NY Appellate Court Finds Highest and Best Use of Condemnee’s Real Property Following Rezoning was 12-Story Budget Hotel

The claimant, 730 Eq. Corp., owned a 20,738 square foot, irregularly shaped, vacant parcel of real property at 730–740 Atlantic Avenue in Brooklyn, located in an M1–1 manufacturing district, which had previously been improved with a gas station. The property was subject to a long-term lease with Amoco, which had intended to construct a gas station on the property. In December 2009, New York State Urban Development Corporation, doing business as Empire State Development Corporation (hereinafter ESDC), commenced an eminent domain proceeding to take numerous properties, including the subject parcel, as part of the Atlantic Yards project. The trial court granted condemnation, and awarded the claimant the principal sum of $6,906,000 as just compensation for the taking of the claimant’s real property. Claimant appealed on the ground of inadequacy, from so much of the same judgment as awarded it the principal sum of only $6,906,000 as just compensation for the taking of its property.

The trial court determined that the claimant had established that, in the absence of the project, there was a reasonable probability that the property would have been rezoned to C6–2A. The court found that many of the buildings in the immediate area had been converted to commercial and residential use, that New York City policy was to rezone underutilized industrial sites to allow for commercial or residential development, and that a zoning district with a FAR of 6 would be in scale to this portion of Atlantic Avenue were supported by the record. Furthermore, contrary to ESDC’s contention, the Amoco lease on the property did not prohibit a finding of a different highest and best use than contemplated in the lease, since the property must be valued at “its highest and best use on the date of the taking, regardless of whether the property is being put to such use at the time.”

The court’s determination that a 12–story budget hotel would be legally and physically possible and financially feasible on the property was supported by the record, including testimony by ESDC’s own expert regarding alternate designs for such a hotel which would meet the zoning requirements, and the evidence of an increased demand for and development of hotels in Brooklyn around the vesting date. Moreover, the court was not required to accept the opinions of ESDC’s experts on the financial feasibility issue. Accordingly, the court held that the Supreme Court properly rejected ESDC’s appraisal and based its award on the claimant’s appraisal with such adjustments as the evidence supported.

730 Eq. Corp. v. New York State Urb. Dev. Corp., 37 N.Y.S.3d 599 (N.Y. App. Div. 2d Dept. 2016)