New York State Court of Claims

New York State Court of Claims
MONTAUK PROPERTIES v. THE STATE OF NEW YORK, # 2009-045-505, Claim No. 113647

Synopsis

Appropriation decision, partial taking of a commercial area.

Case information

UID: 2009-045-505
Claimant(s): MONTAUK PROPERTIES L.L.C.
Claimant short name: MONTAUK PROPERTIES
Footnote (claimant name) :
Defendant(s): THE STATE OF NEW YORK
Footnote (defendant name) :
Third-party claimant(s):
Third-party defendant(s):
Claim number(s): 113647
Motion number(s):
Cross-motion number(s):
Judge: GINA M. LOPEZ-SUMMA
Claimant's attorney: Koeppel, Martone & Leistman, LLP
By: Siegel, Fenchel & Peddy, P.C.
By: Myrna Cadet-Osse, Esq. and Saul R. Fenchel, Esq.
Defendant's attorney: Hon. Andrew M. Cuomo, Attorney General
By: Rose Farrell Lowe, Esq., Assistant Attorney General
Third-party defendant's attorney:
Signature date: December 22, 2009
City: New York
Comments:
Official citation:
Appellate results:
See also (multicaptioned case)

Decision

This is a timely filed claim for the partial appropriation (taking) of property, as well as a temporary easement on the property, owned by claimant, Montauk Properties L.L.C., brought against defendant, the State of New York, pursuant to the Eminent Domain Procedure Law and 30 of the Highway Law.

The subject property, prior to the taking, consisted of three contiguous lots improved with a shopping center. Together the lots comprised an irregularly shaped parcel with approximately 662 feet of frontage along the southerly side of New York State Route 25 (Middle Country Road) and 80 feet of frontage on the westerly side of Hawkins Avenue. The property is located in the Village of Lake Grove, Suffolk County, New York. The total area prior to the taking was approximately 6.822 acres or 297,166 square feet. The buildings on the property totaled approximately 70,205 square feet.

The subject property, after the taking, remains an irregularly shaped parcel predominately level and at street grade. The total area is approximately 6.65 acres or 289,700 square feet. The size of the buildings on the property did not change after the taking.

During the trial of this matter the parties agreed that the title vesting date was December 12, 2006 and that title to the subject property on the vesting date was in the name of claimant (see Def Exh H).

The Notice of Claim was served on defendant on May 2, 2007 and the Amended Notice of Claim was served on defendant on June 4, 2007. The documents were filed with the Court on May 3, 2007 and June 6, 2007, respectively. The appropriation maps and descriptions contained therein are adopted by the Court and incorporated herein by reference. The aforesaid maps and descriptions were filed in the Office of the County Clerk of Suffolk County. Pursuant to the requirements of Court of Claims Act 12(4) and EDPL 510(A), the Court has made the required viewing of the property which is the subject of this claim. The claim has not been assigned or submitted to any other Court or tribunal for audit or determination.

The subject property is identified on the Suffolk County Tax Map as Section 14, Block 5, Lots 4, 5 and 9. The taking and the temporary easement were associated with a construction project to expand New York State Route 25.

Pursuant to CPLR R 3025(c), the Court deems that the pleadings are conformed to the proof presented at trial.

The subject property is zoned for commercial use. The zoning permits a shopping center, such as was developed on the property. The shopping center consists of three buildings. The building located closest to Middle Country Road is a stand alone building occupied by "Two Guys Discount Appliance" store. The building located in the southeasterly portion of the property houses several small retail stores. The third building is occupied by the "Burlington Coat Factory," "Classic Carpet" and "Country Parlor Furniture" stores.

At the time of the taking, the property was legally non-conforming to zoning as a result of a variance approved in 1996 for the expansion of the building housing the Two Guys Discount Appliance store.

The appropriate measure of damages for a partial taking of real property is the difference between the value of the whole property before the taking and the value of the remainder after the taking (Coldiron Fuel Ctr., Ltd. v State of New York, 8 AD3d 779 [3d Dept 2004]). The measure of damages must reflect the fair market value of the property in its highest and best use on the date of the taking (Centereach Car Care Ctr. v State of New York, 271 AD2d 391 [2d Dept 2000]).

Both parties agree that both prior to and after the taking the highest and best use of the subject property was as commercial property. Mr. Ronald Haberman, a real estate appraiser, prepared claimant's appraisal in this matter and testified on claimant's behalf at trial. Mr. Haberman considered what was physically possible, legally permissible, economically feasible and maximally productive for the property in determining its highest and best use. He concluded that the site's current improvement as a shopping center was the highest and best use of the property. Mr. Patrick Given, who is also a real estate appraiser, prepared defendant's appraisal in this matter and testified on defendant's behalf in this case. Mr. Given concurred with Mr. Haberman's conclusion and noted that the subject property was being used as a shopping center both prior to and after the taking.

Consequently, the Court finds that the highest and best use of the subject property is its current use as a commercial property.

Both claimant's and defendant's appraisers utilized three different methods for evaluating damages in this matter, the vacant land valuation approach, the direct sales comparison approach and the income approach.

In analyzing the value of the land before the taking, Mr. Haberman prepared a vacant land valuation using five sales comparable to the subject property. His adjusted value ranges for the land ran from $24.50 to $29.86 per square foot.(1) He selected an estimated value for the subject in the before situation of $26 per square foot for 297,166 square feet yielding a vacant land value of $7,725,000.(2)

Mr. Haberman used the direct sales comparison approach to determine a before taking market value for the entire property, including gross building area. Claimant's appraiser compared the subject property with six improved properties. The adjusted sale price per square foot for the comparables, excluding the high and low, ranged from $187.30 to $229.93. Using these sales, claimant's appraiser estimated a per square foot price of $215, which when applied to the subject property's building area produced an appraised value for the subject property before taking of $15,025,000.

Claimant's appraiser also utilized the income approach to value the subject property before taking. Mr. Haberman began with the selection of 8.5% as an Overall Capitalization Rate. In order to estimate potential gross income, Mr. Haberman divided the subject property into two types of retail space; a large retail unit of 48,600 square feet and a satellite unit of 21,605 square feet. Mr. Haberman compared the satellite space to six leases, three of which were actual leases on the subject property. Results of this analysis displayed rents ranging from $18.94 per square foot to $24.45 per square foot.(3) Mr. Haberman used these figures to estimate a "fair and reasonable" net economic rent of $22 a square foot. He then applied $22 a square foot to the subject property's gross leaseable area for the satellite unit to determine a potential gross income of $475,310.

Turning to the large retail space before taking, Mr. Haberman looked at six comparable large retail leases in order to establish a potential gross income for the subject property's large retail space. Results of this analysis displayed rents ranging from $18.15 per square foot to $23.10 per square foot. Mr. Haberman used these figures to estimate a "fair and reasonable" net economic rent of $21 a square foot. He then applied $21 a square foot to the subject property's gross leaseable area for the large retail space to determine a potential gross income of $1,020,600. Adding the two figures together yielded a total potential gross income for the subject property of $1,495,910.

Mr. Haberman then reduced the potential gross income by an estimated vacancy rate of 5%. He continued by deducting expenses of $81,416 which left a net income of $1,339,698. He then applied an overall capitalization rate of 8.5% which resulted in a before taking value for the subject property using the income approach of $15,760,000.

After reconciling the income approach with the direct sales comparison approach, Mr. Haberman found a final before taking value of the subject property of $15,500,000 of which he attributed $7,725,000 to the value of the land.

After the taking, Mr. Haberman still found that the highest and best use of the property remained as a neighborhood shopping center. The subject property was reduced in size to 289,700 square feet by the taking. Mr. Haberman calculated an after taking vacant land value of $26 per square foot which resulted in an appraised vacant land value of $7,530,000.

Mr. Haberman again used the direct sales comparison approach to evaluate the entire property, including gross building area, in the after taking scenario. Mr. Haberman again compared the subject property with the same six improved properties. After certain adjustments, Mr. Haberman calculated an appraised after taking value of $14,325,000.

Mr. Haberman also utilized the income approach to value the subject property after taking. Mr. Haberman applied reductions to income caused by the loss of 25 automobile parking spaces as well as the loss in land area. He then deducted expenses and capitalized at an 8.6% overall rate. His analysis resulted in an appraised value using the income approach, after taking, of $14,975,000.

After reconciling the income approach with the direct sales comparison approach, Mr. Haberman found a final after taking value of the subject property of $14,780,000 of which he attributed $7,530,000 to the value of the land.

Consequently, Mr. Haberman found total damages of $720,000 by deducting $14,780,000 from $15,500,000, excluding damages related to the temporary easement. Mr. Haberman allocated $254,000 of the total damages to direct damages and $466,000 of the total damages to severance damages.

In analyzing the value of the land before the taking, Mr. Given also prepared a vacant land valuation. Mr. Given compared the subject property to four other comparable properties, two of which were the same properties Mr. Haberman used for his vacant land comparison. After considering each of the sales, including their similarities and differences in comparison to the subject property, Mr. Given concluded a "reasonable estimate" of the subject's land value if vacant as $6,820,000.(4)

Mr. Given also utilized the income approach to value the subject property before taking. Mr. Given began his analysis by estimating the fair annual rental for the subject property. After reviewing certain lease information he selected $18.50 per square foot as an appropriate rental amount for the subject property's anchor store space. He multiplied the $18.50 by 48,600 square feet of anchor store space to get $899,100 as being most indicative of the economic rent for the subject's anchor tenant space.

Mr. Given used similar methodology in arriving at $23 per square foot as an appropriate rent for the subject property's in-line satellite store space. He then multiplied $23 by 15,370 square feet of in-line satellite store space to conclude $353,510 as being most indicative of the economic rent for the subject's in-line satellite tenant space.

Mr. Given performed a separate calculation for the subject property's freestanding retail building. After his analysis he selected $25 per square foot as being most indicative of the economic rent for the subject property's freestanding building. He multiplied $25 by the 6,235 square feet of freestanding retail space to determine a value of $155,875.

Mr. Given then added tenant expense reimbursements to the rental income for the anchor, satellite and freestanding building retail space to get a total rental income of $1,688,257. Mr. Given then applied a vacancy rate of 10% to reach an effective income of $1,519,431. He then deducted expenses to reach an annual net income estimate of $1,092,910. In analyzing the net income Mr. Given utilized the Mortgage Equity Technique, whereby an overall rate is used to capitalize the net income into an indicated value. Applying this rate to the annual net income resulted in an overall valuation of the subject property, before taking, of $12,750,000 using the income approach.

Finally, Mr. Given used the sales comparison approach to value the property as improved, before taking. Mr. Given analyzed four sales of comparable properties, including their similarities and differences in comparison to the subject property as improved and concluded a unit value of $190 per square foot of building area. Mr. Given multiplied $190 by 70,205 square feet of building area to determine $13,350,000 as being most representative of the value of the subject property in the before taking situation using the sales comparison approach.

After reconciling the income approach with the direct sales comparison approach, Mr. Given found a final before taking value of the subject property of $13,000,000.

Mr. Given found that in both the before and after scenarios the highest and best use of the subject property was as commercial development, similar to the existing development on the subject property. In the after taking situation, Mr. Given found that the subject's land size is reduced from approximately 6.82 acres to approximately 6.65 acres. Access to the site was unchanged. There was also a loss of 25 parking spaces and the setback of the northerly building will be reduced from 50 feet to 14 feet. The loss of parking will make the subject more non-conforming than in the before situation. The loss of building setback will make the northerly building non-conforming.

In analyzing the value of the land after taking, Mr. Given began by preparing a vacant land valuation. Mr. Given compared the subject property, after taking, to the same four comparable properties he used in his before taking analysis. After considering each of the sales, including their similarities and differences in comparison to the subject property, Mr. Given concluded a "reasonable estimate" of the subject's land value, after taking, as if vacant, of $6,650,000. Mr. Given found improvements located in the fee acquisition area valued at $60,000. He also found land improvements located in the temporary easement area, which if affected, have a value of $4,000. However, it was stipulated to at trial that compensation for all improvements direct to the land, such as three freestanding signs, in the taking area be valued at $60,000 (see Def Exh H).

Mr. Given also utilized the Income Approach to value the subject property after the taking. Mr. Given again began his analysis by estimating the fair annual rental for the subject property. Mr. Given used the same comparable leases he used in the before situation. After considering each of the appropriate leases, including their similarities and differences in comparison to the subject property after taking, Mr. Given selected $18.20 per square foot as an appropriate rental amount for the subject property's anchor store space. He multiplied $18.20 by 48,600 square feet of anchor store space to get $884,520 as being most indicative of the economic rent for the subject's anchor tenant space.

Mr. Given again used similar methodology in arriving at $22.60 per square foot as an appropriate rent for the in-line satellite store space after the taking. He then multiplied $22.60 by 15,370 square feet of in-line satellite store space to determine $347,362 as being most indicative of the economic rent for the subject's in-line satellite tenant space.

Mr. Given performed a separate calculation for the subject property's freestanding retail building. After his analysis he selected $20 per square foot as most indicative of the economic rent for the subject property's freestanding building. He multiplied $20 by the 6,235 square feet of freestanding retail space to determine an after taking value of $124,700.

Mr. Given then added tenant expense reimbursements to the rental income for the anchor, in-line satellite and freestanding building retail space to get a total rental income of $1,636,354. Mr. Given then applied a vacancy rate of 10% to reach an effective income of $1,472,719. He then deducted expenses to reach an annual net income estimate of $1,046,198. In analyzing the net income Mr. Given again utilized the Mortgage Equity Technique. Applying this technique to the annual net income resulted in an overall valuation of the subject property using the income approach, after taking, of $12,205,000.

Finally, Mr. Given also used the sales comparison approach to value the property as improved, after taking. Mr. Given analyzed the same four sales of comparable properties as those he used in the before scenario, including their similarities and differences in comparison to the subject property as improved, and concluded a unit value of $176 per square foot of building area. Mr. Given multiplied $176 by 70,205 square feet of building area to determine $12,356,000 as being most representative of the value of the subject property in the after taking situation using the sales comparison approach.

After reconciling the income approach with the direct sales comparison approach, Mr. Given found a final after taking value of the subject property of $12,280,000.

Consequently, Mr. Given found total damages of $720,000 by deducting $12,280,000 from $13,000,000, excluding damages related to the temporary easement. Mr. Given allocated $230,000 of the total damages to direct damages and $490,000 of the total damages to severance damages.

The Court notes that both appraisers have reached the exact same amount of total damages resulting from the taking, excluding damages related to the temporary easement. Consequently, the Court hereby adopts defendant appraiser's methodology and findings in this matter without adjustment and awards claimant $720,000 total damages for the taking excluding damages related to the temporary easement.

At trial the parties stipulated that the temporary easement will be in effect for a period of 60 months from the vesting date. The parties agreed to a valuation for the temporary easement of $460 per month for 60 months for a total of $27,600.(5) Consequently, the Court hereby awards $27,600 for damages related to the temporary easement (see Village of Highland Falls v State of New York, 44 NY2d 505 [1978]).

Therefore, based on the foregoing, claimant is awarded a total of $747,600 in damages. This amount was calculated by adding total damages (direct and severance) of $720,000 from the taking to $27,600 in damages related to the temporary easement. Accordingly, claimant is entitled to an award of $747,600 with statutory interest from the vesting date of December 12, 2006 to the date of decision and thereafter to date of entry of judgment.

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 or lienors having any right or interest in any stream, lake, drainage and 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 thereto; and is exclusive also of claims, if any, for the value of or damage to easements and appurtenant facilities for the construction, operation or maintenance of publicly owned or public service electric, telephone, telegraph, pipe, water, sewer or railroad lines. To the extent the claimant has paid a filing fee, it may be recovered pursuant to Court of Claims Act section 11-a(2).

All other motions on which the Court may have previously reserved or which were not previously determined, are hereby denied.

The Chief Clerk of the Court is hereby directed to enter said Judgment accordingly.

December 22, 2009

New York, New York

GINA M. LOPEZ-SUMMA

Judge of the Court of Claims


1. Claimant's appraiser removed the highest and lowest comparable land values from his final calculations throughout his report.

2. Claimant's appraiser rounded off final values throughout his report.

3. Mr. Haberman excluded the highest and lowest leases from his final calculations throughout his report.

4. Defendant's appraiser also rounded off final values throughout his report.

5. The parties further agreed that in the event the temporary easement lasted for a period longer than 60 months then defendant would issue a new Agreement of Adjustment at the monthly rate of $460 for any additional time.