New York State Court of Claims

New York State Court of Claims

CMRC v. THE STATE OF NEW YORK, #2002-029-218, Claim No. 94967


Synopsis


Appropriation - commercial property - income capitalization approach used for valuation. Total appropriation - Court awards $5.8 million.

Case Information

UID:
2002-029-218
Claimant(s):
CMRC, LTD.
Claimant short name:
CMRC
Footnote (claimant name) :

Defendant(s):
THE STATE OF NEW YORK
Footnote (defendant name) :

Third-party claimant(s):

Third-party defendant(s):

Claim number(s):
94967
Motion number(s):

Cross-motion number(s):

Judge:
STEPHEN J. MIGNANO
Claimant's attorney:
Goldstein, Goldstein, Rikon & Gottlieb, PCBy: Michael Rikon, Esq.
Defendant's attorney:
Hon. Eliot Spitzer
Attorney General of the State of New YorkBy: Victor J. D'Angelo, Assistant Attorney General
Third-party defendant's attorney:

Signature date:
September 30, 2002
City:
White Plains
Comments:

Official citation:

Appellate results:

See also (multicaptioned case)



Decision
This is a timely filed and unassigned claim for the full appropriation of claimant's real property pursuant to the Eminent Domain Procedure Law and Sections 30 and 349-c of the Highway Law. The appropriation map, with description, was filed in the Office of the New York County Clerk on September 16, 1996.

The claim was filed in the Office of the Chief Clerk of the Court of Claims on October 18, 1996 and properly served on the Attorney General on the same date. The appropriation map and description set forth therein are adopted by the Court and incorporated herein by reference.

The subject property was located on the northeast corner of West 23
rd Street and 12th Avenue in the Chelsea section of Manhattan (see Exhibits 3, 4 and 5). It is identified on New York City's tax rolls as Block 669, Lot 1. The subject property is nearly rectangular in shape and has approximately 205' of frontage on West 23rd Street and approximately 101' 3" of frontage on 12th Avenue. The parties agreed that the subject property covered a total area of 21,361 square feet. The parcel was zoned M2-3 which permitted commercial and retail uses. The site was improved with a four-story building which was built in 1921. Claimant's appraiser described the building as a "garage/industrial building" (Exhibit 1, Page 30) and the State's appraiser described it as a "warehouse building" (Exhibit A, Page 37). The Court accepts claimant's appraiser's testimony that the gross area of the building was 85,734 square feet. The evidence established that the building had a structural steel frame, reinforced concrete floors and brick exterior walls. The evidence further established that the building had a sprinkler system, was fireproof and had two freight elevators capable of handling small trucks. The building had good electrical service (1,200 amps per floor) and restrooms on each floor. The building also had two illuminated rooftop sign structures and a wall mounted sign on the east side exterior wall. The Court finds that the evidence established that the building was in good condition.
HIGHEST AND BEST USE BEFORE TAKING
Claimant's appraiser, Robert Von Ancken, a New York State certified appraiser, has attained various designations from several appraisal and real estate organizations attesting to his expertise in this field (see Exhibit 1, Pages. 96-99) and was accepted by the Court, without objection, as an expert in the field of real estate appraisal. Mr. Von Ancken opined that the highest and best use of the subject property as improved is for retail and commercial uses that complement the immediate area's sports/recreational, entertainment and related uses (Exhibit 1, Page 37).

The State's appraiser, Richard Marchitelli, a New York State certified appraiser has also attained various designations attesting to his expertise in this field (Exhibit A, Pages 11-12). Mr. Marchitelli's qualifications were conceded and he was accepted by the Court as an expert in the field of real estate appraisal. It was the opinion of this witness that the highest and best use of the subject property as improved is for industrial/warehouse purposes (Exhibit A, Page 39).

In order to determine the highest and best use of the subject property it is necessary for the Court to describe the surrounding neighborhood in some detail. As stated above, the subject property is located in the Chelsea section of Manhattan. The evidence established that Chelsea is an area on the west side of Manhattan bounded by 14
th Street on the south, 30th Street on the north, 6th Avenue (Avenue of the Americas) on the east and the Hudson River on the west (Exhibit 1, Page 25). Mr. Marchitelli acknowledged that at about the time of this taking the neighborhood was experiencing changes in the use with light manufacturing being replaced by commercial, retail and entertainment establishments. Retail establishments were opened along Sixth Avenue between West 17th Street and West 23rd Street (see Exhibit 1, Page 26). Art galleries opened in the area due to the lower rents and the availability of small garage type buildings. The art galleries tended to be located around the Dia Center for the Arts on West 22nd Street and the Paula Cooper Gallery on West 21st Street (Exhibit 1, Pages 25-27; Exhibit A, Page 31). In July of 1994, the Chelsea Piers complex began construction over the Hudson River piers located between West 17th Street and West 23rd Street (Exhibit 1, Pages 25-26, 28; Exhibit A, Page 31). This complex included sports related facilities, restaurants, a film and television studio and retail space.
Despite the change in use in parts of Chelsea, the area surrounding the subject property continued to support the commercial and industrial uses which pre-dated the taking. These uses included parking facilities, storage, U-Haul and truck leasing, warehouses, tire dealerships and vehicle maintenance facilities (Exhibit 1, Page 26). The existing use of the subject property's ground floor by a motorcycle shop, while considered retail, was consistent with the more commercial uses of the surrounding neighborhood. The manufacturing and commercial uses in the neighborhood of the subject property, while in partial transition east of 11
th Avenue, have remained consistent north and south of the subject property since the date of the taking (Exhibit 1, Page 25). The subject property also has access to public transportation. There is east-west bus service on 23rd Street and north-south bus service on 7th, 8th, 9th and 10th Avenues. There is also subway service on 23rd Street at 6th, 7th and 8th Avenues (Exhibit 1, Pages 25-26; Exhibits A, Page 33).
The condemnee is entitled to the highest and best available use of the property, irrespective of whether it is being so used (
Matter of County of Suffolk [Firester], 37 NY2d 649; Keator v State of New York, 23 NY2d 337; Breitenstein v State of New York, 245 AD2d 837). It has been held that a claimant is entitled to the highest and best available use of his property apart from its actual use (Matter of County of Suffolk [Firester], supra). A speculative or hypothetical highest and best use cannot serve as the basis for an award and there must be a reasonable probability that an asserted highest and best use would materialize in the reasonably near future. If the highest and best use proffered is dependant on a change in zoning to permit that highest and best use, then the reasonable probability that a zoning change could be obtained must be found (Masten v State of New York, 11 AD2d 370, affd 9 NY2d 796; West Seneca Cent. School Dist. v State of New York, 60 AD2d 760). An indication that there is "some possibility" is insufficient. It must be established that the asserted highest and best use could or would have been made of the subject property in the near future (Matter of City of New York [Shorefront High School-Rudnick], 25 NY2d 146, 149).
In determining the highest and best use of the subject property, claimant's appraiser relied heavily upon his perceived changes in West Chelsea beginning in the early 1990's. At trial, Mr. Von Ancken testified that starting in 1990 there was a tremendous change in the "retail character" of the neighborhood of the subject property (TT[1]
, Page 13). He stated that the area was changing from industrial to commercial uses (TT, Page 13). With respect to retail uses, he cited the influx of art galleries and entertainment establishments that entered the area in the early and mid 1990's. As seen in the exhibits at trial (Exhibit 1, Pages 76-78, Exhibit 2, Page 6) the art galleries were primarily located on West 20th Street, West 22nd Street and West 26th Street. Most tended to be located around the Dia Art Center on West 22nd Street and the Paula Cooper Gallery on West 21st Street and tended to purchase or lease small one and two-story garage type buildings (Exhibit 1, Page 27). The Court notes that none of the galleries referred to by claimant's expert had an address as far west as claimant's, 617-635 West 23rd Street. The two western most galleries are located at 545 and 548 West 22nd Street (Exhibit 2, Page 6). The attraction to the West Chelsea area was the availability of low rents and small one-story garage type buildings. As testified to upon cross-examination by Mr. Von Ancken, the "retail" uses in the vicinity of the subject property were limited to art galleries and automotive/motorcycle sales and repair business. While Mr. Marchitelli agreed that the vehicle related uses were technically considered "retail", he testified that they were the type of uses that would be suited to more industrial areas such as the subject neighborhood (TT, 178-180). Mr. Von Ancken conceded that the area of traditional retail use (such as clothing, housewares and office supplies) was located further east on 6th and 8th Avenues (TT, Page 59). These uses were restricted to these avenues as public transportation (subway stops) were located at 14th Street and 23rd Street. The testimony established that several major retailers opened stores in this area. None of these large retailers appeared west of 8th Avenue. Despite Mr. Von Ancken's testimony that the subject site had excellent access to public transportation (Exhibit 1, Page 25), this Court finds, as did the Court in Dynamic Delivery Corp. v State of New York[2] (Claim No. 95500, filed October 16, 2002, Nadel, J., affd 290 AD2d 227 1st Dept 2002), that the availability of public transportation in the vicinity of the subject property is limited. While bus transportation is available along 23rd Street, the nearest subway station is three long blocks away. The Court finds that the distance from public transportation and isolated location of the subject property made it less suited for most retail uses.
With respect to the use of the subject property for commercial uses, including those involving sports and entertainments, Mr. Von Ancken relied heavily upon the establishment of the Chelsea Piers complex as a draw to the area. He testified that Chelsea Piers would create an influx of sports related uses. However, Mr. Von Ancken conceded on cross-examination that Chelsea Piers was the only sports and entertainment business in the area, a fact supported by the Court's own observation on the site visit. Mr. Marchitelli testified that Chelsea Piers was a "destination location" that is, most patrons arrive there by automobile and do not loiter in the area after they leave. I find that the Chelsea Piers did not have the effect on the neighborhood suggested by Mr. Von Ancken. Mr. Marchitelli testified that the area to this day remains primarily commercial and industrial and the Court agrees with this, based upon my observations when I visited the subject property. The subject property was, however, ideally situated for automobile and truck traffic with its proximity to Route 9A. Despite the alleged changes in the neighborhood, the subject area, as seen in the photographs offered in evidence (Exhibits 4 and 5) continues to support the pre-existing use. Seven of claimant's eight comparable leases (Exhibit 1, Pages 60-61) demonstrate the industrial/commercial nature of the uses continuing to exist in the subject neighborhood.

Based upon the evidence presented at trial, the Court finds that the highest and best use of the subject property prior to the taking was for industrial and manufacturing purposes.
VALUATION
Claimant is entitled to fair compensation for the property appropriated by condemnation (
Matter of Town of Islip [Mascioli], 49 NY2d 354, 360). Generally, the subject property is valued as it was on the date of the appropriation and the measure of the damages is its fair market value in its highest and best use on that date (Gold-Mark 35 Assocs. v State of New York, 210 AD2d 377). The fair market value is the price for which the property would sell if there was a willing buyer and a willing seller under no compulsion to either buy or sell (Matter of Allied Corp. v Town of Camillus, 80 NY2d 351; Gold-Mark 35 Assocs. v State of New York, supra).
There are three generally accepted approaches to determine the value of real estate: the cost approach, the income approach and the sales-comparison approach. Both appraisers used the income and sales-comparison approaches.

When a property is income producing, as is the case of the subject property, the preferred method of valuation is the income approach (
City of Buffalo v Joseph Davis, Inc., 32 AD2d 604, affd 26 NY2d 869; Kurnick v State of New York, 54 AD2d 1098; City of Niagara Falls v Zak, 40 AD2d 755). Considering the income producing nature of the subject property and the absence of owner occupancy, the Court believes that the income approach is the best indicator of the value and will rely on that approach as presented by the appraisers. Thus, for purposes of this decision, the Court will not engage in an in depth review of the data contained in the sales-comparison analysis used by either appraiser.[3]
Claimant's appraiser, Mr. Von Ancken, analyzed eight rentals of what he deemed to be similar commercial property. The first four rentals are comparable for the first and second floors of the subject property and the last four are comparable upper floor space rents according to Mr. Von Ancken. The beginning of the lease periods ranged from August, 1996 to June, 1998. The suitability of comparables is a matter resting in the sound discretion of the trial court (
Levin v State of New York, 13 NY 2d 87; Glenn Houle Co. v State of New York, 73 AD2d 794). The Court finds that claimant's Comparable Rental 1 is not comparable to the subject property in that Comparable Rental 1 involves the rental of 74,000 square feet on the ground floor of a building. The rental space is substantially larger (approximately 3.5 times) than any floor of claimant's property.[4] The conditions of the rental lease required Von Ancken to make a sizeable adjustment (20%). He also made adjustments for location, corner and size totaling another 20%. He also made a negative adjustment of 4% for time. These adjustments resulted in a very sizeable overall adjustment of 38%, which indicates to the Court that this rental parcel is not really comparable to the subject and I will not consider this rental in determining the subject's fair marker value.
Comparable Rental 2's lease was agreed to in February, 1997 and consists of 20,000 square feet of space on the ground floor of a building on 11
th Avenue for $18.00 per square foot. This property was located right next to the subject property. Von Ancken made a 15% adjustment for the conditions of the lease. Von Ancken stated that the lease was for proposed gallery use and that the tenant was required, as part of the lease, to invest $1,000,000 for space improvements over the lease term. The only other adjustment he made was a negative 3% for time. This resulted in a final adjusted rent per square feet of $20.08.
Comparable Rental 3's lease was entered into in September, 1996 and consists of 42,200 square feet of ground floor and mezzanine space in a building located on West 57
th Street between 11th and 12th Avenues. The rent per square foot, according to claimant's appraiser, was $18.16. Von Ancken made negative 5% adjustments for location and utility/condition finding the comparable to be superior to the subject in these categories. He made a 5% adjustment for size on the basis that smaller parcels rent for more per square foot than larger parcels. These adjustments resulted in a final adjusted rent per square foot of $17.25.
Comparable Rental 4's lease was entered into in May, 1996 for a term beginning June, 1998 and consists of 34,562 square feet of space on the ground floor and second floor of a building on West 25
th Street between 10th and 11th Avenues. The rent per square foot was $14.85. As the lease was negotiated four months prior to the appropriation of the subject property, Von Ancken added 3% based on his conclusion that the real estate market experienced growth in rental rates of approximately 5% per year in 1996. He also made a combined 20% adjustment for corner and street/avenue location as he determined the subject property was superior to the comparable. This resulted in a final adjusted net rent of $18.35 per square feet.
We now move to Von Ancken's comparable rentals for the upper floors of the subject property. Comparable Rental 5, entered into in May, 1997, consists of 9,000 square feet of space on the 14
th floor of a building on West 26th Street between 11th and 12th Avenues. The rent was $8.50 per square foot. Von Ancken made a negative 4% adjustment for time based on the growth in rental rates between September, 1996 and May, 1997. He made no other adjustment and arrived at a final adjusted rent of $8.16.
Comparables 6, 7 and 8 consist of 5,463 square feet, 4,876 and 3,000 square feet of space respectively. As stated above, each floor of the claimant's property consists of 21,300 square feet of space. Each of these rentals is considerably smaller than each floor of the subject property.[5]
The suitability of comparables is a matter resting in the sound discretion of the trial court (Levin v State of New York, 13 NY2d 87, supra; Glenn Houle Co. v State of New York, 73 AD2d 794, supra). I find that claimant's Comparable Rentals 6, 7 and 8 are not comparable to the subject based upon their respective sizes and I will not consider these rentals in determining the subject's fair market value.
Based upon Von Ancken's analysis of the rentals, it was his opinion that the rental value of the ground floor of claimant's property on September 16, 1996 was $19.00 per square foot; the second floor was $13.00 per square foot; the third floor was $9.50 per square foot and the fourth floor was $8.50 per square foot.

The subject property also contained two roof-top signs which were leased to Transportation Displays, Inc. (see Exhibit 1, Page 67). The lease was extended for a two-year period beginning on October 1, 1994 at a flat annual rent of $70,000 (id). Mr. Von Ancken asserts that "both parties acknowledge that the rental rate was negotiated with knowledge of the pending condemnation and is below market" (Exhibit 1, Page 67). It is claimant's appraiser's opinion that the market rental value per year of each of the roof-top signs is $63,000. The subject building also had painted wall signage space on its easterly exterior wall which, according to claimant's appraiser, had a rental value per year of $20 per square foot. The available sign was 20' x 30', or 600 square feet. Thus, it was Mr. Von Ancken's opinion that the rental value of the wall sign was $12,000 per year.

Mr. Von Ancken then determined the potential gross income for the year ending September 15, 1997 of the subject building as $1,203,000. He then deducted 6% as the estimated vacancy rate and credit loss. He then determined and deducted the building's annual total expenses as $301,718 to reach the conclusion that the annual net income was $829,102. He then determined the capitalization rate was 9.7%. The value of the property being determined by dividing the net income by the capitalization rate, Von Ancken's conclusion, using the income approach, was that the value of the subject property was rounded to $8,500,000 ($829,102 ÷ 9.7% = $8,547,443).

The Court now turns to the State's appraisal (Exhibit A) prepared by Mr. Marchitelli. He also used the sales comparison and income approaches to arrive at a value of claimant's property. For the reasons stated previously, the Court will not consider the sales comparison analysis (see infra Page 8). Marchitelli analyzed three rentals of what he deemed to be similar commercial property. The beginning of the lease periods ranged from February, 1996 to June, 1996. The leased areas of the three rentals are 11,500 square feet, 12,000 square feet and 9,122 square feet. Marchitelli determined the rent per square foot of each rental and then adjusted the price for location and physical condition to arrive at an indicated price per square foot.

Defendant's Comparable Rental 1 is located on West 28
th Street between 7th and 8th Avenues and is 11,500 square feet of space. Marchitelli determined the rent was $11.30 per square foot. He made two negative adjustments, one for location of $1.00 determining the comparable to be in a superior location than the claimant's property and a $2.00 adjustment for physical condition, determining the comparable to be in a better physical condition than claimant's property. This resulted in a net adjustment of negative $3.00 and an indicated rent of $8.30 per square foot.
Comparable Rental 2 is for the rental of 12,000 square feet of space in a building located on West 19
th Street between 6th and 7th Avenues. Marchitelli determined the rent was $7.75 per square foot. He made one adjustment of negative $1.00 for the superior location of the rental property. This resulted in a net adjustment of negative $1.00 and an indicated rent of $6.75 per square foot.

Comparable Rental 3 is for the rental of 9,122 square feet of space in a building on West 25
th Street between 5th and 6th Avenues. Defendant's appraiser determined the rent was $10.36 per square foot. He made a negative $1.00 adjustment for the superior location of the rental property. This resulted in a net adjustment of negative $1.00 and an indicated rent of $9.36 per square foot.
Based upon this analysis, Marchitelli concluded that the market rent of claimant's property was $8.00 per square foot at the time of the taking for a potential gross income of $683,552. He concluded the vacancy rate to be 8% ($54,684) for an effective gross income of $628,868. He then estimated the total expenses to be $258,400 resulting in a net operating income of $370,468. Marchitelli concluded that the capitalization rate was 10.4% and that the indicated value of claimant's property was $3,562,192 which he rounded to $3,600,000 ($370,468 ÷ 10.4% = $3,562,192).

As stated previously, the suitability of comparables is a matter resting within the sound discretion of the trial court (
Levin v State of New York, 13 NY2d 87, supra; Glenn Houle Co. v State of New York, 73 AD2d 794, supra). The Court finds that the three rentals used by the State in the income capitalization approach are not comparable to the subject property. Regarding Comparable 1, defendant's appraiser made a net adjustment of approximately negative 27% for location and physical condition. This is a substantial adjustment and indicates to the Court that this property is not truly comparable to the subject. In addition, the appraiser made no adjustment for the difference in size between the rental (11,500 square feet) and the subject property (21,300 square feet per floor). The rental is a little more than half the size of each floor of the subject property. It was established at trial that smaller parcels rent for more per square foot than larger parcels, thus, it is the Court's belief a further negative adjustment of at least 5% is necessary. This would result in a total negative adjustment of more than negative 30%. This further adds to the Court's belief that Rental 1 is not truly comparable to the subject.
The Court further finds that Comparables 2 and 3 are not truly comparable to the subject based upon the fact that Marchitelli did not make any negative adjustment for the smaller size of either of the rentals. Also to be considered is that Rental 2 is located on the 4
th floor of an "8 and 10 story multi-tenant loft building" (Exhibit A, Page 65) and Rental 3 is on the 10th floor of a 12 story loft building (id., Page 66). The subject building had only 4 stories. Further, Marchitelli made no distinction in rents for the lower floors of the subject as compared to the upper floors. The Court accepts Von Ancken's testimony in this regard that lower floors have more rent per square foot than the upper floors. The Court finds that the State's failure to present evidence to the Court for rents of both lower and upper floors comparables detracts from the credibility of the State's appraisal. For all of the foregoing reasons, the Court finds that these rentals are not truly comparable to the subject and the Court will not consider them in determining the fair market value of claimant's property.
While actual rent may be the best indicator of value, it is merely a factor to be considered in determining income value and another figure may be adopted if the actual rent is shown to be too high or too low (
Motsiff v State of New York, 32 AD2d 729, affd 26 NY2d 692; Kommit v State of New York, 60 AD2d 945; Matter of City of New York [First Elephant Estates - La Hermosa Church], 17 AD2d 317). Here, claimant's appraiser in his appraisal set forth the rent roll for the subject property for the year 1993. He commented on each lease setting forth the annual base rent increase. There were five lessees. One lessee paid a flat rent and two paid increases based upon the Consumer Price Index (CPI) rate. Only the tenant paying a flat rate did not share increases in real estate taxes, direct utilities and rubbish removal. No evidence was presented by either side to establish the CPI rate or the annual increases in real estate taxes, direct utilities or rubbish removal after 1993. Thus, while evidence was submitted to establish the actual rent paid in 1993, there was insufficient evidence submitted for the Court to determine that the actual rent paid by the lessees in 1996 was a true indicator of value or was too high or too low. Thus, the Court will not consider the rent paid by the tenants of the subject building in determining the income value.
Turning now to claimant's proof, regarding Comparable Rental 2, the Court finds that Von Ancken's adjustment of 12% for conditions of the lease is not supported by a preponderance of the credible evidence. Claimant presented no evidence, other than Von Ancken's conclusion, that the $1 million the lessee in Comparable Lease 2 had to spend on improvements over the term of the lease somehow necessitated an upward adjustment. The Court finds no adjustment for conditions of the lease is supported by the evidence. This results in a net adjustment of negative 3% for a price of $17.46 per square foot.

Turning to Rental 3, this comparable is located on West 57
th Street between 11th and 12th Avenues. Claimant's appraiser, realizing that this location is superior to claimant's, made a 5% negative adjustment. The Court finds that this adjustment is too low and that a negative 10% adjustment is more reasonable. This results in a net adjustment of negative 10% for a price of $16.34 per square foot.
Regarding Rental 4, this comparable is located on West 25
th Street between 11th and 12th Avenues. Claimant's appraiser asserts that the subject property has a corner location and is on a more widely traveled street than the comparable and makes a 10% adjustment for each. The Court does not believe that any adjustment for a corner location is supported by the evidence. I also find that a 10% adjustment for street location is too high and that a more reasonable adjustment is 5%. This results in a net adjustment of 8% for a price of $16.04 per square foot.
Turning now to Rental 5, this comparable is for the rental of 9,000 square feet of space. Each floor of claimant's property is approximately 2.3 times larger than this comparable yet Mr. Von Ancken did not make any adjustment for size. He testified that smaller properties rent for more per square foot than larger parcels. The Court notes that Mr. Von Ancken made a 5% adjustment for size to Rental 3, a lease for 42,000 square feet of space - approximately twice as large as claimant's. Thus, the Court finds that a negative 5% adjustment for size is reasonable. This results in a negative 9% adjustment for a price of $7.73 per square foot.

In
City of Buffalo v Irish Paper Co. (31 AD2d 470, affd 26 NY2d 869), the Appellate Division Fourth Department stated the rule that compensation for property under a cloud of condemnation shall be based on value of the property as it would be at the time of the taking if it had not been subjected to the debilitating threat of condemnation and was not taken (see, City of Buffalo v Clement Co., 28 NY2d 241; see also, Niagara Frontier Bldg. Corp. v State of New York, 33 AD2d 130, affd 28 NY2d 755). Von Ancken testified that the subject property was under cloud of condemnation "back to 1990 - - 1986" (TT, Page 24). He stated that the property was slated to be demolished as part of the Westway Highway and then as part of the Miller Highway. He also stated it was known to the owner and tenants of the property from the late 1980's that the property would be acquired (TT, Page 24). He concluded that this fact made it difficult for the owner to get tenants to come into the building. While Marchitelli asserted that the subject property was not under a cloud of condemnation, he stated that the term means that there is a threat of a property being condemned (TT, Page 247). Marchitelli conceded on cross-examination that if a person came to him in 1990 and asked for advice about whether to acquire the subject property he would have told the person that the building was being considered for acquisition by the State at that time (TT, Pages 247-248). Accordingly, the Court concludes that the subject property was under a cloud of condemnation and compensation shall be based on the value of the property as it would be at the time of taking if it had not been subjected to the debilitating threat of condemnation (City of Buffalo v Irish Paper Co., 31 AD2d 470, affd 26 NY2d 869, supra).
The Court arrives at a before valuation of the subject property based upon a preponderance of the evidence, which includes the corrections which the Court deemed necessary to take into account the differences between the subject property and claimant's Comparable Rentals 2, 3, 4 and 5. The following summary reflects these corrections:

Rental 2
Rental 3
Rental 4
Rental 5
Price Per Square Foot
$18.00 $18.16 $14.85 $8.50


Adjustments

Condition of Lease 0 0 0 0
Time -3% 0 3% -4%
Location 0 -10% 0 0
Corner 0 0 0 0
Street/Avenue 0 0 5% 0
Size 0 5% 0 -5%
Utility/Condition 0 -5% 0 0

Net Adjustment -3% -10% 8% -9%

Indicated Value Per Square Foot $17.46 $16.34 $16.04 $7.73

The Court accepts claimant's appraiser's conclusion that there is a $6 per square foot difference in the rents between the ground floor and the second floor and a $1 per square foot difference in the rents between the third floor and the fourth floor.

The Court finds that the indicated rent for the ground floor of claimant's property is $16.50 per square foot; for the second floor is $10.50 per square foot; for the third floor is $7.75 per square foot and for the fourth floor is $6.75 per square foot.

Turning to the value of the two roof-top signs, the Court does not accept Von Ancken's conclusion that the rental rate for these signs was negotiated with knowledge of the pending condemnation and is below market value. Claimant neither presented documentary evidence nor testimony from the lessee or an officer of claimant's corporation to substantiate this conclusion. As stated previously, actual rent is the best indicator of value but another figure may be adopted if the actual rent is shown to be too high or too low (
Motsiff v State of New York, 32 AD2d 729, affd 26 NY2d 692, supra; Kommit v State of New York, 60 AD2d 945, supra). Here, the Court finds that the actual rent paid for the two roof-top signs is the best indicator of rental value and I find the yearly value of the two roof-top signs combined is $70,000.
Von Ancken's appraisal (Exhibit 1, Page 68) relates that the exterior wall sign had been available for lease since at least 1991, five years prior to the condemnation of the property. Thus, I find that claimant has failed to establish by a preponderance of the credible evidence that the exterior wall space had any value.

Von Ancken estimated the vacancy and credit loss rate at 6% while Marchitelli estimated this rate at 8%. The Court concludes, based upon the evidence, that the vacancy and credit loss rate is 7%.


Claimant's appraiser testified that the appropriate capitalization rate is 9.7% and the State's appraiser stated it is 10.4%. I find the appropriate capitalization rate to be 10%. The Court accepts claimant's appraiser's testimony that total expenses for the subject building would have been $301,718.

RECAPITULATION OF DAMAGES
1
st Floor ($16.50/sq ft x 21,300 sq ft) $ 351,450
2
nd Floor ($10.50/sq ft x 21,300 sq ft) 223,650
3
rd Floor ($7.75/sq ft x 21,300 sq ft) 165,075
4
th Floor ($6.75/sq ft x 21,300 sq ft) 143,775
Roof-Top Signs (2) 70,000
Exterior Wall Space for Sign
0
Total Potential Gross Income $ 953,950

Less Vacancy and Credit Loss (7%)
(66,777)
Total Effective Gross Income from Property $ 887,173
Total Expenses
(301,718)
Net Operating Income $ 585,455


Net Operating Income/Capitalization Rate = Value


$585,455 ÷ 10% = $5,854,550



As the Court did not place great weight on the State's appraisal, there is no need to consider the rebuttal in great detail. Likewise, the Court has not relied on claimant's Exhibit 6, the State's prior appraisal of the subject property dated November 22, 1995, which was performed as part of the Route 9A reconstruction project appraisal. The appraisal was performed prior to the subject property's acquisition by the State and was performed as part of the appraisal of the entire project.


The Court has viewed the subject property and, in accordance with all of the foregoing, we find that claimant is entitled to an award of $5,854,550 with statutory interest from September 16, 1996 (the date of the taking) to the date of this decision (see, Court of Claims Act § 19 [1]) and therefore, to the date of entry of judgment herein, pursuant to CPLR 5001 and 5002.

The award to claimant herein is exclusive of the claims, if any, of persons other than the owners of the appropriated property, their tenants, mortgagees and lienors having any right or interest in any stream, lake, drainage, irrigation ditch or channel, street, road, highway or public or private right-of-way, or the bed thereof, within the limits of the appropriated property, or contiguous thereof, and is exclusive also of claims, if any, for the value of or damage to easements or appurtenant facilities for the construction, operation or maintenance of publicly owned or public service electric, telephone, telegraph, pipe, water, sewer or railroad lines.

Let judgment be entered accordingly.





September 30, 2002
White Plains, New York

HON. STEPHEN J. MIGNANO
Judge of the Court of Claims



[1] "TT" refers to the trial transcript.
[2] This property was located directly next to claimant's property.
[3] The Court is further totally unconvinced of the real world "comparability" of the comparable sales submitted by both parties for reasons of proximity, neighborhood and size.
[4] Each floor of claimant's property has 21,300 square feet of space.
[5] Comparable 6 is approximately four times smaller. Comparable 7 is approximately 4.5 times smaller and comparable 8 is approximately 7 times smaller.