The temporary judicial reprieve for 324 apartment residents of Carnegie House at 100 W. 57th St. also bought time for the building’s valuable but overlooked commercial portion.
The property’s near-30,000 square feet of precious Sixth Avenue retail space are owned by Georgetown Company. Georgetown, which rents to 10 stores in the building, pays 25% of the location’s annual ground rent, we’ve learned. Under the proposed hike, the retail rent would skyrocket from $1.1 million to $6 million.
Any rent increase paid by Georgetown would be passed on to store tenants, which range from a tiny bike-rental shop to a giant, two-level Duane Reade.
A panel of appellate judges last week unanimously nixed the proposed $24 million ground rent that was approved last year by a lower court. The panel cited misconduct by an arbitrator known as an “umpire” who failed to disclose a job offer the land owners’ lawyer had made to him.
Duane Reade at the corner of Sixth Avenue and West 57th Street has about 20,000 square feet. Smaller store tenants include Fresh & Co., Zibetto Espresso Bar, a dry cleaner and a souvenir shop.
Of the property’s total ground rent, 65% is paid by residents, 25% by the retail condo and 10% by an in-house garage.
The land is owned by a partnership that includes tech mogul Michael Dell and real estate investors Rubin Schron and David Werner. Their spokesman, James Yolles, said of the appellate decision, “The tenants can seek all the delays they want, but the numbers are the numbers and we are confident that the next arbitrator will reach the same conclusion.”
Georgetown representatives didn’t respond to phone calls and an e-mail request for comment.
The president of the co-op board, Richard Hirsch, last week called the appellate court’s move a “critical victory” for residents but cautioned it was only as “temporary stopgap.”
Some observers were shocked that the arbitrator’s misstep caused the appellate judges to throw out the entire $24.6 million award.
But building resident Scotty Sheriff, a lawyer well-versed in real estate, said: “I learned very early that as an attorney, your duty is not only to avoid impropriety but to avoid even the slightest appearance of it.”
He said, “I literally cringed” when he learned of the misconduct.