Lawsuit: Bribe-Receiving HOA, Greedy Real Estate Developer Conspired To Blindside, Bulldoze NYC Co-Op Unit Owners Into 'Green-Lighting' Building Sale For Less Than Full Value; Intimidation Threats Included Warnings That Projected Increase In Existing Ground Lease Payments In 2018 Threatened To Wipe Out Their Home Equity In Apartments

In New York City, The Real Deal (NYC) reports:

• Residents of a Chelsea co-op claim they were strong-armed into the shady sale of their building, alleging that the buyer, Galil Management, may have plied board members with cash or flashy new apartments.
  
  In a lawsuit filed [] in state Supreme Court, a dozen residents of 101 West 23rd Street accuse the board and Galil Management of launching a “campaign of intimidation, harassment, threats coercion and scare tactics” to get support for its “devious plan” to sell the 80-unit building. Galil, formerly E&M Associates, bought the land and ground lease in 2014 for $95 million in 2014. The lawsuit claims the board may have undersold the property to Galil because the firm paid off members or promised them apartments in a development that will replace the co-op.
  
  An attorney for the residents, Andrew Wong, told The Real Deal that the bribes allegation is based on rumors and the belief of his clients. He said so little is known about the building sale that they believe more factors are at play.
  
  “The terms are so favorable to the buyers that there’s something else going on here that we want to know about,” he said.
  
  Representatives for Galil and the board could not immediately be reached for comment.
  
  The complaint accuses Galil and board members of concealing details of the building sale from the co-op’s shareholders and harassing residents until they signed onto the deal, which needed 81 percent of the shareholders to succeed. The board members painted the building sale as an imperative move to avoid financial ruin for the co-op, the lawsuit states.
  
  “The board told shareholders that this was the only deal in town and if it was not approved, then everyone would lose everything,” the lawsuit claims. “They have rammed through this sale without regard to the best interests of all the shareholders and the cooperative.”
  
  The lawsuit alleges that the residents were also first blindsided by the board’s plans to sell the co-op when they announced a deal with the Chetrit Group — which owns the land at 115 West 23rd Street, the adjacent parcel — for $40 to $45 million.
  
  That sale fell through, and in the spring of 2015, the board told the residents that it was in talks with Bateleur Capital. This sale also soured because the board was “insulted” by Bateleur’s significantly lower offer of $20 million, according to the lawsuit. But only a few weeks after the fallout with Bateleur, the board announced that it would sell the co-op to Galil — the land owner — for roughly the same price: $20 to $25 million. The residents allege that the building is worth at least $46 million.
  
  During a shareholder meeting on August 19, the board said the co-op needed to go through with the sale or it would need to file for bankruptcy due to an impending increase in maintenance costs when the ground lease reset in 2018. If it came to that, residents would lose the entire value of their shares, the board allegedly warned.(1)
  
  Galil also only gave the shareholders until Oct. 1 to agree to the sale and stipulated that the residents would need to be out by February 2016, effectively giving them only four months to find somewhere else to live, according to the lawsuit.
  
  The complaint suggests that one of the board members, David Carlos, as a broker with Savills Studley, stood to benefit from the deal, but also intimates that Galil might be paying off board members or offering them apartments in a development that will replace the co-op.
  
  The group of residents are seeking at least $25 million in damages.

Source: Galil, Chelsea co-op board conspired on building sale, residents claim (A lawsuit alleges that bribery may have taken place at 101 West 23rd Street).

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(1) Periodic escalations in ground lease payments for co-ops & condominiums that don't own the land their buildings are situated on appears to be a big problem for unit owners in those buildings. See, for example:

• High-End Homeowners Begin Plans To Flee Ritzy, 21-Story Midtown NYC Co-Op That Sits On Leased Land; Painful Ground Rent Increases On The Horizon, Expected To Be In The Million$, Threaten To Drive Building's Apartment Values Into Toilet Despite Otherwise Bullish Market,
  .
• Luxury Living Or High-Priced Urban Trailer Parks? Skyrocketing NYC Real Estate Values Have Some Apartment Owners In Ground-Leased Buildings Biting Their Nails; Periodic Upward Rent Adjustments, Lease Expirations Threaten To Evaporate Their Home Equity While Appreciation Inures To Landowner.