About the “Value” of the CitiStorage Property
Adam D. Perlmutter
Open Space Alliance for North Brooklyn
June 18, 2016
There has been a lot of discussion both here and elsewhere about the “value” of the CitiStorage property. Most think that Brodsky should be happy with realizing an almost 2100% return and take the City’s offer. A few think that he should get as much money as possible, even if he out maneuvered the community for the park land in 1999.
Here is more food for thought. The issue is whether he should sell at a free market value or a fair market value. In considering whether $100,000,000 million is fair market value, Crain’s said that the free market should place the price between $120,000,000 and 180,000,000. See below. But people should also consider the City’s eminent domain power, and how the law will prevent Brodsky from getting a valuation based the hot Northside market. That is something the Crain’s article failed to understand or even consider, which was a huge and dangerous mistake for anyone looking at buying the property.
In the case of United State v. Miller, the US Supreme Court traced the history of the market value standard for condemnation and agreed that value was to be determined as of the date of taking, with the qualification, however, that any increment due to the initiation of the project should be disregarded in certain cases. To determine exclusion or inclusion, the Supreme Court phrased the test as follows:
The question then is whether [the] lands were probably within the scope of the project from the time the Government was committed to it. If they were not, but were merely adjacent lands, the subsequent enlargement of the project to include them ought not to deprive the respondents of the value added in the meantime by the proximity of the improvement. If, on the other hand, they were, the Government ought not to pay any increase in value arising from the known fact that the lands probably would be condemned. The owners ought not to gain by speculating on probable increase in value due to the Government’s activities.
The CitiStorage park mapping was within the scope the rezoning when it got passed in 2005. As a result, the property was within, as opposed to, adjacent to the project. Accordingly, the valuation date would be as of the date of condemnation, BUT the valuation would not be based on comparables within the 185 block area of Brooklyn that got rezoned as part of the 2005 rezoning, since the entire area was the project, not just the park land. That puts the City’s offer within line of fair market value based on comparable M3-1 sales in other parts of Brooklyn and Queens.
The bottom line is that if Brodsky sells to a purchaser at a higher price, that person risks a judicial finding in condemnation that they paid more than fair market value based upon the circumstances of this case. They could pay Brodsky a lot of money only to have their land taken and get less back in condemnation. That is truly caveat emptor — let the buyer beware.