The knock-on effects of the 2019 rent law aren’t just tanking rent-stabilized values, they’re sparking legal battles between brothers.
Michael and Ed Ostad, who head fix-and-flip lender Flatiron Realty Group, slapped younger brother Steve with a suit demanding a court dissolve the trio’s partnership so the elder Ostads could unwind themselves from 10 underwater rental properties, PincusCo first reported.
This is the second time in a week the brothers have filed effectively the same suit — a judge rejected the first on Monday, writing the “allegations are insufficient to support relief requested,” Steve’s attorney Christopher Milito of Morrison Cohen noted.
“Their case didn’t even make it to the starting line, much less past it, ” Milito said, adding that Steve “sincerely doubts” the portfolio is underwater.
“We’ll find out for sure when third-party subpoenas go out and the cash gets tracked under judicial supervision,” he concluded.
Michael and Ed did not immediately return requests for comment.
The portfolio — a little over half rent-stabilized, tax records show — spans the city, from the Bronx over to East Harlem down to Gramercy Park and across the East River to Jackson Heights, Queens.
And the unit makeup differs widely from building to building. The property at 1065 Nelson Avenue in the Bronx, for example, is all rent-stabilized; 361 1st Avenue in the East Village is entirely free market.
That variance shows how a handful of rent-regulated buildings can drag down an entire portfolio. The elder Ostads claim the buildings’ values have slipped below the loan amounts — a common complaint among owners since the rent law all but froze building revenues.
The brothers’ plan is to liquidate the assets, which collateralize $80 million in debt, according to the suit.
Standing in the way, seemingly, is Steve.
Though falling values drove the decision to sell, Steve’s refusal to cooperate likely spurred the suit. Michael and Ed’s complaint includes an operating agreement that notes the ownership entities can be dissolved via written consent; judicial decree is the other option.
The older Ostads, who describe themselves as “successful urologists” in addition to investors, don’t mince words in describing their younger brother’s alleged incompetence.
They claim Steve, who is over a decade their junior, “did not go to college … has never had a job … [and] has a lifelong history of serious personal issues and self-destructive behaviors.” They allege Steve has been sued over a dozen times in the past five years and in the same period racked up millions of dollars of judgments and debts, some of which they have had to cover.
In the past year, the ownership entities have paid over $1 million to settle those debts, not counting $200,000 to hard money lenders “who have repeatedly visited the companies’ offices demanding that they pay Steven’s debts,” the lawsuit details.
A redacted text message from one of Steve’s friends included in the complaint shows what the older brothers have allegedly been dealing with.
Steve, who founded residential brokerage Empire City Realty in 2010, spent a few years at his brothers’ firm as an associate before launching lending firm Real Quick Capital in 2022, according to his LinkedIn.
Real Quick is listed as permanently closed on Google and the website domain is unclaimed. The site for Empire City is also defunct.
Steve last appeared in The Real Deal in early 2023 when he listed his Greenwich Village townhouse for the same price he paid in 2021. He has yet to find a buyer, property records show.
Michael and Ed, meanwhile, seem to be in growth mode.
The duo bought a $100 million residential and retail portfolio concentrated near Barclays Center from the Pintchik family in January. Ed has been scooping up one-off buildings and modest portfolios across the city — spending about $43 million in the past year, according to PincusCo.
This article has been updated to include a comment and additional context from Steve Ostad’s attorney
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