Extell sues Enterprise for premium rent at Midtown garage

Parking facility should be appraised as a dev site: lawsuit

New York /
Nov.November 06, 2015 08:32 AM

Extell Development asked a judge to let it charge one of its parking garage tenants, Enterprise Rent-A-Car, as if it were leasing retail space at the base of a luxury tower.

Gary Barnett’s firm filed suit against the car rental firm over a rent reset at 12 West 48th Street, where the developer manages a parking garage.

Enterprise occupies 11,000 square feet at the six-story, 51,000-square-foot garage. The firm’s lease calls for rent to be adjusted periodically, to account for changes in the property’s “fair market value.”

In the complaint, Extell’s lawyer asserts that reappraisal should be performed based on possible uses of the property – which has just over 90,000 square feet of buildable space, according to Reonomy – rather than its actual, present use.

The building, the suit reads, “is currently used merely as a parking garage for the operation of a car rental business. i.e., a use far less than its highest and best use. There are five years left on the lease. The ‘fair market value’ of this property as a retail or development site is thus considerable.”

Enterprise apparently wasn’t impressed by this logic.

“For obvious reasons,” the claim states, “the tenant insists that the appraisal be done based on the use of the space as a parking garage.”

A lawyer unaffiliated with the case who examined the documents was similarly unmoved.

“In my view it’s pretty stupid,” said Adam Gilbert, a partner at Nixon Peabody specializing in real estate litigation and real estate valuation issues.

The building is leased, Gilbert said, and not available for development. Another tenant, Central Parking, occupies the remainder, according to CoStar.

The lawsuit “suggests Extell can get to the land,” he said. “There’s no evidence of that.”

He also pointed to a provision of the lease cited in the complaint that calls for “a commercial real estate broker familiar with the operation of the parking garage business in the City of New York” to arbitrate a potential disagreement between landlord and tenant.

That provision, he said, clearly suggests the sides agreed to appraise the property as a garage. Extell is “just reading that out,” Gilbert said.

Finally, the complaint makes clear the parties have previous performed rent resets according to these rules. At those times, Extell seems to have agreed to value the space as if it were part of a parking garage, Gilbert pointed out.

“There are a number of arguments here available to the defense,” said Gilbert. “This case is going nowhere. It’s regrettable that [Extell] brought it.”

Another lawyer who looked over the complaint said Extell’s logic is more appropriate in negotiations with ground lessors. In those cases, appraising according to the property’s “highest and best use” is often appropriate, that attorney said.


Related Articles

arrow_forward_ios
One Manhattan Square Extell Development CEO Gary Barnett (Credit: Curbed NY)

Extell lands $690M refinancing package for One Manhattan Square

Extell lands $690M refinancing package for One Manhattan Square
Churchill Real Estate's Justin Ehrlich and 381 Broadway (Google Maps)

Two-year Tribeca foreclosure saga continues with lawsuit over $20M

Two-year Tribeca foreclosure saga continues with lawsuit over $20M
Vanke US managing director Kai-yan Lee, RFR’s Aby Rosen and 100 East 53rd Street (Photos via Foster + Partners and Getty)

Vanke seeks to remove RFR from Midtown condo project

Vanke seeks to remove RFR from Midtown condo project
Extell Development's Gary Barnett and 32 West 48th Street (Google Maps)

Extell makes its Diamond District hotel official

Extell makes its Diamond District hotel official
Magnum Real Estate's Ben Shaoul and 87 Leonard Street (Getty; StreetEasy)

Tribeca condo owners sue Magnum Real Estate, seeking $7.6M

Tribeca condo owners sue Magnum Real Estate, seeking $7.6M
From left: Ben Ashkenazy, 1991 Broadway, 2067 Broadway and Samuel Gindi (Getty; Google Maps)

Billionaire developer Ben Ashkenazy in feud with investor over reputation, cash

Billionaire developer Ben Ashkenazy in feud with investor over reputation, cash
New York Wheel (S9 Architecture|Perkins Eastman; Pixabay)

Going in circles: Dueling New York Wheel lawsuits emerge

Going in circles: Dueling New York Wheel lawsuits emerge
HFZ's Ziel Feldman and CIM's Shaul Kuba (Getty, iStock)

HFZ sues CIM to halt condo foreclosure sale

HFZ sues CIM to halt condo foreclosure sale
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...