The Flatiron Building sold on Wednesday — at least, it looked that way for a couple of days. Jacob Garlick, the high bidder at the auction, came out on top with a bid of $190 million. That was a rude surprise to Jeffrey Gural, whose family firm is part of a four-owner consortium already holding 75 percent of the building; his group was considered the likeliest buyer for the remaining quarter. It was a court-ordered sale, intended to resolve the long-running stalemate between Gural’s group and the remaining fifth owner, Nathan Silverstein.
There were, says auctioneer Matthew Mannion, 11 registered bidders as the auction began, and “four or five actually placed any bids”; after they reached about $160 million, it became a two-person bid-’em-up race between Gural, a well-known New York real-estate guy, and Garlick, an investor from Virginia who owns a couple of buildings here but has virtually no public profile. When Garlick won, he dropped to his knees in excitement, telling NY1 that such a moment had “been my lifelong dream of mine since I’m 14 years old. I’ve worked every day of my life to be in this position. We are honored to be a steward of this historic building, and it will be our life’s mission to preserve its integrity forever.” Then he took off and has not said another word in public — or, apparently, to any of the other parties involved — since. (He has also not responded to requests for comment from the New York Times or any other news reporters, including me.) On Friday, The Real Deal reports, he failed to deliver the 10 percent down payment that was due. He appears to have been granted an extra day or two after that, and blew through that deadline as well. The lawyer Peter Axelrod, who is acting as the referee between the building’s feuding partners, told the Times, “I suspect he didn’t have the money, or that he realized he overbid and decided not to proceed.”
It was an unusual auction, says Mannion. Typically, potential buyers of a property this size have to front a few million dollars beforehand to establish that they’re legit. This time, although buyers were required to register in advance, they didn’t have to pay ahead. “I’ve done thousands of auctions,” Mannion says, sounding a little surprised, “and you can count the amount that didn’t require a down payment up front on one hand.” It’s not entirely clear whether, under the terms of sale, Garlick will be on the hook for a portion of his bid anyway, to cover the costs of the auction and lawyering and more generally causing a headache.
Since he dropped out, the building is being offered to the underbidder, Gural, at $189.5 million. He is almost sure to decline, since he had been bid up by about $30 million in the final moments. It seems likeliest that the building will go back to auction, and that he’ll get a second and somewhat less expensive bite of the apple when it does.
Why bid up an auction when you don’t have the money? Gural speculated to the Times that Garlick might have been secretly working on behalf of his soon-to-be-former partner Silverstein, who stands to profit from a higher final price. (Big if true: That is known as shill bidding, and it’s illegal.) Or maybe Garlick just got caught up in the heat of the moment. There is research about this, and it seems that a mix of physical factors — such as blood oxygen levels — can cause a sort of fight-or-flight response at the prospect of losing to a rival. Basically, people get caught up in the moment and just keep going, past the point of reason. Then the smoke clears, and when it comes time to write the check, they quietly head back to their corners, or to their offices in Virginia.