State's appropriation of claimant's property left land improvements unmarketable. Claimant awarded value of land as vacant, plus cost of demolition.
|Claimant(s):||2390 WEST RIDGE,LLC|
|Claimant short name:||2390 WEST RIDGE LLC|
|Footnote (claimant name) :|
|Defendant(s):||THE STATE OF NEW YORK|
|Footnote (defendant name) :|
|Judge:||RENÉE FORGENSI MINARIK|
|Claimant's attorney:||PHILLIPS LYTLE LLP
BY: MARK J. MORETTI, ESQ.
|Defendant's attorney:||HON. ANDREW M. CUOMO
New York State Attorney General
BY: REYNOLDS E. HAHN, ESQ.
Assistant Attorney General
|Third-party defendant's attorney:|
|Signature date:||June 30, 2010|
|See also (multicaptioned case)|
Claimant, 2390 West Ridge LLC, filed claim number 113165 on January 4, 2007, pursuant to Section 30 of the New York State Highway Law and the Eminent Domain Procedure Law, claiming the State's appropriation of its land damaged them in the amount of $544,850.00. I held a trial on this matter on March 25 and 26, 2009.
Three separate, but contiguous, parcels, united in ownership, were affected by this appropriation. Specifically, the appropriation of a fee interest in real property described in Map No. 160, Parcel No. 201; the appropriation of a temporary easement for removing and reconstructing a sidewalk ramp described in Map No. 161, Parcel No. 202; and the appropriation of a temporary easement for removing or razing a sign, plus absolute title to that sign, as described in Map No. 221, Parcel 272. These maps pertain to State Highway 6, Town of Greece, County of Monroe, State of New York. The appropriation maps and descriptions contained therein are adopted by the Court and incorporated by reference. The Defendant has complied with necessary procedures under New York State Eminent Domain Procedure Law with regard to service. I have made the required viewing of the premises. This claim has not been assigned or submitted to any other court or tribunal for audit or determination.STATE'S MOTION TO STRIKE
Following Claimant's direct case, the State moved to strike Claimant's appraisal. The State made several arguments regarding the sufficiency of Claimant's appraisal. Most notably, that Claimant's expert denominated it a "Summary Appraisal Report" (Exhibits 3-A, 3-B and 3-C), and that not all the data supporting his conclusions were included in the appraisal. The State's argument at trial relied heavily on the Uniform Standards of Professional Appraisal Practice guidelines regarding the contents of a self-contained appraisal. But, as Claimant points out, a self-contained, trial-ready appraisal in an appropriation action must comply with the Uniform Rules, specifically 22 NYCRR § 206.21(b). Both parties briefed this issue post trial.
An appraisal report that substantially complies with the requirements of 22 NYCRR 206.21(b) is admissible in an eminent domain proceeding, and any inadequacies in the report go to its weight (National Fuel Gas Supply Corp. v Goodremote, 13 AD3d 1134, 1135 [citing Matter of Welch Foods v Town of Westfield, 222 AD2d 1053, 1054]; Champlain Natl. Bank v Brignola, 249 AD2d 656, 657). After having reviewed Claimant's appraisal report (Exhibit 3-C), the parties' arguments at trial and their post-trial submissions, I find that Claimant's appraisal report substantially complies with 22 NYCRR 206.21(b) and shall not be stricken. The State's detailed critique of Exhibit 3-C will be considered in my determination of the subject property's value. The State's motion to strike is denied.SUBJECT PROPERTY
The affected property is commonly known as 2390 West Ridge Road in the Town of Greece, New York.(1) The land fronts on the north side of West Ridge Road, approximately 211.89 feet, and extends to a depth of approximately 215 feet. It is a 1.1 acre parcel, bounded to the west by Grecian Gardens Drive, a private road, and to the east and north by St. John's Church and School (Exhibit 3-C, p. 10). The property is accessed from a single curb cut on West Ridge Road and is subject to an 18-foot easement for the benefit of St. John's Church and School, providing access to the church property north of 2390 (Exhibit 11).
The subject property is improved by three separate structures. Structure one is the former St. John the Evangelist Church. Originally constructed during the 1870s, it was converted to retail use after Claimant's 1980 purchase.(2) Both appraisers opined that the converted church is rated in average to good condition.
Structure two is the former church rectory, a frame dwelling that has been converted to three retail spaces. This building has two floors and a basement and two means of ingress and egress. It is located to the west of the converted church, across the macadam parking lot. Two commercial tenants leased the first floor and one tenant was on the second floor. Claimant's appraiser rated this structure as average to good condition; Defendant's appraiser described it as average. Based on the testimony, evidence at trial and my viewing of the property, I find this structure to be in average condition.
Structure three is a masonry four-bay garage, used by Claimant for storage. It is located at the rear of the subject parcel, north of the converted church and former rectory. Claimant's appraiser rated this structure as average to good condition; Defendant's appraiser described it as average. Based on the testimony, the evidence at trial and my viewing of the property, I find this structure to be in average condition.
The affected land improvements include: a macadam parking lot with 48 approved parking spaces; a concrete, handicapped-accessible ramp with steel pipe railing; a double-sided, laminate, electric sign on a metal standard; and lawn and landscaped areas. Based on the testimony and evidence presented, I find these particular items to be in average condition.LAND AS VACANT
Claimant's appraiser originally valued the land as vacant as of August 16, 2006 (Exhibit 3-A). He adjusted the figures in his analysis, on page 17 of the Summary Appraisal Report (Exhibit 3-C), using the valuation date of October 14, 2004, the date of the taking (Exhibit 3-C). I note that the three sales used in the Claimant's appraisal's market data approach remained the same, but the adjusted prices in the October appraisal were lower than the adjusted prices in the August appraisal. Claimant's appraiser explained that, in each report, he increased the value of the land by 2% per annum between the date of the sale and the date of the taking based on "market trends." He opined that all land in the area of the subject property increased in value over that time. Thus, rather than relying on actual sales of comparable property to support his opinion of consistently rising property values, he attributed an across-the-board 2% increase in value.
I decline to follow Claimant's theory that the market for vacant land trended up 2% each year during this time period without the data to support such a statement. Further, I find that the vacant land sale comparables should have been adjusted for the adverse easement the 2390 property was subject to, and Claimant's appraiser made no allowance for that adverse easement. I find Defendant's appraiser's five comparable sales, with adjustments, to be reasonable (Exhibit A, p. 70) and adopt a vacant land value of $17.75 per square foot, or $845,539.00 (Exhibit A, p. 72).LAND AS IMPROVED
Both appraisers agreed that the highest and best use of the subject property was its current use in the before situation. Claimant's appraiser valued the buildings at $313,050.00(3) , with land improvements at $24,750.00. Defendant's appraiser valued the buildings at $324,400.00, with land improvements at $30,000.00 (Exhibit A, p. 138). Both appraisers relied upon the comparable sales approach, as well as the income approach to value, in determining their conclusions as to the value of the subject property before the taking.
Both appraisers also used three identical comparable sales on West Ridge Road in the Town of Greece. The sale price for each property was consistent between appraisals (Exhibit A, p. 74; Exhibit 3-C, p. 26), but that's where the similarities ended. Upon comparing the various adjustments made by each appraiser, I find the adjustments made by Defendant's appraiser to be the most credible, particularly with regard to how the sales were adjusted for market conditions. Defendant's appraiser adjusted the value based on market conditions at the time of each individual sale, while Claimant's appraiser added the across-the-board 2% per year appreciation discussed above.
Regarding both appraisers' income approach to value, both appraisals considered the actual rents earned at the time of the taking. Again, I rely on Defendant's appraisal, given the detailed analysis of market rents comparable to each individual tenant on the subject property. Also, I note that Defendant's appraiser considered actual expenses for the subject property when summarizing the operating expenses in the analysis (Exhibit A, p. 134). I adopt Defendant's appraisal's reconciliation of the values developed from the two approaches, as well as the allocations:
Land $ 845,600.00
Land Improvements 30,000.00
Building Improvements: 324,400.00
Value of property before the taking: $1,200,000.00 (Exhibit A, p. 138)LAND VALUE AFTER TAKING
There is no dispute as to the amount of land taken in this appropriation. Both sides agree that 2,550 square feet of land was used by the State to widen West Ridge Road (Exhibit A, p. 2; Exhibit 3-C, p. 32). There is also no dispute that the value of the land as vacant remained unchanged in the before and after situations. As a result, I find that the land as vacant is worth $17.75 per square foot, for a total after appropriation land value of $800,300.00.IMPROVEMENTS AFTER TAKING
It is also undisputed that the land taken at the front of the stone church jogged around the front vestibule, creating an irregular property line after the appropriation (Exhibit 1B-2). As a consequence, the concrete ramp leading to the front landing had to be removed, as well as some of the landscaping. Had the State taken the property in a straight line, part of the church vestibule would have had to be removed. This situation exacerbates the pre-existing problem of the stone church's proximity to West Ridge Road and brings the building even closer to the edge of the road pavement.
Practically speaking, the appropriation effectively limited handicapped access to the building's retail space, made snow removal more costly, caused ice, slush and rain to be sprayed from the road onto the building's front entrance and windows, and forced the property owner to enhance a small employee entrance at the back of the stone church as an alternate means of entry when weather conditions limited the use of the roadside entrance. The taking had an impact on the subject property, but was that impact of such significance that the only remedy is demolition of the stone church and two other structures as Claimant proposes?
At the time of the taking, the stone church and the rectory contained tenants and it is undisputed that the rent earned at this time provided a fair and reasonable return on investment to the property owner. The State's appraiser conducted a market approach analysis (Exhibit A, pp. 152 - 156), as well as an income approach (Exhibit A, pp. 157 - 164), developing a reconciled amount of $1,120,000.00 for the property (Exhibit A, p. 163) after the taking. The State's appraiser concluded that the property's use would continue, the improvements as constituted still added value to the land and that the taking had minimal impact on the Claimant's ability to attract tenants, opining that the rental value was diminished only by $1.00 per square foot.
Claimant's appraiser, however, valued the property after the taking as vacant, and assumed the property was not marketable (Exhibit 3-C, p. 34). He concluded that the property improvements were no longer functional and they should be demolished. Claimant's appraiser does not rely upon the traditional approaches to value, but instead relies upon what actually happened to the property post-taking, i.e. Claimant's inability to lease the property once the tenant Bell Atlantic Mobile of Rochester L.P. d/b/a Verizon Wireless ("Verizon") vacated in January of 2006. Claimant's counsel posits that the Court may rely on other evidence not contained in the appraisal when determining value. Claimant offered Exhibits 31 - 54 in support of his contention that he was unable to obtain a reasonable rate of return on his investment after the appropriation. Defendant argues against consideration of these exhibits because they concern events which occurred after the date of taking.
"It is well settled that the 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" (Chemical Corp. v Town of E. Hampton, 298 AD2d 419, 420, citations omitted). I find no merit to Defendant's argument that the Court should ignore relevant market data concerning the remaining property because that data became (and only could become) available after the taking. In this regard, I note that, in the Chemical Corp. case, the plaintiff's appraiser used a sale of the subject property which occurred four years after condemnation and one year after the action was commenced as evidence of value. The Court agreed that "an arm's-length transaction is usually the best indicator of market value" (298 AD2d at 422) but determined that the circumstances behind the sale were not adequately explained.
Further, while the remainder is to be valued as of the date of taking, this does not mean that information obtained after the taking is not admissible or relevant to that determination. Contrary to Defendant's position, I find that it is not improper to admit evidence of post-taking sales or leases (see Dormann v State of New York, 4 AD2d 979; Dennison v State of New York, 48 Misc 2d 778). In fact, the Court of Claims Act specifically provides for the introduction of evidence of a sale or lease of a property after a taking (Court of Claims Act § 16). It stands to reason, therefore, that market data obtained after a taking, demonstrating that a property can no longer be sold or leased as is, is also admissible.
Finally, I note that ignoring the market data demonstrating the actual effect of the taking would run contrary to the principle that rental value tends to prove fee value (Ettlinger v Weil, 184 NY 179). "Except under unusual circumstances, the actual earnings of multiple dwelling and other improved properties form the factual basis for economic value . . . Estimates of earnings out of conformity with actual earnings should, in the main, be disregarded . . ." (Matter of City of New York, 195 Misc 842, 854).
Patrick J. Bassett purchased the subject property in November 1980 (Exhibit 11). Mr. Bassett testified that he was looking for a retail location for Oakdale Piano and Organ ("Oakdale"). He used the old church for the music store and then a music teacher rented the church basement. Shortly after, he had four tenants in the old rectory. Mr. Bassett stated he had had no vacancies "since the day I bought it." In December 2002, Mr. Bassett transferred his individual fee title to 2390 West Ridge LLC. Over the course of time, it appears Mr. Bassett, then Mr. Bassett as Claimant's sole member, developed long-term tenancies in both the church and the rectory.
After Oakdale and the music teacher vacated, Frontier Communications of Rochester occupied the church. Their lease called for a term of five years (1995 - 2000), with the possibility of extension (Exhibits 21, 22). In May 2000, Verizon executed a two-year lease, with three, one-year options to renew (Exhibit 23). Finally, in June 2002, Verizon executed an amended lease with a term to expire in June 2005, with an option to extend the lease for an additional three years (Exhibit 24). In February 2005, Verizon executed a second amended lease through January 2006 (Exhibit 25). I note that each successive lease increased the annual base rent. It started at $60,000.00 in 1995 and ended at $180,000.00 in 2005 (Exhibits 21, 25). At the time of the taking, Verizon was up for a third renewal of its lease, which it declined to take.
The rectory had three tenants at the time of the taking in 2004. Joseph's Floral & Gifts ("Joseph's") signed a lease in June 1990 for a term of five years at $14,400.00 per year (Exhibit 12). On January 4, 2005, Joseph's went to a month-to-month lease agreement at $10,800.00 per year (Exhibit 13). New owners for Joseph's executed an amended month-to-month lease agreement in February 2007 at the same amount (Exhibit 14).
House of Hair signed its original lease agreement in May 1981, at $9,600.00 per year for three years (Exhibit 15). It executed a second lease agreement in June 1984 in an annual amount of $11,040.00 for five years (Exhibit 16). A third lease agreement was executed in August 1989 at $13,800.00 per year for five years (Exhibit 17) with an option to renew for an additional five years at $15,180.00 per year (Exhibit 18).(4)
The third rectory tenant, Clincue, executed its original lease agreement in November 1983 for a five-year term at $7,200.00 per year (Exhibit 19). A second lease agreement was signed in August 1989 for a term of five years at $12,000.00 per year for 1989 through 1992 and at $14,400.00 per year for 1992 through 1994 (Exhibit 20). Mr. Bassett testified at trial that all three of these tenants were still renting their space in the rectory at the time of the taking.
At some point after the tenants vacated, and prior to the Claimant's appraiser's visit to the property in August 2006, Mr. Bassett's companies began marketing the subject property. Exhibit 53 is a flier used by Bassett Realty Inc., depicting the subject property with the three structures, but noting that "[s]tructures can be removed." It also appears that, commencing in December 2005, a classified ad was run in the Rochester Democrat and Chronicle, announcing "stores for rent" in a "hi traffic" center (Exhibit 54). Mr. Bassett had signs announcing availability as a pad site, that is, a vacant site, placed in the windows of the church, as well (Exhibit 3-C, p. 39).
During this time, Mr. Bassett received two inquiries regarding leasing the church, both offered $1,000 per month - well below the rent the church generated prior to the taking. He also had two calls from brokers representing chain restaurants looking for a site to develop on West Ridge Road. Restaurants presented an issue because it was unlawful to sell alcohol on the subject property's premises as long as the school next door was operating (Exhibit 11 [deed restriction]). Also, there were other properties in the vicinity that were more attractive. None of these options came to fruition.
In the meantime, Mr. Bassett razed the rectory and the garage. His own companies performed work related to the demolition of these two structures at a cost totaling $42,134.77 (Exhibits 34 and 35). However, he discovered environmental issues during the demolition, specifically asbestos. This entailed hiring specialists to perform an environmental survey and the appropriate removal and disposal of contaminated debris. This process cost approximately $18,856.85 (Exhibits 43, 48, 49 and 51).
While planning and executing the demolition, Mr. Bassett explored the possibility of reconfiguring the site and modifying the church to make it more enticing to possible tenants(5) (Exhibit 31). Mr. Bassett hired an engineering firm, Schultz Associates, to assist with project meetings, site plan development, including a storm water and sanitary sewer plan, and meetings with the Town of Greece (Exhibits 36, 38, 39, 41, 42, 44, 46, 47 and 52). The architect was Fenity Associates Architects. Fenity prepared the actual drawings (Exhibits 31, 40, and 50). Despite all the preparation and planning, Mr. Bassett was unable to lease or otherwise develop this site. Based on the testimony at trial and the evidence submitted, I have concluded that his inability to lease the subject premises was not for lack of effort on his part. The appropriation had such a detrimental impact on the property that demolition is the only way to compensate Claimant.
Claimant's appraiser included an estimate for demolition in the amount of $152,500.00 (Exhibits 3-C, p. 35 and 27). Defendant's appraiser estimated $100,000.00 (Exhibit A, p. I-41). Since the dates of these estimates, 2006 for Claimant and 2007 for Defendant, Claimant incurred the expenses discussed above when he demolished the rectory and the garage, hoping to stop the financial bleeding he was experiencing from this once lucrative property.(6) Given the additional costs incurred, especially the identification of the asbestos, it appears that the costs to raze all structures on the property is actually higher than the $100,000.00 proposed by Defendant and more in line with the estimate of $152,500.00 proposed by Claimant. I find that Claimant is entitled to $152,500.00 for demolition costs. This amount will be deducted from the land value in the after situation.Easement
When St. John the Evangelist church deeded the subject property to Mr. Bassett in 1980, it retained for itself an easement over an 18-foot wide driveway from West Ridge Road northerly through the property for use by its congregation "on Saturdays, Sundays, Church holidays, Thursday evenings" and any bingo night (Exhibit 11). The deed gave Mr. Bassett the right to extinguish this easement at any time after five years from the date of the deed for $15,000.00 (Exhibit 11). Inasmuch as the appropriation has rendered the subject property unleasable and Claimant's only viable option is to demolish the buildings to clear the site for new development, the easement must be extinguished. Prior to the appropriation, when the structures were present on the property and the easement ran between the buildings, it did not have a great impact on the earning potential of the property. An 18-foot driveway running virtually down the center of a vacant piece of land will have a greater negative impact. Because the appropriation created this situation, the $15,000.00 cost of extinguishing the easement will be deducted from the land value in the after situation.Temporary Easements
Both parties agree that the temporary easements shown on maps 161 and 221 involve 364 square feet of land (Exhibit 3-C, p. 38; Exhibit A, p. 164). Both appraisers assigned an interest rate of 10% over the term of the easement, but they differ on the term of the easement. I adopt the State's term of three years and use the land value of $17.75 as explained above for a value of $1,939.00.SUMMARY
Map. No. 160, Parcel No. 201
Before the taking:
Land $ 845,600.00
Land Improvements 30,000.00
After the taking:
Land $ 800,300.00
less demolition ( 152,500.00)
less easement ( 15,000.00)
Adjusted land value $ 632,800.00
Land Improvements 0.00
Value of appropriation of fee $ 567,200.00
Maps No. 161, 221, Parcels 202/272
Value of fee $ 567,200.00
Value of temporary easements 1,939.00
Total Damages: $ 569,139.00
The Court recognizes its determination of values for the subject property is not within the range of values, but there is sufficient evidence in the record to support its findings (Matter of City of New York [A. & W. Realty Corp.], 1 NY2d 428; Mordecai v State of New York, 118 AD2d 763).
Claimant is awarded the sum of $569,139.00 with appropriate interest thereon from the date of taking, October 14, 2004, until the date of this decision and thereafter to the date of entry of judgment herein.
The award to the Claimant herein is exclusive of the claims, if any, of persons other than the owners of the appropriated property, its 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 thereto, and is exclusive also of the claims, if any, for the value of or damage to easements and appurtenant facilities for the construction, operation, and maintenance of publicly owned or public service electric, telephone, telegraph, pipe, water, sewer, and railroad lines.
All other motions on which the Court may have previously reserved or which were not previously determined, are hereby denied.
It is ordered that, to the extent Claimant has paid a filing fee, it is recoverable pursuant to Court of Claims Act § 11-a(2).
LET JUDGMENT BE ENTERED ACCORDINGLY.
June 30, 2010
Rochester, New York
RENÉE FORGENSI MINARIK
Judge of the Court of Claims
1. This property is also referred to as "2400" (Exhibit 5), "2410" (Exhibit 6), and "2390 - 2410" (Exhibit A and Exhibit 10). I will use "2390" in this decision.
2. Claimant 2390 West Ridge LLC took title to the subject property in December 2002 (Exhibit 10). Patrick J. Bassett, the principal of that limited liability company, took title to the subject property, personally, in November 1980 (Exhibit 11).
3. Claimant's appraiser valued the total parcel at $1,050,000.00 (Exhibit 3-C, p. 31). He valued the land as vacant at $712,200.00 (Exhibit 3-C, p. 16), and the land improvements at $24,750.00 (Exhibit 3-C, p. 25). I calculated the value of the buildings by deducting the land and land improvements from the value of the total parcel.
4. Exhibit 18 shows a modification of the monthly rent to $1,250.00 per month or $15,000.00 per year. This was not explained at trial but because I am comparing annual returns, I will rely on the figure of $15,180.00.
5. Mr. Bassett testified he was able to easily procure a permit from the Town of Greece to demolish the rectory and the garage but believed he would be unable to procure a permit to demolish the church.
6. Claimant is still paying taxes.