Published: August 21, 2007
In December 2002, when real estate investor RFR Holding LLC announced that it had entered into an agreement to purchase Sotheby’s flagship headquarters at 1334 York Avenue for $175 million, Aby Rosen, a principal of the firm, was quoted as saying, “RFR is delighted to have acquired this Class A asset, already fully occupied by one of the most prestigious and recognizable tenants in the world.”
In a press release issued at the time, Sotheby’s President and Chief Executive Officer Bill Ruprecht similarly enthused that the sale represented “an outstanding opportunity. . . Sotheby’s looks forward to a long and exciting future in our worldwide headquarters that are without equal in the auction world.”
Relations between landlord RFR, which was to lease back the ten-story building located on the tony Upper East Side between 71st and 72nd Streets to Sotheby’s on a long-term basis, and its tenant have not been so rosy of late. According to a filing Sotheby’s made with the US Securities and Exchange Commission (SEC) on August 9, the auction house said RFR Holding may have “violated” the terms of its lease agreement by shopping the property for as much as $500 million.
Sotheby’s contends that its lease agreement with RFR Holding should put it at the head of the line of potential buyers. “The company is pursuing its rights with respect to the right of first offer,” said Sotheby’s in its quarterly SEC filing. “If the company is successful, this could result in a material benefit to the company.”
In its filing, Sotheby’s recapped its agreement with RFR Holding: “On February 7, 2003, the company sold the York property and entered into an agreement to lease it back from the buyer for an initial 20-year term, with options to extend the lease for two additional 10-year terms. According to the terms of the lease, if the landlord desires to sell the York property or to engage in certain other transactions involving a change of ownership or control of the landlord, notice shall be given to the company by the landlord of such proposed transaction and the landlord shall give the company an offer to purchase the York property and a statement of the proposed purchase price and the proposed closing date for the transaction. Upon receipt of such notice, the company has a 30-day right of first offer to accept or reject the landlord’s offer. If accepted, the company would purchase the York property at the proposed purchase price.”
It is unclear whether Sotheby’s, having recently reported the highest second quarter results in the company’s history, wants to buy back 1334 York Avenue. Through a spokeswoman, the firm declined any further comment beyond its 10Q filing.
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