Flatiron Building
At least for a few days, it appeared that the Flatiron Building had sold on Wednesday. With an offer of $190 million, Jacob Garlick, the auction’s highest bidder, won. Jeffrey Gural was taken aback by this as his family company was thought to be the most likely buyer for the remaining 25% of the building, which is currently owned by a four-owner consortium. The long-running impasse between Gural’s group and the final fifth proprietor, Nathan Silverstein, was resolved with the court-ordered sale.
According to auctioneer Matthew Mannion, there were 11 registered bidders when the auction started, but only “four or five actually placed any bids.” Once the bids reached about $160 million, Gural, a well-known New York real estate professional, and Garlick, a Virginia investor who owns a few buildings nearby but is largely unknown in the public, engaged in a two-person bid-’em-up race. When Garlick won, he cried out in joy and told NY1 that experiencing it had been a “lifelong dream of mine since I’m 14 years old. I’ve worked every day of my lift to be in this position. He then left without saying anything further in public or, it appears, to any of the other parties involved. “We are honored to be a steward of this historic building, and it will be our life’s mission to preserve its integrity forever,” he said before leaving. He failed to deliver the required 10% down payment on Friday, according to The Real Deal. He appears to have received an extension of one or two days after that, but he also missed that date. The building’s conflicting parties’ mediator, attorney Peter Axelrod, told the Times, “I suspect he didn’t have the money, or that he realized he overbid and decided not to proceed.”
According to Mannion, the auction was unique. For a property this scale, prospective buyers typically need to put up a few million dollars up front to prove their legitimacy. This time, buyers had to register ahead of time but weren’t needed to make a payment. It’s unclear whether, per the terms of sale, Garlick will be liable for a portion of his bid anyhow, to cover the costs of the auction and lawyering and generally causing a headache. Mannion says, sounding a little surprised, “I’ve done thousands of auctions and you can count the amount that didn’t require a down payment up front on one hand.”
Since he withdrew, Gural, the underbidder, is being given the property for $189.5 million. Given that his offer was increased by about $30 million in the dying seconds, he is almost certain to decline. It appears likely that the building will be put back up for auction and that, when it does, he will get a second, somewhat less costly bite of the apple.
Why enter an offer in an auction if you lack the funds? Garlick may have been covertly working for his soon-to-be-former partner Silverstein, who stands to gain from a higher final price, Gural hypothesized to the Times. That is known as shill bidding, and it is prohibited.) Alternatively, it’s possible that Garlick was simply swept up in the excitement of the situation. According to study on the subject, the possibility of losing to a rival can trigger a type of fight-or-flight response depending on a number of physical factors, such as blood oxygen levels. In essence, people simply keep moving forward against all logic when they become engrossed in the present. When it’s time to write the check, the smoke clears, and they stealthily return to their corners or their workplaces in Virginia.
From Curbed.