Issue #133  8/29/2007
Sotheby's May Have to Look For New Digs in New York City or Perhaps It Will Just Buy Back Its Headquarters

If you are a long-time reader of this newsletter, you may recall that I covered the announcement of Sotheby's sale of its New York headquarters' building in early January 2003. They also hiked their rates back then too. As Yogi Berra used to say, "It seems like déjà vu all over again." Except with a twist that Yogi would love.

According to a quarterly August 9th filing by Sotheby's with the Security and Exchange Commission, the buyer of the building, RFR Holding might have "violated" the terms of its lease agreement with the auction house by reportedly shopping the property for as much as $500 million. RFR at the time of purchase reportedly paid only $175 million to Sotheby's, not including a lucrative lease back by Sotheby's.

Sotheby's claims that its lease agreement with RFR Holding puts it at the front of the line of any potential buyers. "The company is pursuing its rights with respect to the right of first offer," said Sotheby's in the SEC filing. "If the company is successful, this could result in a material benefit to the company."

According to the filling, "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."

Gee, sounds like Sotheby's is having seller's regret. Of course, that was then (a stock that was tanking, a chairman that was in jail for price fixing that screwed the company's customers and resulted in multi-million dollar fines for the company, a website that blew over $100 million and had to be folded later that year, a lower Moody's rating, a net loss of nearly $55 million in FY2002, etc.). Today, after Sotheby's just posted its second best quarter in its history and has hiked its fees twice this year, it may be looking to buy back some property--and pay nearly three times what it sold its headquarters for less than five years ago.