Who Owns Grand Central Terminal and Why? Once More With Feeling.

March 31st, 2014

A week or so ago, we posted the question of who owns the Grand Central Terminal, but so far, nobody came up with the answer. This is not surprising once you learn the answer. No, it isn’t Penn Central; though it is still around – it’s now an insurance company or something unexpected like that. And it isn’t the City of New York or any other government/transportation entity. You might think that after all the sturm und drang of the Penn Central Transp. Co. v. City of New York litigation, that would be the case. But it isn’t.

According to the New York Times (Sam Roberts, Grand Central’s Flesh-and-Blood Landlord, N.Y. Times, Jan. 29, 2013), it’s “the balding 52-year old” fellow named Andrew S. Penson who  — in the words of www.crainsnewyork.com of June 13, 2013, “quietly snapped up ownership of one of the most famous train stations in the world, Grand Central Terminal” some eight years ago. He is said to have done that “with dreams of minting hunderds of millions of dollars by selling off the landmark’s more than 1 million square feet of unused development rights.”

“Developments rights”? You mean those air rights above Grand Central? It would so appear. But in a familiar repetition of a familiar story, Penson’s plan “was broadsided by Mayor Michael Bloomberg’s proposal to create out of whole cloth millions of square feet of development rights in midtown east and sell them off to jump-start a new generation of bigger, smarter office towers.” So “Mr. Penson is fighting back,” and has hired none other than David Boies of Bush v. Gore fame, as Crain’s puts it, ”to press his case in court if need be.”

We admire Mr. Boies’ forensic accomplishments, but somehow his name does not leap to mind when the subject of inverse regulatory takings comes up. In fact, we would like to know how many inverse condemnation cases Mr. Boies has actually tried, or handled on appeal as lead counsel. Still, a big-shot New York lawyer is a big-shot New York lawyer, and he may just pull it off. Then again, he may not. We await the event with bated breath.

But be that as it may, we recall how in the days of the Penn Central litigation the police power hawks in New York and elsewhere, carried on how valuable those Grand Central terminal air rights were, and how their existence — if only on paper — should keep Penn Central content in the belief that it could use those “rights” to build elsewhere, even on lots that were already occupied by substantial buildings  — like the Biltmore Hotel, if memory still serves.

If you are interested in a detailed autopsy of the earlier Grand Central/Penn Central litigational fiasco, we invite you to read our efforts in Making Laws and Sausages: A Quarter-Century Retrospective on Penn Central Transportation Co. v. City of New York, 13 William & Mary Bill of Rights Journal 679 (2005).*  It’s all there, but if you aspire to claiming any mavenhood on this subject, at least do read the description of the Penn Central litigation in the lower courts (the SCOTUS part has been commentaried on to death), plus footnote 56, and of course, our article’s Conclusion.

The Penn Central litigation is noteworthy for the largely unnoticed fact that of the three appellate courts that decided it, no two agreed on the nature of the legal issues being litigated, so each decided issue(s) that had nothing to do with the issues decided by the other two appellate courts. Honest, folks.

Anyway, it looks like we may get to see another chapter in the Grand Central terminal litigational wars — sort of like the Punic Wars. We can’t wait.

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*     The kids running that law journal screwed up big time and mis-paginated the printed copy of the article; it starts either on p. 653 or 679. But since the article is, er, on the long side, you should have no trouble finding it in Volume 13 of the William & Mary Bill of Rights Journal. Do try.

 

 

Bubble, Bubble — Is That the Sound of the post-Bubble Bubble beginning to Pop?

March 29th, 2014

This one is serious, folks, so pay attention. As we noted in this blog from time to time, the California housing market has been goosed upward recently by big-buck folks buying up distressed homes cheaply en masse in order to rent them out, and make a buck that way, as well as score some capital gains as the California housing market recovers.

According to today’s L.A. Times — front page, no less — it looks like that gravy train is slowing to a halt. Tim Logan, Investors Curb Home Buying, L.A. Times, March 29, 2014, at p. A1. “Companies are dialing back their purchases of houses to rent out, a signal prices hit a ceiling in SoCal.” The peak  in the numbers of such sales was reached in 2013, when it hit 613 homes being bought by the 20 largest single-family home buyers. This year it came down to 96. Sounds like a peak in numbers has indeed been reached.

But this isn’t all. Markets have this habit whereby they rarely stand still — they either move up or down. And given these figures and the economy generally, we don’t see how home prices can keep going up. Other than the big-boy cash home buyers, we don’t see how Mom-and-Pop homebuyers — the kind of folks who want a nice roof over their heads — can pay more than the current median prices of $385,000. And the other thing about big-buck professional homebuyers, is that they are not likely to sit there and watch the market value of their investments go down — they’ll bail when the market turns hinky and do their best to sell and collect whatever gain they managed to accumulate – and move on to other investments.

Still, some of big-time buyers are still at it. The L.A. Times reports that Starwood Waypoint Residential Trust is still buying homes in Southern California, and just popped $144 million on “a portfolio of 707 homes, ” which according to our calculator comes to $203,000 per home. We should also note that should you be able to find a $200-grand home around here, you wouldn’t want to live in it. So those $200-grand bargains must be in highly disfavored parts of the state.

So stay tuned, and see how it turns out. Being a congenital pessimist we have a hunch that this isn’t going to end well.

“Zoning Grand Muftis” — Judicial Policy or Judicial Hypocrisy?

March 29th, 2014

We came across a quote from Robert Thomas’ blog www.inversecondemnation.com that has inspired some thinking on our part. Quoth Mr. Thomas:

“[F]ederal judges constantly tell us that they want no part of land use and takings cases — despite their plain textual basis in the Fifth and Fourteenth Amendments — because federal courts don’t want to be “super zoning boards” or second-guess local governments. Yet, they have the time, apparently, to go into great detail about how an employee puts on and takes off his or her clothing, with an entire body of case law developed that second-guesses employers, with nary a question raised about federal jurisdiction, or ripeness, or other things that we takings lawyers are so used to. http://www.inversecondemnation.com/#sthash.EYK63yg5.dpuf

Actually, if we may wax pedantic for a moment, federal judges also have it that they abhore being cast in the role of  “zoning Grand Muftis” and — so they say — they are therefore not much interested in passing on land-use controversies. What’s wrong with that, you ask? Answer: it isn’t true — not a word of it. Local land-use issues are litigated in federal courts all the time. There is even a respected treatise on federal land-use law. Judges do get involved in zoning controversies with gusto and at length when the land-use controversy involves constitutional issues other than regulatory takings. In fact when it comes to land-use cases that give rise to First Amendment issues, their Lordships are  all over those. We were once tempted to create whole new land-use category of cases falling under the heading of “Nudie Cuties” — i.e. land-use cases involving zoning controlling nude dancing in saloons, thereby giving rise to First Amendment constitutional issues. And that isn’t all. Federal courts get involved on all sorts of land-use issues.

Even worse is the situation where outright eminent domain is involved. The law of condemnation often requires that in addition to establishing “public use,” public necessity must also be shown. This is usually required by statute. But — statute, shmatute — outside of Florida where a limited degree of judicial review of necessity is allowed, courts tell us that necessity is not subject to review by them unless the owner can establish fraud on the part of the condemnor.

Actually, the courts have never explained that anomaly. They offer the transparently insincere excuse that  they lack the competence to review decisions involving engineering, traffic, hydrology, and similar technical matters  that go into decisions of whether a public project meets the criteria of public necessity — i.e., whether the project is necessary, whether the subject property is necessary for it, and — here comes the good part — whether the project is so located as to be most compatible with the greatest public good and least private harm. Sounds good, but just you try litigating that question! No way, Jose.

But wait until a case walks in involving review of environmental issues arising out of public projects (like a highway, or a dam for instance). Presto, chango! It’s then a whole other story, and the same judges who just told us they lack competence to determine all those technical engineering matters that go into issues of highway necessity, come alive and in environmental review matters, freely review and frequently throw out engineering decisions. Why? Check out a series of federal cases captioned Keith v. Volpe and you’ll get an idea of what we mean.  How is it possible that judges are incapable of reviewing these factors when questions of public necessity are involved in an eminent domain case, but can handle them without raising a sweat when they come up in the context of an environmental review case? Thus, there are famous cases in which judges have disapproved designs of highways (and other public works) because in those judges’ opinions they were not so designed as to meet environmentally proper engineering, hydrological, ecological and other standards. Yet, those same judges profess to be incompetent to do the very same thing when a condemnee raises the issue of public necessity in an eminent domain case. See the quote from the Illinois case provided infra.

For an oldie but goodie in that category read William Tucker’s article in Harper’s magazine, entitled Environmentalism and the Leisure Class, Dec. 1977, at p. 49, which describes in detail how wealthy New York environmentalists killed a major, badly needed project (an emergency standby reservoir on top of a mountain, that would be available to provide an alternative source of power in case of failure of conventional power generation facilities). How did they do it? By endless litigation before federal administrative agencies and federal courts. No problem reviewing all that technical engineering stuff there.

Or, take a look at a much more recent Illinois case involving a taking of a cemetery for expansion of the Chicago airport where the Illinois Appellate Court said:

“Judicial interference in the actual plan to be implemented would lead to interminable delays, as there is always a different way to configure the use of land, especially a plan as massive as the expansion of an airport. Even if the overall expansion plan has changed such that the planned runway could be built on land other than the cemetery land, the fact remains the runway is planned to be built there, and the trial court would have no authority to scuttle the plan or require the City to redraw the plan to place the runway elsewhere.” City of Chicago v. St. John’s United Church of Christ, 935 N.E.2d 1158 (Ill.App. 2010).

So are courts competent to review questions of public necessity in eminent domain? Heavens, no. That would lead to “interminable delays,” don’t you know. But when it comes to environmental issues the same courts can take decades nitpicking to death public project opposed by a determined environmentalist groups — take a look at that Keith v. Volpe litigation if you want an example; make sure you count up the published cases, and the years it took to litigate them.

It all brings to mind the old saw that it all depends on whose ox is getting gored. But hey man, it’s the law, and we must respect it. Or must we?

California Choo Choo (Cont’d.)

March 28th, 2014

This is one of those items where a newspaper headline and subheading  tell it all and require no comment. From today’s L.A. Times:

Bullet Train Won’t Meet Target Travel Times, Panel Says

“Regular trips are likely to take longer than the anticipated two hours and 40 minutes.”

But in case you are a non-California flatlander, here is an explanation:

“The faster trips were held out to voters in 2008 when they approved $9 billion in borrowing to help pay for the project. Since then, a series of political compromises and planning changes designed to keep the $68-billion line moving ahead have created slower track zones in urban areas.” Ralph Vartabedian, Bullet Train Won’t Meet Target Travel Time, Panel Says, L.A. Times, March 28, 2014, at p. AA1.

 

 

Lowball Watch — The Feds

March 25th, 2014

A tip of our hat to Dwight Merriam for alerting us to a new U.S. Court of Federal Claims decision, Lost Tree Village Corp. v. United States, No. 08-117L, opinion filed March 14, 2014.

This was an inverse condemnation case arising out of the denial of a federal development permit under Section 404, and the valuation figures of both sides painted a stark picture. Following an earlier detour to the Federal Circuit on the issue of liability, once liability was found, and the case went to a valuation trial, the owner contended that the before value (with permit) was $4,285,000, and the after value (without the permit) was $25,000. The government contended for a before value of $3,910,000, and an after value of $30,000.

The court found a taking using the Penn Central three-factor approach, and awarded $4,217,887.93, with attorneys fees to be calculated later. For earlier rounds of this litigation, see 100 Fed.Cl. 412 (2011) and 707 F.3d 1286 (Fed.Cir. 2013),

You can find a link to the entire 15-page opinion in today’s post on Robert Thomas’ blog www.inversecondemnation.com

Lowball Watch — Texas

March 25th, 2014

Digitaljournal.com reports a condemnation case from Cleburne, Texas, as follows. The taking was by Peregrine Pipelineline Co. for a mile long pipeline easement, from Eagle Ford Land Partners. The offer was $80,000. The jury awarded $1.6 million, and after the court added interest, the total award came to $2.1 million. The controversy centered on the presence vel non of severance damages. PR Newswire, Texas Landowners Win $2.1 Million Judgment Against Pipeline Company Over Lower Property Value, March 24, 2014..

 

No Comment Necessary for this Headline

March 25th, 2014

Headline from today’s Los Angeles Times (3/25/14): California second least affordable state for renters, study says

http://www.latimes.com/business/money/la-fi-mo-california-rent-0140324,0,3714931.story#ixzz2wzHBiFAW

So who is first? Aloha, folks. Also the District of Columbia beats California, but technically it’s not a state.

Bubble, Buble . . .

March 24th, 2014

Latest dispatch from Southern California tells us that wealthy Chinese — that’s Chinese as in China, not your local Chinatown — are scooping up homes in the better parts of town favored by Chinese buyers. Homes in places like Arcadia, San Marino (a long-time favorite of wealthy Chinese), San Gabriel, Temple City and Walnut, are selling like hot cakes at rapidly rising prices. In parts of Arcadia prices are up 23.7% to 30.5%, and the median price is around $1.32 million. The market is apparently driven by Chinese “flight capital” — money earned in China but being spent in America, rather than remaining at risk in China’s increasingly uncertain economy. E. Scott Reckard and Andrew Khoury, Wealthy Chinese Home Buyers Boost Suburban L.A. Housing Markets, March 24, 2014 — click on http://www.latimes.com/business/la-fi-chinese-homebuyers-20140324,0,5923659.story#axzz2wtgIyIix

But whatever those buyers’ motivation, the Chinese home buying spree is having a ripple effect. This is unsurprising if you reflect on the fact that of late the Chinese have bought 12% of all U.S. homes bought by foreigners, as opposed to only 5% in 2007, the last pre-crash year. Which means that homes in desirable parts of California are becoming increasingly unaffordable to ordinary folks who, even before the Chinese buying spree, have been getting crowded out of the regular home market by well endowed cash buyers and investors. Now, add this Chinese cohort who considers these outlandish home prices to be bargains, and what you get is . . . You tell us.

This isn’t good, folks. It’s nice when your home appreciates as you age, but there is such a thing as too much of a good thing – as we should have learned in 2008.

A Puzzle for All You Inverse Condemnation Mavens

March 22nd, 2014

Who owns Grand Central Terminal?

You can give us your answer by writing to Gideon.kanner@gmail.com — Put the words “Grand Central” in the subject line. No tangible prize for getting it right, but if you do, you’ll have the satisfaction of being a real Grand Central Maven.

That Was the Year That Was

March 22nd, 2014

If you like to keep up with what’s going on in our field on an ongoing basis, especially if you want to follow California doings, we recommend the current Nossaman post by Brad Kuhn and Rick Rayl, dated March 21, 2014, entitled 2013 Eminent Domain Year in Review & 2014 Forecast – click on http://www.jdsupra.com/legalnews/2013-eminent-domain-year-in-review-201-99020/

It’s a good summary of what transpired in California courts in the past year: The good, the bad and the ugly. It’s all there.


The purpose of this blog is to provide a forum for people, whether eminent domain professionals or not, for exchange of ideas and a discussion of eminent domain news and issues. It does not provide legal advice. Questions concerning actual cases should be directed to the readers' own legal, appraisal and real estate advisers.

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