Appropriation Award: $75,202.00.
|Claimant(s):||WILLIAM PORTER REAL ESTATE, INC. (DBA 243 GROTON AVENUE ASSOCIATES)|
|Claimant short name:||PORTER REAL ESTATE|
|Footnote (claimant name) :|
|Defendant(s):||THE STATE OF NEW YORK|
|Footnote (defendant name) :|
|Judge:||RENÉE FORGENSI MINARIK|
|Claimant's attorney:||BOND, SCHOENECK & KING, PLLC
BY: TAYLOR E. REYNOLDS, ESQ. and
KATHLEEN M. BENNETT, ESQ.
|Defendant's attorney:||HON. LETITIA JAMES
New York State Attorney General
BY: KEVIN A. GROSSMAN, ESQ.
Assistant Attorney General
|Third-party defendant's attorney:|
|Signature date:||November 20, 2020|
|See also (multicaptioned case)|
Claimant, William Porter Real Estate, Inc. (DBA 243 Groton Avenue Associates), filed claim number 128831 on November 21, 2016(1) , claiming the State's appropriation of its land, pursuant to section 30 of the New York State Highway Law and the New York State Eminent Domain Procedure Law (EDPL), damaged it both directly and indirectly. The Notice of Appropriation with the map and description of the appropriated property was filed with the Cortland County Clerk on November 17, 2014 [Map No. 26, Parcel 23 (Fee) and Map No. 27, Parcel 24 (Temporary Easement)].(2) I adopt these maps and descriptions and incorporate them by reference. The State has complied with the necessary procedures under the EDPL with regard to service. Claimant personally served the Attorney General on December 19, 2016. This claim has not been assigned or submitted to any other court or tribunal for audit or determination. I have made the required viewing of the premises.
The parcel is located at 1088 Route 222, Town of Cortlandville, Cortland County (subject property). It was a parcel improved with a mixed-use rental building on the valuation date of November 17, 2014. The parties agree the State appropriated 1,497 square feet of Claimant's property in fee simple as well as a temporary easement of 3,702 square feet for a term of three years.
A property owner is entitled to just compensation for land appropriated by the State for public use. The owner is to be "placed in the financial position that he or she would have occupied had the property not been taken (citations omitted) . . . Damages must be measured based upon the fair market value of the property as if it were being put to its highest and best use on the date of the appropriation, whether or not the property was being used in such manner at that time (citations omitted)" (Matter of State of New York [KKS Props., LLC], 119 AD3d 1033, 1034 [3d Dept 2014]).
William W. Porter is a principal in 243 Groton Avenue Associates, owner of the subject property. He testified he has been involved with commercial real estate in central New York state for over 50 years. As a teenager, he worked in maintenance and retail at the shopping centers his father built and managed. After Mr. Porter graduated from college and law school, he worked in his father's company which built shopping centers, housing tracts and office buildings. Mr. Porter's career focus has been the construction and management of shopping centers. He stated he has sold many of his former properties over the last 10 to 15 years.
Mr. Porter testified he purchased the subject property in the 1990s. He described it as a stand-alone property for commercial use and believed a State agency had occupied the entire building prior to his purchase. However, when the State agency vacated the premises, the subject property went into foreclosure. Mr. Porter purchased it from the bank by referee's deed dated August 4, 1997 (Exhibit 1, p. 51).
He described the building on the subject property as a former residence with a commercial addition at the rear, where the basement, first floor and second floor were separate units to be leased. After Claimant purchased the property, an Allstate agency originally interested in the shopping center at the rear of the subject property, decided to rent the newer commercial portion of the building instead. Allstate remained in the building until a year or two prior to the appropriation, when word of the road project, and possible impact on properties in the Route 13/Route 281 corridor, became public.
Mr. Porter testified that after the Allstate agency declined to renew its lease, he decided to offer the property as a residential rental for customers of the Cortland County Department of Social Services (DSS) (Exhibit 4). Tenants from DSS moved into the second floor and the former Allstate agency space and paid $375.00 per month commencing July 1, 2012 (Exhibit 2) and June 26, 2012 (Exhibit 3), respectively. He stated he believed the former tenant, the Allstate agency, paid a higher monthly rent at its new location.
Mr. Porter described access from Route 222 prior to the appropriation as more than 8 to 10 feet wide on the subject property and sufficient for easy ingress and egress, as the front of the subject property was at grade with the road. After the appropriation, there is a large drop to the property, effectively limiting access to eight feet. Also, there was no legal access at the rear of the subject property where it abuts the shopping plaza. Mr. Porter explained that he had a relationship with the Monro Muffler franchise next to the subject property and negotiated an unwritten agreement whereby traffic generated on the subject property could use Monro Muffler's driveway for access. In turn, Monro Muffler was permitted to use the subject property for parking.
However, relations with Monro Muffler soured over time. Mr. Porter pressed Monro Muffler to purchase or rent the portion of the subject property it regularly used for parking. Mr. Porter also stated he understood that the parcel located on the other side, his neighbor to the north (the City side) refused to sell his property, which happened to be his home, to anyone. Mr. Porter states the neighbor's residence was demolished as part of the road project and that he has since secured an access easement from a property owner in the shopping plaza (Tax ID No. 86.13-01-55.210) (Exhibit 1, p. 9).(3)
Kenneth V. Gardner II is the Owner/President of North East Appraisals and Management Co., Inc. and a New York State Certified Real Estate General Appraiser in practice for approximately 39 years at the time of trial. Mr. Gardner is accepted as an expert in the area of real estate appraisal.
The subject property is located within the Route 13/Route 281 corridor (Corridor) - properties with frontage on those two highways plus properties in the immediate market area (tr at 55).(4) He described the location of the subject property as on the south side of Route 222, a couple parcels east of the intersection with Route 281. A Monro Muffler shop is the immediate neighbor to the west and a Walgreens is the property to the west of that on the south east corner of the Route 222/281 intersection. The adjacent property to the east side was a single family residence until it was acquired as part of the highway redevelopment plan. Mr. Gardner also testified that the parcels around the Route 222/281 intersection had a second drug store, a former fast food restaurant and a car wash. Two bank branches, a Burger King Restaurant and a shopping plaza round out the area (tr at 39-40; Exhibit 1, p. 6). He opines that the subject property sits in a "healthy, vibrant commercial district" (tr at 42).
Although Mr. Gardner was not retained by Claimant until after the appropriation and after the building on the subject property had been demolished, he testified he was familiar with the area and had driven by it many times, and felt he had enough information to value the property as improved (tr at 41).
The subject property was 10,297 square feet(5) with 64 feet of road frontage, generally at grade with Route 222 and had been used as a "stand-alone property for some time" (tr at 48). It had its own access to Route 222 via a wide curb cut shared with Monro Muffler. Mr. Gardner opined that approximately 20 feet of the driveway was on the subject property (tr at 48; Exhibit 1, p. 10). The access was sufficient for the permissible commercial use it enjoyed prior to the appropriation (tr at 51). Mr. Gardner described the structure as residential with an added on commercial space which, in his opinion, was not unique in the Corridor (tr at 52-53).
However, he determined that the land as vacant was more valuable than as improved with the commercial use, given the small size of the property and the market forces in the area. His opinion was that the highest and best use of the property was for redevelopment with other commercial uses (tr at 53). When the structure existed, it was valuable as an offset to the carrying costs until the subject property could be developed (Exhibit 1, p. 15).
Mr. Gardner applied a sales comparison approach using four sales in the Corridor after having evaluated all sales that occurred in the Corridor from 2000 to 2017 (Exhibit 1, pp. 17-18). He opined that his analysis of these sales indicated an upward trend in prices at two percent per year and he adjusted his comparable sales accordingly (tr at 59). His Sales Comparison Table on page 30 of Exhibit 1 lays out each sale and how it compares to the subject property. Mr. Gardner's most similar comparable sale was across the street from the subject property, Sale #14. The coffee shop, Sale #15, is in close proximity but has no road frontage, lacks visibility from the main roads and is improved by a 288 square foot structure. Sale #15 has the highest net adjustments of the four sales. Sale #16, McDonald's, is at the southern end of the Corridor and is a larger parcel. Sale #18 is at the northern end of the Corridor, closer to the subject property, on Route 281. Sales #16 and #18 have superior visibility from the highway (Exhibit 1, p. 30). Mr. Gardner concluded the average price per square foot, based upon these four sales, was $10.00, therefore, the value of the land before the appropriation was $103,000.00 (10,297 square feet x $10/square foot) (rounded) (Exhibit 1, p. 31).
After the appropriation, the subject parcel was reduced in size by 1,497 square feet of land area. The structure had been partially located on the land acquired and was demolished by the State as a result. In addition, a 3,702 square foot parcel was taken as a temporary easement. Once the roadway improvements were completed, the remaining parcel was now approximately 3-4 feet below grade, with only 8 to 10 feet of driveway access from Route 222, causing the Claimant to rely upon Monro Muffler for complete, safe access to his land. The subject property possessed no access easements (Exhibit 1, p. 32; tr at 63). Mr. Gardner opined that the highest and best use has now become "surplus land to be assembled with an adjoining property" (Exhibit 1, p. 41). The subject property is now simply too small with too little access to be developed independently. Mr. Gardner described the market for assembly parcels as less than optimal, stating that property owners in this position are essentially compelled to sell because the land is too small for a stand-alone business so they are limited to marketing to adjacent landowners and the sale prices are low because of that circumstance (tr at 65-67).
As a result, Mr. Gardner altered his sales comparison approach slightly in the after scenario by swapping out two of the prior four sales. After the appropriation, he relies on sales #14, #15, #19 and #20. The largest number of adjustments are for size of the parcel and only one, #14, has superior road frontage due to the subject parcel's change in grade (Exhibit 1, p. 41). Mr. Gardner finds a $2.50/square foot average, thus a total value of $22,000.00 after the appropriation (8,800 square feet x $2.50/square foot).
Mr. Gardner values the temporary easement at $7,400.00 (tr at 67).
Zackery Smith, the Vice-President of Hafner Valuation Group since 2015 and a New York State Certified General Appraiser, was formerly a valuation specialist with Congdon & Company Consultants and Appraisers from 2011 to 2015 (Exhibit A, p. 80). He performed the valuation on behalf of Defendant and is qualified as an expert. Mr. Smith relied upon the tax map to create his property description. He computed square footage of 10,936 for the size of the subject parcel and measured 63.51 feet of frontage on Route 222. He also noted that the rear portion of the subject parcel abuts an internal roadway for the shopping plaza (Exhibit A, p. 40). The photographs of the structure on the property were taken November 17, 2014 and were the basis for Mr. Smith's opinion that the structure was in below average condition (Exhibit A, pp. 14-21; tr at 100). The appropriation resulted in the demolition of the structure and the reduction in size of the lot by 1,497 square feet in Fee Simple and a 3,702 square foot temporary easement (Exhibit A, p. 43). Mr. Smith opined that the acquisition "didn't really affect the access too much . . ." as there still was a curb cut in the same location on Route 222 and access to the same roadway within the shopping plaza at the rear of the subject parcel (tr at 100-101).
Mr. Smith concluded that the highest and best use before the acquisition was the continued use as a multi-family residence as an interim use awaiting commercial development. After the acquisition, Mr. Smith determined it was assemblage for commercial development as the structure had been demolished and the parcel was reduced in size (tr at 103).
Mr. Smith relied upon a sales comparison approach using four sales looking specifically for properties comparable for multi-family use (tr at 103). He developed a price per unit value of $28,000.00 for a total value of $84,000.00 (three units x $28,000.00) (Exhibit A, p. 59). Mr. Smith found three comparable sales for the subject parcel as vacant within the corridor (Exhibit A, p. 60). He testified the ultimate value of the land as vacant before the acquisition was $80,000.00. I note that he reduced the sale values by $5.13/square foot in demolition costs for comparables with structures where applicable. After acquisition, using the same sales, the value of the land as vacant was $70,000.00.
Mr. Smith also provided an analysis using the Income Capitalization Approach purely as a method to develop lost income to Claimant. He extrapolated a Potential Gross Income (PGI) of $15,900.00 per year based on the actual rents received then he applied a vacancy rate of 10%, stabilized real estate taxes of $5,100.00 per year, utilities of $500/unit/year, insurance of $450/unit/year, 5% maintenance and repairs, 1% for miscellaneous expenses for a Net Operating Income (NOI) of $5,501.00 per year (Exhibit A, pp. 67-69). Mr. Smith then computed a Capitalization Rate of 13.5% based on sales of multi-family properties in Cortland County (Exhibit A, p. 71). When applied to the NOI of $5,501.00, the value is $41,000.00 (rounded) (Exhibit A, p. 72).
Mr. Smith's final reconciliation of values were $84,000.00 for the land as improved before acquisition and $70,000.00 for vacant land after acquisition for direct damages in the amount of $14,000.00. He used the $7.30/square foot from the Sales Comparison Approach to value the temporary easement and concluded the value to be $8,107.00. He also computed a present value for lost income for a three year term based on the length of time the State required the temporary easement at $12,673.00 (Exhibit A, pp. 73-74). The State believes Claimant is entitled to $34,780.00.HIGHEST & BEST USE
Claimant's appraiser opined the subject parcel's highest and best use is land for assemblage for commercial use before the appropriation and as surplus land for assemblage afterwards. The State's appraiser opined that the highest and best use before the appropriation was as a multifamily residence while awaiting commercial development and as land for assemblage for commercial use afterwards.
"A party asserting a highest and best use different from the existing one must establish that it is reasonably probable that the asserted highest and best use could or would have been made of the subject property in the near future. A use which is no more than a speculative or hypothetical arrangement . . . may not be accepted as the basis for an award (citations omitted). [I]t must be shown that [the projected use] is economically as well as physically feasible (citations omitted)" (Matter of Rochester Urban Renewal Agency v Lee, 83 AD2d 770 [4th Dept 1981]; Thompson v Erie County Indus. Dev. Agency, 251 AD2d 1026, 1027 [4th Dept 1998]).
It is undisputed that at least one commercial tenant occupied the building until it became clear that the Corridor project was imminent, causing Claimant to rent to at least two DSS clients. Mr. Porter testified he made more money renting to Allstate than he did to the residential tenants and only did so to offset some of his losses. His assertion remains unchallenged. It is also undisputed that the subject property shares a driveway with Monro Muffler and claims access to a roadway through a shopping plaza at the rear of the subject property and neither option for access is legal, whether by contract or by easement. Mr. Gardner opined that the access must have been sufficient because tenants were satisfied (tr at 51). I note that neither party provided evidence of legal access other than a photo showing a paved area between the subject property and Monro Muffler. Neither appraiser measured that portion of the driveway, or the curb cut on the subject property.
The condition of the structure on the valuation date was described by Mr. Smith as below average. This Court deems that description generous and would describe it as in poor condition based on the photographs in Exhibit A, pp. 14-21. I find that Claimant's asserted highest and best use as assemblage for commercial use before the acquisition is reasonably probable, given the conditions just described and given the positive state of the market in the area of the Corridor where the subject property sits. I also agree with Claimant that the highest and best use of the property after acquisition is surplus land for assemblage, given the reduction in size of the property, the diminished visibility resulting from the change in grade and the continuation of problems with sufficient legal access.INDIRECT DAMAGES
Indirect damages are measured by the difference between the before and after values, less the land value and the value of the improvements appropriated (Matter of Eagle Cr. Land Resources, LLC [Woodstone Lake Dev., LLC], 149 AD3d 1324, 1326 [3d Dept 2017], lv denied, 29 NY3d 916 ). The best evidence of value is a recent sale of the subject property in an arms-length transaction, barring that, the comparable sales comparison approach is the preferred option (Matter of Allied Corp. v Town of Camillus, 80 NY2d 351, 356 ).
Claimant's selection of comparables in the before scenario are aligned with the highest and best use as assemblage for commercial use, therefore I will use them in the sales comparison analysis. I also prefer Claimant's selection of comparable sales as they are all zoned commercial and reflect the positive movement in the market area illustrated by Mr. Gardner (tr at 42). Mr. Gardner's adjustments are reasonable and a value of $10.00/square foot or $103,000.00 (rounded) is indicated. All comparables selected were parcels improved with structures in varying sizes. Mr. Gardner determined that the buildings either added no, or such little value as to be insignificant. He makes no adjustments or allowance for the cost to demolish a structure on a parcel intended for assemblage. Mr. Smith included a reasonable calculation for demolition, based on actual demolition costs, of $5.13/square foot or $15,260.00 (rounded) (2,974 square feet x $5.13/square foot) (Exhibit A, p. 66). Thus, I find the value of the land as vacant before the appropriation to be $87,740.00 ($103,000.00 - $15,260.00) or $8.52/square foot.
After the appropriation, Claimant's proposed value changes drastically, taking a steep decline in value for the loss of 1,497 square feet and a three to four foot change in grade on the road frontage. Mr. Gardner's selection of sales #19 and #20 in his Comparable Sales Comparison in the after scenario are in line with the highest and best use as surplus land for assemblage. Further supporting the reduction in value was the diminished access from Route 222 which Mr. Smith approximated was six feet wide (tr at 130) and the lot was now too small to develop for stand-alone commercial use (tr at 122). I adopt Claimant's analysis and find the land value after the appropriation to be $22,000.00(6) (rounded) (8,800 SF x $2.50/SF) (Exhibit 1, p. 42).
DIRECT DAMAGES - LAND VALUE
Based on the analysis above, the land value prior to the acquisition was $8.52/square foot, therefore Claimant's direct damages are $12,755.00 (1,497 square feet x $8.52/square foot).
Defendant took a temporary easement in the amount of 3,702 square feet for a three year term with a rental rate of 10% of the value of the land in fee simple (Exhibit A, pp. 74, 86). I value the Temporary Easement at $9,462.00 ([3,702 square feet x $8.52/square foot] x 3 x 10%).
Land 1,497 square feet at $8.52/square foot = $12,755.00
Difference ($87,740.00 - $22,000.00) = $65,740.00
less land value ($12,755.00) = $52,985.00
Temporary Easement = $ 9,462.00
Total Damages Awarded to Claimant: $75,202.00
Therefore, Claimant is entitled to an award of $75,202.00, with statutory interest from the vesting date of November 17, 2014 (date of appropriation) to the date of this decision and thereafter to the date of entry of judgment for the appropriation (see CPLR §§ 5001 and 5002). Suspension of interest is not warranted since the notice of acquisition was not personally served (Sokol v State of New York, 272 AD2d 604 [2d Dept 2000]; see also EDPL 514 [B]). However, by "So Ordered" Stipulations filed on May 26, 2017 and September 1, 2017, interest was suspended from June 1, 2017 through October 27, 2017 (date of appraisal exchange deadline).
The award to Claimant herein is exclusive of the claim, 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, 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 or appurtenant facilities for construction, operation or maintenance of publicly owned or public service, electric, telephone, telegraph, pipe, water, sewer or railroad lines.
Any motions on which the Court previously reserved or were previously undecided 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.
November 20, 2020
Rochester, New York
RENÉE FORGENSI MINARIK
Judge of the Court of Claims
1. Per Stipulation and Order filed February 14, 2017.
2. Per Stipulation and Order filed November 6, 2020.
3. No evidence of any easements or contracts for access were produced at trial. Nor were any surveys showing evidence of access.
4. References to the trial transcript will be referred to as (tr at page).
5. Due to the discrepancies in the multiple surveys, Mr. Gardner computed the square footage by taking the State's map after the appropriation and adding to that figure the number of square feet the State appropriated. A prior survey appeared to have been measured from the center of the roadway and not the edge of the right of way (tr at 49-50; Exhibit 1, p. 35). I adopt Mr. Gardner's determination of 10,297 square feet.
6. The historical tax assessment information further supports the significant diminution in value. The assessed value in 2014/15 was $137,500.00, but decreased to $117,500.00 in 2015/16. Finally, in 2016/17 it was assessed at $50,000.00.