Judge values condemned Atlantic Avenue property at over $9 million
Issues surrounding the land along Prospect Heights’ Atlantic Avenue, including the land upon which the Barclays Center rests, continue to play out in court. Earlier this month, a judge valued at a portion of the property at approximately $9.2 million, opening the possibility for the development of a 12-story budget hotel.
The property at 730-40 Atlantic Avenue was condemned by New York State via the Empire State Development Corporation to make room for the Atlantic Yards Project. The surrounding property has been designated an M1-1 district—an industrial use zone that allows automotive uses—and a gas station was operating at 730 Atlantic Ave. until 2001. The property has since remained vacant. 730 Equity Corp took over the property and applied to have it rezoned as mixed commercial residential C6-2A with the goal of building a hotel on the grounds.
ESDC fought the rezoning asserting in its legal motions that the highest and best use of the property is “auto related use such as a gas station, parking lot, or garage.” The value of which was appraised by ESDC at $2,075,000. 730 Equity Corp disagreed and countered that if the property was rezoned as C6-2A, the property would easily be valued at $20,650,000.
Brooklyn Supreme Court Justice Wayne Saitta reviewed the respective appraiser reports and concluded that the true value of the property is closer to $9 million. Saitta reached this number by first discounting much of the information provided by ESDC’s appraiser.
Doris Silber, ESDC’s appraiser, compared 730-40 Atlantic Ave. to sales in the neighborhood. However, the comparable sales were of properties not used for auto related purposes but for the development of hotels.
Saitta estimated that all of Silber’s comparable properties were demolished auto businesses purchased for the building to eventual hotels “undermine[d] Silber’s conclusion that the highest and best use of the property was an automotive use.”
730 Equity Corp’s appraiser, Daniel Sciannameo, based his $20 million computation on the assumption that the lot would be converted for the development of a hotel. Looking at the lands surrounding 730-40 Atlantic Ave.—including 802-8 Pacific Street between Vanderbilt and Carlton avenues— Saitta concluded that the “property would have most probably been rezoned to C6-2A.”
Saitta surveyed the surrounding area and noted that Atlantic Avenue “acts as a corridor that separates Prospect Heights from Fort Greene and Downtown Brooklyn.”
Given the nature and location of Atlantic Avenue, the judge went on, it is not integrally a part of any particular neighborhood. Unlike neighboring Pacific Street, Atlantic Avenue, “creates a situation that can support a larger development,” Saitta said, allowing a basis for Sciannameo’s appraisal assumption.
Physical probability aside, the court also looked at whether or not it would be financially acceptable to allow a hotel on the Atlantic Avenue site.
“[E]ven though a 124,000-square-foot hotel is physically possible on the site, the Court must also consider whether such a hotel is financially feasible,” Saitta wrote.
ESDC argued that a hotel in Brooklyn would not be viable.
“Brooklyn is a secondary market for hotels compared to Manhattan, and [the Atlantic Avenue site] is an inferior location to Manhattan,” Saitta wrote in providing a summary of ESDC’s argument. Empirical evidence may cast doubt on ESDC’s claim. With at least 40 hotels in Brooklyn, many of which opened between 2010 and 2011, there is “evidence of increased hotel development and tourism in Brooklyn.”
Finding that the property would likely have been rezoned and that it would be appropriate for a hotel to be erected in the spot, Saitta was presented with the tedious task of valuing the property factoring in the costs of lawyers, zoning experts, and traffic consultants needed for the rezoning process and the time for development. Using a detailed calculation and appropriate adjustments, 730-40 Atlantic Avenue was valued, by Saitta, at $9,186,000.
Goldstein Rikon & Rikon represented 730 Equity Corp. and the firm Berger & Webb served as counsel to ESDC.
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