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
Patrick Nelson of Nelson Partners Student Housing and the Skyloft Austin (Nelson Partners Student Housing, STG Design, iStock)
Languishing student housing firm on the hook for $50M
Languishing student housing firm on the hook for $50M
964 Park Place (Google Maps, iStock)
Eviction redux: Crown Heights family faces second ouster
Eviction redux: Crown Heights family faces second ouster
Adam Birnbaum of Abrams Fensterman and 964 Park Place (Twitter, Google Maps)
Shocking twist in Crown Heights “deed theft” case
Shocking twist in Crown Heights “deed theft” case
 Miki Naftali and Adam Leitman Bailey (Getty, Adam Leitman Bailey; Illustration by Kevin Rebong for The Real Deal)
Heavyweight lawyers at war in Naftali holdout drama
Heavyweight lawyers at war in Naftali holdout drama
Extell Development's Gary Barnett. Bluestone Group's Eli Tabak and 605 West 45th Street (Google Maps. LinkedIn, Extell Development)
Gary Barnett hunts lucrative Hell’s Kitchen assemblage
Gary Barnett hunts lucrative Hell’s Kitchen assemblage
Ranee Bartolacci and Nir Meir (Getty, iStock / illustration by Ilya Hourie for The Real Deal)
Judge runs out of patience with Nir Meir
Judge runs out of patience with Nir Meir
National Association of REALTORS' Charlie Lee (LinkedIn, iStock, Illustration by Kevin Cifuentes for The Real Deal)
NAR catches break in one antitrust lawsuit
NAR catches break in one antitrust lawsuit
arrow_forward_ios

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

Loading...