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Petitioner, NOTICE OF PETITION "againstCONSOLIDATED EDISON COMPANY OF NEW YORK, INC., Respondent.
11113273
PLEASE TAKE NOTICE, upon the annexed verified petition of 5 1 Park Place LH, LLC,
and upon all the papers and proceedings heretofore had herein, the undersigned will move
pursuant to CPLR 7507, 75 11 and/or 760 1 in Room 130 of the courthouse, located at 60 Centre Street, on the 6'h day of January, 2012 at 9:30 a.m. of that day or as soon thereafter as counsel
can be heard, for an order vacating the arbitratiodappraisal award issued on August 24, 2011
together with such other and further relief as may be just, proper and equitable. PLEASE TAKE FURTHER NOTICE, that demand is hereby made that service of any answering papers to the meion be served at least seven (7) days before the return date. Dated: November 22,201 1 New York, New York
Yours etc., Goldberg Weprin Finkel Goldstein, L > L
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NOV 8Z 2ofE
TO: CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. 4 Irving Place New York, New York
Petitioner,
PETITION
-againstCONSOLIDATED EDISON COMPANY OF NEW YORK, INC.,
Petitioner 51 Park Place LH, LLC, as and for its petitioner to vacate the ArbitratiodAppraisal award defined below pursuant to CPLR 7507, 7511 andor 7601, respectfully avers as follows:
PARTIES
1.
Petitioner herein, 51 Park Place LH, LLC (Petitioner), is the current lessee of
the demised premises at issue and a New York limited liability company with an address at 51
New York corporation with an address of 4 Irving Place, New York, New York and is the current lessors of the demised premises at issue.
OVERVIEW
3.
This case has a long and eventful history, but has ended with a wholly illogical,
invalid and untenable valuation award in which the fair market of the premises at 5 1 Park Place, New York, New York (the Premises) was determined, but not in the way required by the lease.
4.
Rather, in concluding what the fair market value of the Premises was as of August
2008 (and February 2010 for purposes of the purchase option), the appraisers failed to adhere to
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the specific directive that the value be determined as vacant and unimproved but subject to the subject lease.
5.
In fact, the appraisers failed to even consider the most fundamental factor of a
leased property, for the purpose of valuation, to wit, rental income. 6. No valuation of a rental property can be legitimate without including in the
calculus, the actual/potential rental income stream. 7. Moreover, the appraisers determination violates both the contract and applicable
statute because the appraisers failed to execute their required oaths and issue a proper determination, which defects vitiate the award. 8. Because the decision of the appraisers is invalid as a matter of fact and law and is
fundamentally flawed, pursuant to CPLR 7507, 751 1 and 7601, Petitioner hereby moves to vacate the award and the Determination (as herein defined) should be vacated.
BACKGROUND
9. Con Ed is the owner of the Premises and Petitioner is the successor tenant of the
Premises under that certain Agreement of Lease dated August 1, 1972 (the Lease) originally by and between Con Ed, as landlord, and 49 Park Associates, Inc., as tenant. A copy of the Lease is annexed hereto as Exhibit B.
10.
1 1.
During the initial term of the Lease, the rent rose from $12,500 per year in 1973-
The Lease contains a provision pursuant to which the tenant is entitled to exercise
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14.
Section 1.04 of the Lease establishes the procedure for establishing the rent which
The Rental which Tenant agrees to pay during each renewal term shall be an amount per annum equal to % of 1% in excess of the prime rate ...,of the fair market value ... of the Land only considered as vacant and unimproved ... provided however, that the Rental, regardless of such market value, shall in no event be less than $33,000.00 per annum during any renewal term.
- Exhibit B. See,
15.
The Lease provides that, if the parties could not agree on the fair market value of the Premises, a valuation proceeding would be utilized to determine the value. 16. Pursuant to the Lease, each party was to appoint an appraiser (who was required
to have very specific experience and credentials) and, if the two appraisers could not agree on a fair market value within thirty days, the appointees would then chose a similarly experienced and credentialed third appraiser to serve as an umpire.
17.
Thereafter, the determination of any two appraisers would be determinative. Specifically, the Lease provides, in pertinent part, as follows: The appraiser specified .. , shall be a licensed real estate broker doing business in the borough of Manhattan, City and State of New York, and having not less than ten (10) years active experience as brokers and appraisers in said Borough. Before proceeding to determine the fair market value of said land, the appraisers so appointed shall subscribe and swear to an oath fairly and impartially to determine such value. If within thirty (30) days following the appointment of the latter of said appraisers, said two appraisers shall be unable to agree upon the then fair market value of said Land as aforesaid, the said appraisers shall appoint by instrument in writing, as third appraiser, an impartial person, similarly qualified, who upon taking similar oath, shall proceed with the two appraisers first appointed to determine the then fair market value of said Land as aforesaid ...
18.
- Exhibit B. See,
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b.
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19.
After Petitioner exercised its option to renew, the parties did not agree on the fair
market value of the Premises and each hired an appraiser, Jerome Haims for Petitioner, and Robert Von Ancken, for Con Ed. 20. Faced with the requirement to proceed with the Lease-prescribed appraisal
process, and retention of a third appraiser, Petitioner and Con Ed met to establish the procedures and schedule for the appraisal process, which resulted in an agreement dated November 23, 2010 (the November Agreement) which memorialized the following agreed-upon schedule: December 15,2010 January 14,2011
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The appraisers issue a joint determination of value or, failing that, shall submit their respective appraisals to the third appraiser, J o b Pearson.
Rebuttal appraisals to be exchanged Three appraiser to meet to discuss and determine fair market value of the Premises
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The determination of fair market value is to be issued Plaintiff and Defendant to enter into an agreement specifying the amount of the Rental for the Renewal Period
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intervening holidays and Con Ed agreed to the request, answering with its own request for an extension of the aforementioned dates because it wanted to conduct more invasive environmental
22.
By agreement dated December 2 1,20 10, the deadlines were extended such that,
among other things, the deadline for the appraisers determination was June 13,2011.
23.
While Petitioner was cooperative and agreed to the extension of the dates, the
unintended and unanticipated consequence of that cooperation was additional delays by the appraisers in arriving upon their determination which led to the determination not being issued in April, as originally anticipated, or even in June, as Petitioner was willing to tolerate, but rather
The Lease gave Petitioner an option to purchase the Premises. The purchase price for the option to purchase was to be determined by a similar
25.
appraisal process as that established for determination of the rent in the renewal term.
26.
The purchase price to be paid by Tenant to Landlord in respect of such conveyance shall be the fair market value of the Land, Vacant, Unimproved and Unencumbered [by the Lease], and shall be fixed by appraisal of the Demised Premises as of the date of the notice of the exercise of the option.
- Exhibit B. See,
27,
The parties agreed to utilize the same appraisal process and appraisers to
determine the fair market value of the Premises for purposes of both the new rent and the purchase price, but further agreed that the valuation for the purchase price determination would not factor in the Lease inasmuch as the Lease specifically excluded itself from that calculation.
of the fair market value of the Premises, vacant and unimproved but subject to the Lease, as
Mr. Haims determined that the fair market value of the Premises was $3,670,000
while Mr. Von Ancken opined that the fair market value was $1 5,109,250. 30.
After meeting and discussing the foregoing appraised valuations, Mr. Haims and
Mr. Von Ancken were not able to agree on a fair market value,
3 1.
In light of the deadlock, a third appraiser, John Pearson, was retained to serve as
By determination dated August 10,2011 (but emailed to the parties on August 24,
20 1 1) (the Determination), the appraisers issued their conclusion that the fair market value of
the Premises, was $10,350,000 with respect to the rental calculation and $10,700,000 with respect to the purchase option. A copy of the Determination is annexed hereto as Exhibit A. 33. The Determination was not acknowledged.
technical and substantive, which render it invalid as a matter of fact and law, and which require its rejection and vacatur.
In a valuation such as that at bar, the Court of Appeals has directed that the fair
While both appraisers, and presumably, Mr. Pearson in serving as the third
appraiser, purported to determine the value of the Premises as subject to the Lease, it is apparent that they did not do so properly. 37. The critical factor in determining the value of a property which is subject to a
lease, is the rental income which is or could be derived under that lease. 38. The appraisers in their respective appraisals did factor in the consequences of the
existence of the Lease inasmuch as both recognized that the Lease prevented use of the Premises as condominiums (the highest and best use), they failed to appreciate - and factor in - the impact
of the potential rental income that a hypothetical tenant occupying the Premises under the Lease
would be willing or reasonably able to pay and that defect tainted the Determination as it did their respective appraisals. 39.
A tenant holding a leasehold of the Premises under the Lease would face
significant and expensive obstacles to profitably develop and operate the Premises which would
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necessarily significantly and deleteriously impact the rent which such tenant could be expected
to pay. 40.
This significantly lower rental stream must concomitantly significantly lower the
The appraisers failed to consider, analyze and utilize this significant diminishing
factor in arriving upon their determination of the fair market value and, as such, arrived upon a erroneously inflated valuation.
42.
Determination is fatally compromised and the result is contrary to fact and law, is arbitrary and without evidentiary foundation.
43.
The valuation set forth in the Determination is flawed, defective and patently
44.
be vacated.
The appraisers so imperfectly executed their duties that the Determination must
The Appraisers Did Not Execute Their Oaths As Required B y the Lease
45.
The Lease requires that prior to undertaking their duties in determining the fair
market value of the Premises, the appraisers appointed shall subscribed and swear to an oath fairly and impartially to determine such value. See, Exhibit B, at Article 1.05.
46.
Upon information and belief, Messrs. Haims, Von Ancken and/or Pearson failed
to subscribe and swear to an oath to fairly and impartially determine the value of the Premises.
e.
47.
As a matter of contract and law, because the appraisers failed to execute their
oaths before undertaking the duties and issuing their Determination, the Determination is rendered invalid and must be rejected.
The Determination Was Not Acknowledged
48. By statute, an award following an appraisalhrbitration process must be in writing,
50.
5 1.
The Determination was not affirmed as required by statute. The Determination has not been attested to before a notary public. The Determination is legally defective and must be rejected and vacated as a
52.
53.
CPLR 7507, 75 1 1 and 7601 inasmuch as it is contractually, procedurally and statutorily and
legally deficient and defective.
WHEREFORE, Petitioner respectfully requests judgment vacating the Determination and
remanding the matter to the arbitrators for proper determination of the fair market value of the Premises, as well as awarding to Petitioner such further and different relief as the Court may deem just and appropriate in these circumstances.
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Dated:
November 22,201 1 New York, New York Goldberg Weprin Finkel Goldstein, LLP
Attornkys for Petitio er 1501 Broadway, 22" New York, New York 10036 (2 12) 22 1-5700
TO:
Consolidated Edison Company of New York, Inc. 4 Irving Place New York, New York
U
1 V t
VERIFICATION
STATE OF NEW YORK
) ) ss,:
I, the undersigned, an attorney admitted to practice in the courts of the State of New York state that I am a partner of the law fr of Goldberg Weprin Finkel Goldstein, LLP, attorneys for im Petitioner; I have read the foregoing Petition and know the contents thereof; the same is true to my knowledge, except as to those matters therein alleged to be on information and belief, and as to those matters I believe them to be true. The reason this verification is made by me in that a member of the Petitioner is not in the County in which I maintain my law office.
Dated: New York, New York November 22,201 1
Index No,
Year
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51 PARK PLACE LH LLC
-- against --
Petitioner
NOTICE OF PETITION
AND VERIFIED PETITION
~~~
To
Dated:
that an order will be presented for settlement to the HON. within named Court, at on at
Supreme Court Records OnLine Library - page 14 of 14 Dated,
M.