Kalikow buys out Manhattan House Partner

Daniel Geiger, Real Estate Weekly
July 19, 2007

Pays $119 million for Jeremiah O'Connor's stake in the property settling lawsuit

Richard Kalikow has bought out his investment partner, Jeremiah O’Connor Jr., in the Upper East Side rental apartment building, Manhattan House, which the two purchased in October 2005 in order to convert into condominiums. The two had been in a lawsuit in recent months that was launched by O’Connor’s ownership interest, ONA Manhattan House LLC, in order to force a breakup of the partnership.

According to court documents O’Connor and Kalikow had been feuding over the conversion’s financing, the scope of the work, as well as how the project would be marketed and the design of its Web site. Among the complaints listed in court documents, O’Connor alleged that Kalikow’s ownership entity in the property, Alpha Manhattan LLC, submitted insufficient budget proposals for the conversion work that subsequently were rejected by lenders, delaying O’Connor’s plans for the property. It appears that O’Connor and Kalikow had different ideas regarding how much work would be conducted.

“ONA has objected to Alpha about the proposed apartment renovations,” ONA’s complaint stated. “Alpha has attempted to justify its suggested mix of apartments on the ground that it wants to create a large inventory of smaller apartments and offer customized units in lieu of larger combination apartments. Alpha never consulted ONA concerning this unilateral, significant and improper diviation from the strategy of maximizing the number of larger combination units.”

But the acrimony seemed to permeate even the project’s smaller details.

“Alpha and ONA have been unable to agree on the website design,” ONA’s complaint read. “First, the concept pages for the website initially presented to ONA incorporated elements from the marketing materials and were of inferior design.”

ONA had sought to force Kalikow to either sell his stake in the property for $31 million or buy ONA’s for $119 million as part of a buy-sell clause in their partnership agreement. ONA’s interest was more valuable the documents show because the firm had invested considerably more in the $889 million Manhattan House, $97.6 million versus Kalikow’s $24.6 million. The documents noted that only $779 million of the purchase price has been paid so far through equity and debt.

ONA had been suing Kalikow because it said he hadn’t recognized their decision to invoke the breakup.

Lawyers for both Kalikow and O’Connor would not comment on the case.

A statement released by Rubenstein Associates only stated that Kalikow had exercised his right to buy out his partner in the 575-unit luxury apartment building on East 66th Street. It said that UBS is providing the financing for Kalikow, but wasn’t specific about whether it would be for the acquisition of O’Connor’s interest or to cover the cost of the conversion.

That release also stated that Kalikow and O’Connor purchased the building from New York Life for $623 million, not the $889 million that O’Connor’s complaint states.