CHILI HINCHEY v. THE STATE OF NEW YORK, #2006-013-504, Claim No. 105549
CHILI HINCHEY PLAZA PARTNERSHIP, by Daniel R. Bickel, Receiver
Footnote (claimant name)
THE STATE OF NEW YORK
Footnote (defendant name)
PHILIP J. PATTI
FORSYTH, HOWE, O’DWYER, KALB & MURPHY, P.C.
BY: DUNCAN W. O’DWYER, ESQ., andROBERT J. KALB, ESQ., on the Brief
HON. ELIOT SPITZER
Attorney General of the State
of New York
BY: REYNOLDS E. HAHN,
ESQ.Assistant Attorney General
February 17, 2006
See also (multicaptioned
This is a timely filed claim
for the taking of 8,134± square feet (sq. ft.) of frontage owned by
Claimant, Chili Hinchey Plaza Partnership, by Daniel R. Bickel, Receiver,
located at 1295 Chili Avenue in the Town of Gates, Monroe County, in a project
identified as “Chili Road, Pt 1, SH No. 254” and, as set forth in
Map No. 227, Parcel No. 232, also included several improvements. The
improvements involved the removal of 8,134± sq. ft. of asphalt in fair to
poor condition, 18 lined parking spaces, 100± linear feet of steel
guardrail and a double-sided identification sign.
The Notice of Appropriation and map as it affected Claimant’s property
were filed in the office of the Monroe County Clerk on November 6, 1998, the
agreed upon date of vesting. The Court has viewed the property (Court of Claims
Act § 12).
Claimant took title to this property by deed dated July
7, 1983 and recorded August 29, 1983 in the Monroe County Clerk’s Office
in Liber 6376 at Page 248 (Exhibit 1). There appears to be no dispute by either
party as to this date.
The subject property was located on and abuts the
south side of Chili Avenue and consisted of 5.981± acres and was
appropriately zoned General Business (GB) and was served by all public
utilities. It was improved with a 68,428 ± sq. ft. multi-level structure
erected in 1949-1950 and at the time of the appropriation was described as being
in fair to poor condition reflecting “significant deferred
maintenance” (Exhibit 2, pg. 23). The upper level had 26,397± sq.
ft. of gross building area at road grade, while the lower level of 42,031±
was below grade and had a rear exposure at parking lot grade. The total rentable
area was 67,822± sq. ft., with 26,335± sq. ft. on the upper level and
41,487± sq. ft. on the lower level. At the time of the taking there were
90,000± sq. ft. of asphalt paving in fair to poor condition with parking
for 112± cars in front and an area to the rear for open parking.
result of the taking, Claimant lost a strip of area along the front
approximately 431 feet in length and varying between 12 feet to 19 feet in
width. Some 8,134± sq. ft. of asphalt were removed, resulting in the loss
of 18± paved/lined parking places. Also removed were 100± linear feet
of guardrail and a double-sided plaza identification sign. No building
improvements were located in the area of the taking. The alleged effect of the
taking centered upon the loss of the 18± parking places which, since they
were located at the front of the buildings, impacted the convenience of
customers using the plaza, since they would now be required to park at the rear
of the plaza and walk around to the front to access the stores located there.
According to Claimant’s expert, the loss of what he described as prime
parking spaces diminished the available parking area by 16% for shoppers
wishing to use the upper (front) retail establishments. He also noted that the
zoning in effect for the property at the time of acquisition required six spaces
per 1,000 sq. ft. and, in the case of the subject property, that would have
required 158 spaces based on the applicable square footage. Consequently, he
opined that the taking had a further negative impact on the subject’s
value as a consequence of the appropriation. However, the subject property
still was compliant with the town zoning requirements, since there was ample
area to the rear that could be utilized for parking (Exhibit 2, pg. 3). While
Claimant’s expert states that “[s]everal tenants vacated space at
the subject as a direct result of the inadequate parking (see addenda)”
(Exhibit 2, pg. 3), the addenda contains but a single letter, dated January 4,
1999 from Teacher’s World (Exhibit 2, A-15), to support that assertion.
Claimant’s expert concluded that the highest and best use of the
subject property prior to the appropriation was “as developed.”
However, after the Defendant’s acquisition of the various improvements
and that area containing the 18 parking spaces, the highest and best use changed
in his opinion to “a transitional use until such time that the property
would either be demolished and redeveloped or completely renovated”
(Transcript, pp. 32-33). He opined that this may not occur for several more
years and that in the meantime the property would continue to deteriorate due to
the loss of parking, resulting in the further loss of tenants because of the
loss of adequate parking and reduction of the income stream.
at the subject’s value, Claimant’s expert did not consider the cost
approach and performed a market data or sales approach in arriving at a land
value as improved, as well as vacant. He stated, however, that the income
approach was the preferred methodology by which to determine the subject’s
worth. The market data approach was not relied upon since he concluded that
properties such as Claimant’s are purchased based upon their income
potential and strength, and comparable sales would be difficult to find, since
there were not similar properties available which exhibited that income stream
and investment quality comparable to the subject, given its age, vacancy rate
and lack of sufficient parking to the front.
utilizes the sales comparison approach, however, to fix the subject’s land
value to be incorporated in his income approach (Transcript, pp. 33-34). After
utilizing the sales comparison approach, he set the value for the subject at
$300,000.00 per acre.
In his analysis of the subject’s value using
the income approach, he fixed the subject’s before value to be
$1,335,000.00, utilizing the actual rents and the direct capitalization method.
He buttressed that by implementing a discounted cash flow methodology over a
five-year period and arrived at a before value of $1,270,000.00. He then
reconciled these valuations to set the before value at $1,300,000.00. To fix
his after taking value, Claimant’s appraiser limited his analysis to the
discounted cash flow using a higher capitalization rate to reflect that greater
risk of ownership and the effect the appropriation had on the subject property.
This resulted in the subject being valued at $840,000.00, and a loss of
$460,000.00 which the appraiser broke down as follows:
Direct Damages: $65,000.00 (land and improvements)
Indirect Damages: $395,000.00
The State’s cross-examination of
this expert established that the subject’s value of $1,794,000.00, as
found by his use of the whole-to-whole market data approach, was significantly
higher than the value he found using the income approach. The appraiser
acknowledged that a prudent owner would be reluctant to invest the amount of
money necessary to make needed improvements to the existing structures since the
improvements would outlast the useful life of the improvements presently
existing and therefore the structure would have to be demolished. He set the
cost of demolition at $342,000.00 (Exhibit 2, pg. 41), which, according to my
calculations, results in a value of $1,452,000.00 prior to the taking. The
State then questioned the expert’s income analysis which, using the
capitalization and/or discount rate as set by him, set the subject’s value
at less than that as found using the market data approach. In fact,
Claimant’s expert conceded at one point under cross-examination that the
income approach demonstrated that the property was breaking even and not
generating a return on equity for the owners (Transcript, pp.
Claimant rested without further proof and the Defendant moved to
strike the income analysis from Claimant’s appraisal as well as the trial
testimony in support of the same, since the whole-to-whole market data approach
clearly showed the property had greater value as vacant land than as improved.
Thus the improvements were in fact a detriment to the property, did not lend any
real contributory value to the property and would have to be demolished by any
prudent investor. I reserved decision on the motion and the Defendant then
rested without putting before me any testimony from an expert regarding the
subject’s highest and best use before or after the taking or the value of
the subject property.
The conundrum posited before me is obvious. On this
record it is clear that Claimant’s expert found the subject and its
improvements to be in fair to poor condition due to significant deferred
maintenance. I find that means the owners chose not to make any significant
improvements which could attract new tenants. This attitude is supported by the
owner’s failure to redevelop the area of the burned-out bowling area over
the 15 years it owned the property prior to the Defendant’s acquisition of
frontage. In my opinion, this failure to maintain the property is as compelling
a reason for the rate of vacancies as the alleged loss of parking
Since there is no proof before me relating to the subject’s
highest and best use other than Claimant’s, I find it to be commercial
subject to future redevelopment. However, while at the time of acquisition it
was generating income, it is obvious on this record that it was decreasing and
would soon fail to break even. This inevitably would result in further
declination of the condition of the improvements and their contributing value to
It is a well-established principle that in ascertaining the
highest and best use of the subject, an appraiser consider whether the
improvements existent on a parcel contribute to its value. If not, then in the
analysis of value of a property, it is appropriate to not consider their
presence and value and to fix a value of the property as vacant land (The
Appraisal of Real Estate, The Appraisal Institute, 12th ed., pp. 305-311).
Thus, a proper analysis would be to establish the value of the subject on a
whole-to-whole comparable market data approach and factor out of that
determination the cost of demolition, which Claimant did. Consequently, I have
given no weight to that portion of Claimant’s appraisal, or its
expert’s testimony, which relies on the income approach to value (Van
Kleeck v State of New York, 18 NY2d 897; Acme Theatres v State of New
York, 26 NY2d 385).
Further, since I find that the improvements do not
have any contributory value to the subject, it follows that there is no
consequential or indirect damage to the subject, and I so find.
remaining issue before me then is to determine a value for the subject property
based on the Claimant’s market data approach. Claimant’s expert
offered four sales, each of comparable size, with Sale Nos. 1, 3 and 4 located
in areas of differing commercial growth. Sale No. 2 is located in the City of
Rochester and was zoned low density residential, and I have not considered that
sale in my calculations or any discussion below. I considered that
Claimant’s expert added the demolition costs to the sale prices of Sale
Nos. 1 and 3, and accept that amount as accurate. I find that the only location
adjustment would be to Sale No. 3 and cannot agree that its location is superior
to the degree as fixed by Claimant’s expert, resulting in a negative 15%
adjustment. I accept the determination that no adjustment is required for
zoning. I find that some of the adjustments made for topographical variations
are too severe. Sale No. 1 should be readjusted to reflect a 10% negative
adjustment in order to bring the subject into parity with it. I make no change
to the appraiser’s adjustment for topography as it pertains to Sale No. 3.
However, Sale No. 4 should have an upward adjustment of 10% to reflect the
subject’s superior topographical composition. Finally I find that Sale
Nos. 1 and 3 each require an upward adjustment for time to accurately reflect
the market dynamics which demonstrate the fact that properties in the area of
these sales, as well as the subject property, were appreciating. Therefore, I
have made upward adjustments of 5% to Sale No. 1 and 10% to Sale No. 3.
find that with these adjustments the per acre value of the subject ranges from a
low of $333,600.00 rounded (R) to a high of $363,000.00 (R). After due
consideration, I find the per acre value to be $345,750.00.
I find the
before value of the subject property to be $2,068,000.00 (R) (5.981 acres x
$345,750.00) and its value after the taking to be $2,003,000.00 (R) (5.794 acres
x $345,750.00) for a difference of $65,000.00. I accept as accurate the
Claimant’s determination for the loss of paving, guardrail and sign of
$9,000.00. I find Claimant’s total damages for land and improvements
taken to be $ 74,000.00, as follows:
Rochester, New York
HON. PHILIP J. PATTI
Judge of the Court of
The original claim herein was served and filed
on or about February 2, 2002. As asserted in a “so ordered”
stipulation of the parties filed on February 26, 2002, the original claim was
sealed. The amended claim, revised to eliminate any reference to the advanced
payment agreement, was filed on February 13, 2002. The parties further
stipulated that the claim herein was timely filed.
This data and the information relating to the
dates of filing of the Notice of Appropriation were taken from Claimant’s
appraisal (Exhibit 2) as the Defendant chose not to introduce its appraisal and
there appeared to be no dispute as to these items.
Claimant’s testimony reads 43,031 sq.
ft.(Transcript, pg. 21), but I have adopted the measurement in his appraisal of
42,031 sq. ft. (Exhibit 2, pg. 3).