Urban Commons 2 West LLC

Opinion

1 UNITED STATES BANKRUPTCY COURT 2 SOUTHERN DISTRICT OF NEW YORK 3 Case No. 22-11509-pb 4 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x 5 In the Matter of: 6 7 URBAN COMMONS 2 WEST LLC,

8 9 Debtor. 10 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x 11 The following constitutes the Court’s modified bench ruling on the motion of the Residential Board, the 12 Commercial Board and the Condominium Board of Managers for judicial review of the appraisal that was recently performed 13 to determine the fair market value of the land underlying the Debtors’ hotel for the purpose of re-setting the ground 14 lease rent.

15 This modified ruling revises my April 21, 2023 bench ruling not only to correct transcription errors but also to 16 make the ruling clearer and more readable. The substance of the decision has not changed. Due to its origins as a bench 17 ruling, this decision is more colloquial and immediate in style than a formal written decision. 18 Date: New York, New York 19 May 25, 2023

20 /s/ Philip Bentley 21 United States Bankruptcy Judge

24 1 UNITED STATES BANKRUPTCY COURT 2 SOUTHERN DISTRICT OF NEW YORK 3 Case No. 22-11509-pb 4 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x 5 In the Matter of: 6 7 URBAN COMMONS 2 WEST LLC,

8 9 Debtor. 10 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x 11 12 MODIFIED BENCH RULING ON MOTION FOR JUDICIAL REVIEW OF 13 APPRAISAL 14 15 A P P E A R A N C E S : 16 17 DAVIDOFF HUTCHER CITRON LLP 18 Attorneys for the Debtor

19 605 Third Avenue 20 New York, NY 10158 21 22 BY: JONATHAN S. PASTERNAK 23 24 KLESTADT WINTERS JURELLER SOUTHARD & STEVENS, LLP 1 200 West 41st Street, 17th Floor 2 New York, NY 10036 3 4 BY: TRACY L. KLESTADT 5 KATHLEEN M. AIELLO 6 7 FRIED, FRANK, HARRIS, SHRIVER & JACOBSON LLP

8 Attorneys for Battery Park Authority 9 One New York Plaza 10 New York, NY 10016 11 12 BY: JANICE MAC AVOY 13 14 COHEN, WEISS and SIMON, LLP 15 Attorneys for The Hotel and Gaming Trades Council 16 900 Third Avenue, 21st Floor 17 New York, NY 10022 18

19 BY: RICHARD M. SELTZER 20 21 PITTA LLP 22 Attorneys for The Hotel and Gaming Trades Council 23 120 Broadway 24 New York, NY 10271 1 BY: BARRY N. SALTZMAN 2 3 HERRICK, FEINSTEIN LLP 4 Attorneys for BPC Lender 5 Two Park Avenue 6 New York, NY 10016 7

8 BY: STEVEN B. SMITH 9 SILVIA A. STOCKMAN 10 11 COLE SCHOTZ P.C. 12 Attorneys for VIK XS Services, Inc. 13 1325 Avenue of the Americas, 19th Floor 14 New York, NY 10019 15 16 BY: MARK TZUKERMAN 17 18 ALSO PRESENT TELEPHONICALLY:

19 CHARLES ESSIG 20 ANDREW HEYMANN 21 MICHAEL HILLER 22 HARRY JEREMIAS 23 BERNARD A. KATZ 24 AVERY S. MEHLMAN 1 JENNIFER L. RODBURG 2 FRANCK RUIMY 3 ENID NAGLER STUART 4 DEREK A. WOLMAN 5 6 7

8 9 10 11 12 13 14 15 16 17 18

19 20 21 22 23 24 1 THE COURT: I'm ruling from the bench on the 2 motion of the three parties that call themselves 3 collectively “the Boards” — specifically, the Residential 4 Board, the Commercial Board and the Condominium Board of 5 Managers of the Millennium Point Condominium — for judicial 6 review of the appraisal that determined the fair market 7 value of the land on which the hotel that the Debtors own

8 sits. 9 I'm ruling from the bench today because it's clear 10 that the parties need a prompt ruling in order for the sale 11 process for the hotel to move forward without delay. As I 12 often do, I may subsequently issue a written decision that 13 clarifies and perhaps expands on my bench ruling in minor 14 respects, but which will not change the substance of today's 15 ruling. 16 The dispute before me is over the resetting of 17 ground rent — that is, the rent the Debtors owe as tenants 18 under their ground lease with Battery Park City Authority

19 (“BPCA”), the public authority that owns and manages Battery 20 Park City. I'm going to give some details in a moment about 21 that ground lease and how it relates to some of the other 22 key documents in this case, but first, let me step back and 23 give a slightly broader context. 24 Some of the issues in the dispute now before me 1 building of which the Debtor's hotel is a part is 2 complicated. As I mentioned, the building is built on 3 ground-leased land. The building is a mixed-use condominium. 4 It's a condo with two principal subunits, one referred to as 5 the residential unit, the other referred to as the 6 commercial unit, and the commercial unit in turn is 7 subdivided into subunits, one of which is the hotel unit.

8 The residential unit is subdivided into the units for the 9 various residents who live in the building. 10 Because of the complexity of this structure, the 11 rights of the building's occupants — the residents, the 12 hotel and the Skyscraper Museum — are governed by a number 13 of legal documents. There's the ground lease between BPCA 14 and the building that I mentioned. There are also a set of 15 design guidelines, a condo declaration and condo bylaws, and 16 deeds for the various condo units in the building. There is 17 also a master lease, which BPCA entered into with another 18 New York State entity in or around 1980, about 20 years

19 before the other governing documents were executed. How 20 these various documents fit together and interrelate is at 21 the heart of the parties' dispute over the rent reset and 22 appraisal process. 23 BPCA, as the owner of the land, entered into the 24 ground lease in or about 2000 for a term of about seven 1 initial rent subject to periodic resets, the first reset 2 having been originally scheduled for January 2022, a little 3 more than a year ago. For a variety of reasons, the reset 4 didn't happen then. It got delayed until the parties turned 5 to it a few months ago. 6 As is typical, the ground lease provides a 7 procedure for resetting the ground rent. In a nutshell, the

8 procedure calls for each party to hire its own appraiser — 9 the two parties being BPCA on the one hand and the three 10 Boards on the other hand. If after conducting their own 11 party appraisals, the parties can't agree on the value, the 12 ground lease provides that the two appraisers then try to 13 jointly agree on a third appraiser, a neutral, and the value 14 of the land for rent reset purposes is then determined by 15 majority vote of the three appraisers. The rent is then set 16 as a percentage of the appraised value. 17 This process essentially leaves the final decision 18 to the neutral appraiser, subject to potential input from

19 whichever party appraiser chooses to join with him. For 20 simplicity's sake, I'm going to refer to the appraisal 21 that's being challenged as one done by “the appraiser,” by 22 which I mean the neutral appraiser, even though I know 23 technically the appraisal was signed by the neutral plus 24 BPCA’s party appraiser. 1 provision specifying the key assumptions to be used in these 2 appraisals. Ground lease reset provisions vary in the 3 assumptions they require. For example, some ground leases 4 provide for the land to be valued as if it was unimproved, 5 vacant, and unencumbered — that is, subject to the highest 6 and best use. Other ground leases require different 7 assumptions. For example, some require the land to be valued

8 based on whatever buildings or other improvements have been 9 constructed on the land — "as is," rather than "as if vacant 10 and unimproved." Other ground leases require the land to be 11 valued subject to certain encumbrances — for example, 12 encumbrances contained in the ground lease, or encumbrances 13 created by operation of law, such as zoning laws or landmark 14 designation laws. 15 In this case, the governing provision of the 16 ground lease provides that the appraiser shall value the 17 land "as unencumbered by this lease and the master lease and 18 unimproved." The parties have no disagreement about the

19 meaning of the word "unimproved." They agree it means the 20 land should be valued as if it were vacant. 21 What the parties disagree about is whether, in 22 valuing the land, the appraiser should assume it is subject 23 to any encumbrances — specially, any development 24 restrictions. BPCA's position is that it should not. It 1 master lease" mean unencumbered by any contractual 2 development restrictions. (No-one claims there are any 3 statutory or regulatory development restrictions.) 4 The Boards disagree. They argue that the 5 governing provision here excludes consideration only of the 6 ground lease and the master lease, and not of the other 7 governing documents — namely, the design guidelines, the

8 condo declaration and bylaws, and the deeds for the various 9 condo units. Moreover, those other documents (like the 10 ground lease and master lease) provide that the land will be 11 developed as a mixed-use project, with a hotel as well as 12 residential units. As a result, the Boards argue, the 13 appraiser must value the land as if it was subject to that 14 requirement, which I’ll refer to as the "mixed-use 15 development requirement." 16 In support of this argument, the Boards point to 17 New York case law holding that provisions of this sort, 18 specifying the encumbrances that an appraiser should or

19 should not consider when valuing real property, must be 20 narrowly construed. Here, because the governing provision 21 specifically excludes consideration of the encumbrances 22 contained in the two leases but makes no mention of the 23 encumbrances contained in the other governing documents, the 24 Boards contend the appraiser should have valued the land as 1 The parties here followed the appraisal process 2 required by the ground lease, with each party appraiser 3 conducting its own appraisal, after which a jointly-selected 4 neutral appraiser conducted an appraisal. Both BPCA’s 5 appraiser and the neutral appraiser valued the land as if it 6 were unencumbered, and the Boards’ appraiser valued the land 7 as subject to the mixed-use development requirement. All

8 three appraisers concluded that the land would be worth 9 vastly more if it were developed as a purely residential 10 building than it is worth in its current use, as a mixed-use 11 building containing a hotel as well as residential units. 12 Consequently, based on the different encumbrance assumptions 13 they used, the appraisals conducted by BPCA’s appraiser and 14 the neutral each attributed a value to the land more than 15 triple the $50 million value determined by the Boards’ 16 appraisal. 17 The Boards argue that the neutral appraiser should 18 have valued the land as subject to the mixed-use development

19 restriction, rather than as subject to no development 20 restrictions. They ask the Court to overturn his appraisal 21 on the basis of this supposed error. 22 The record before me is purely documentary. The 23 two sides each annexed a number of documents to their 24 briefs. There's no dispute among the parties as to the 1 my considering any of these documents in connection with 2 this motion. In addition, none of the parties asked to 3 present testimony, so I'm basing my ruling on the briefs and 4 on the various documents that have been annexed to the 5 parties' motion papers. 6 The threshold issue before me is, what standard of 7 review am I required to apply in reviewing the neutral

8 appraiser's appraisal? I find that the grounds on which a 9 court may overturn an appraisal are very limited under New 10 York law, which the parties agree governs. I also find that 11 the very limited grounds for overturning an appraisal have 12 not been met in this case. On that basis, I'm going to deny 13 the motion. 14 At bottom, I agree with BPCA's contention that the 15 black letter standard under New York law for judicial review 16 of an appraisal is that the Court is permitted to overturn 17 an appraisal only in extremely limited circumstances, such 18 as when fraud, bias, or bad faith has been shown. The Boards

19 do not contend that any fraud, bias, or bad faith exists 20 here on the part of the neutral appraiser. Instead their 21 argument is that I have the power to overturn the appraisal 22 on other grounds. They've advanced a variety of grounds that 23 they say warrant reversal, and I will walk through those in 24 turn in a moment. 1 judge applying New York law is to determine how the New York 2 courts would decide the issue before me — namely, the 3 standard of review. As a first step, I'm required to look to 4 decisions by New York's highest court. If those decisions 5 don't clearly resolve the issue, I'm required to look at the 6 lower court decisions and try to predict how New York's 7 highest court would rule if it was presented with the issue.

8 See, e.g., Chufen Chen v. Dunkin' Brands, Inc., 954 F.3d 9 492, 497 (2d Cir. 2020). 10 Following this approach, the starting point for my 11 analysis is the one Court of Appeals decision that's most 12 closely on point, the decision in In re Penn Central, 56 13 N.Y.2d 120 (1982). That decision arose in a suit brought by 14 Penn Central seeking to confirm an appraisal made by a panel 15 of three appraisers pursuant to an agreement between Penn 16 Central and Conrail. The dispute involved a parcel of land 17 as to which Conrail owned the surface rights and Penn 18 Central owned the air rights above the land. The parties had

19 sold their combined fee interest to a third party and 20 submitted the question of the allocation of the purchase 21 price to the panel of three appraisers. 22 The appraisers allocated the price 65 percent to 23 Penn Central for its air rights and 35 percent to Conrail 24 for its surface rights. Conrail refused to accept this 1 the sale proceeds in accordance with the allocation. 2 Penn Central commenced a proceeding to have the 3 appraisal confirmed. Ultimately, the case reached the Court 4 of Appeals and the court confirmed the appraisal. The Court 5 of Appeals rejected a variety of objections that Conrail 6 advanced, including claims that are somewhat similar, at 7 least in tone, to some of the Boards' arguments here —

8 arguments that the appraisal was "patently defective" and 9 that enforcing the appraisal "would be a gross travesty of 10 justice." Strong claims, all of them rejected by the Court 11 of Appeals. 12 What's most relevant here is the standard the 13 Court of Appeals applied in deciding to reject these 14 arguments by Conrail. The court held, "As a general rule 15 under CPLR 7601, a dissatisfied party who participated in 16 the selection of an independent appraiser has no greater 17 right to challenge the appraiser's valuation than he would 18 have to attack an award rendered by an arbitrator." 56 N.Y.

19 2d at 131. 20 The Boards don't dispute that the standard applied 21 in reviewing an arbitrator's award is extremely limited. As 22 a general matter, courts follow the standard I mentioned 23 earlier — that is, that the award can only be overturned on 24 a finding of "fraud, bias, or bad faith." That's a quotation 1 Second Corp. Development, 82 A.D.3d 446 (1st Dept 2011). And 2 in that case, notably, the Appellate Division applied that 3 general standard of arbitration award review to a case that 4 sought review of an appraisal. That is, the First Department 5 not only confirmed that that very limited standard governs 6 in review of arbitration awards; it also extended the 7 standard to appraisals, as the Court of Appeals had done in

8 the Penn Central case. 9 Another relevant case is Wien & Malkin LLP v. 10 Helmsley-Spear, 6 N.Y.3d 471 (2006). That's a Court of 11 Appeals case holding that an arbitration award must be 12 upheld even if the arbitrator has made errors of law or 13 errors of fact. 14 Lower courts in New York have by and large 15 followed the rule adopted by the New York Court of Appeals 16 in Penn Central. I just cited the First Department's 17 decision in 936 Second Avenue. For a few further examples, 18 see Vitale v. Friedman, 227 A.D.2d 198 (1st Dept 1996), and

19 101 West 23 Owner I LLC v. 715-723 Sixth Avenue Owners 20 Corp., 174 A.D.3d 447 (1st Dept 2019). 21 I say New York’s lower courts have “by and large” 22 followed this standard, because I understand there may be a 23 small number of courts that have applied a more relaxed 24 standard of review. I'm aware of only one such decision, by 1 of that sort — where the New York Court of Appeals and a 2 number of Appellate Division cases have come out one way and 3 one, or at most a few, trial court cases have come out the 4 other way — then, obviously, there can be no real debate 5 over which rule I'm required to follow. 6 The Boards don't dispute that the standards I 7 mentioned do apply to review of arbitration awards, and as I

8 mentioned earlier, they don't claim they can meet those 9 stringent standards. Instead, their principal argument is 10 that those standards of review apply only to arbitrations, 11 and not also to appraisals. However, the Boards do not point 12 to any New York State court decisions that are contrary to 13 the rule I'm applying today. 14 Two of the three principal cases they rely on are 15 federal district court decisions which in my view are 16 completely unpersuasive as authority for New York State law 17 on this issue. The first case they rely on is a more than 18 50-year-old decision of the District Court for the Southern

19 District of New York, Clark v. Kraftco Corp., 323 F. Supp. 20 358 at 361 (S.D.N.Y. 1971). There, the District Court held 21 that, under New York law, the court "retains the authority 22 to substitute itself for the appraisers" and to overturn an 23 appraisal that it finds rested on mistaken factual or legal 24 grounds. That standard is completely inconsistent with the 1 Central and that, as I said, the great bulk of the New York 2 courts have applied ever since. And Clark was decided in 3 1971, a decade before Penn Central, so of course it's no 4 basis for me to not follow Penn Central. 5 The Boards also rely on a more recent federal 6 District Court case, Sauer v. Xerox Corp., 17 F. Supp. 2d 7 193 (W.D.N.Y. 1998). That case did postdate Penn Central,

8 but I find it's entitled to no weight in deciding this issue 9 of New York law. Its discussion of this issue consists of 10 nothing other than a citation to Clark and a short quotation 11 from Clark. It contains no discussion of any New York State 12 cases, and it completely disregards the fact that any 13 validity Clark might once have had was repudiated by the 14 Court of Appeals in Penn Central. 15 One other case relied on by the Boards deserves 16 mention — namely, the New York Court of Appeals’ decision in 17 936 Second Avenue L.P. v. Second Corp. Development Co., 10 18 N.Y.3d 628 (2008). That was a case in which two parties had

19 each hired their own appraiser. These two appraisers had 20 reached different value conclusions based on using different 21 assumptions about how to value the land. After the two party 22 appraisers finished their appraisals, the two parties then 23 asked the courts to determine the assumptions that a neutral 24 appraiser should use to value the property. 1 neutral appraiser issued its report and the court overturned 2 the appraisal on the ground that it had used the wrong 3 assumptions. Instead, this was a case where the parties went 4 to court before the neutral appraiser did his work, and 5 asked the court to determine the standards the neutral 6 should apply. Thus, this case, 936 Second Avenue, is not in 7 any way inconsistent with the New York case law I've

8 described, which addresses judicial review of appraisals 9 after they have been completed. 10 Another argument advanced by the Boards is that 11 the issues addressed and the materials considered by the 12 neutral appraiser exceeded the permissible scope — 13 specifically, that it was improper for the neutral to decide 14 what assumptions to apply, and also improper for BPCA to 15 send the neutral a letter brief advocating its view on that 16 issue. I don't agree with this contention. I think it’s 17 defeated by the undisputed facts that were presented to me. 18 Most important, the Boards willingly participated

19 in the very process to which they now object. At the outset, 20 the Boards instructed their own appraiser to use the 21 standard they liked — that is, to value the property as 22 subject to the mixed-use development requirement. They took 23 that issue out of his hands. This is apparent from the 24 appraisal that that the Boards' appraiser went on to issue, 1 8 of that appraisal, the appraiser states that he's been 2 instructed to apply the standard that the Boards are 3 advocating. 4 Throughout the process, the Boards have been 5 represented by a highly capable and very experienced real 6 estate litigator, Mr. Hiller. They undoubtedly knew all 7 along that the issue of what standard to apply was a

8 critical gating issue on which any appraisal would depend — 9 that is, that it's not possible to do an appraisal of the 10 land here without first deciding whether you’re valuing the 11 land as subject to encumbrances or not. 12 If the Boards believe it’s not proper for an 13 appraiser to decide this issue, they should have brought 14 that issue to the Court for resolution before the neutral 15 issued its appraisal, as the parties did in the Second 16 Avenue case. The Boards should have asked the Court to 17 determine what standard the appraiser should apply, and 18 asked the appraiser to defer its work until the Court had

19 made that determination. At a minimum, the Boards should 20 have done this when they received the appraisal prepared by 21 BPCA's appraiser, which applied a standard opposite to the 22 one the Boards had directed their appraiser to apply. 23 I realize there was a tight schedule in place at 24 that time. The stipulated scheduling order I had entered 1 appreciate that at the time the Boards got the BPCA 2 appraiser's appraisal, they would have had to act very 3 quickly, and to ask me to act very quickly, if they had 4 followed this approach. 5 However, the Boards are represented by 6 sophisticated bankruptcy counsel as well as sophisticated 7 real estate counsel, and it's well known that bankruptcy

8 courts are capable of acting very quickly when it's 9 necessary to do so. I've made clear to the parties on more 10 than one occasion in this case, including prior to the time 11 we're talking about, that I'm prepared to act very quickly 12 whenever that is needed. 13 Most important, as I mentioned a moment ago, the 14 Boards could have acted long before that time, since they 15 must have known all along that this issue would be critical 16 to any appraisal. So it's hard to avoid the conclusion that, 17 if they believed it was not proper for the appraiser to 18 decide this issue — that a court instead of an appraiser

19 needed to decide it — they should have brought that issue to 20 me before then, when there would have been plenty of time 21 for me to address the issue. 22 Finally, I'm not persuaded that the issue of what 23 encumbrance assumptions to apply was an issue that 24 appraisers are not themselves qualified to decide. My 1 somewhat regular basis. When a ground rent reset dispute 2 arises and appraisers are brought in to value the land for 3 that purpose, it's not uncommon that the landlord and the 4 tenant may have different views on how the land should be 5 valued — for example, whether or not the land should be 6 valued as encumbered. And my understanding is it's not 7 uncommon for the appraiser to make that decision. In any

8 event, I don't have a record on whether that's common or 9 not. What I can say is the Board has made no showing that 10 it's uncommon, let alone unlawful or viewed as improper 11 within the appraisal community. No showing of anything of 12 that sort. 13 For all of these reasons, I find that it was not 14 improper — and certainly not grounds to overturn the 15 appraisal — for the neutral appraiser to consider the issue 16 of what encumbrance assumptions to apply, or for BPCA to 17 submit a letter brief to the neutral appraiser advocating 18 its position on that issue.

19 The Boards argue, next, that I should overturn the 20 appraisal on the ground that it was wholly irrational for 21 the appraiser to value the property as if it were 22 unencumbered. And they've cited at least one case for the 23 proposition that a court can overturn an appraisal that it 24 finds to be wholly irrational. 1 contrary to the standard of review adopted by the New York 2 Court of Appeals in Penn Central and by the various 3 Appellate Division cases that have followed Penn Central. 4 “Wholly irrational” is not the same as fraud, bias, or bad 5 faith. It's an expansion upon that standard. Thus, even if 6 one or two lower courts may have reviewed appraisals using a 7 “wholly irrational” standard, this is contrary to

8 controlling New York law. 9 Second, the appraisal here is anything but wholly 10 irrational. I'm not delivering a comprehensive ruling on the 11 merits, because I've concluded that's outside the scope of 12 proper judicial review in this case. But I have carefully 13 reviewed the record. I have carefully considered the 14 arguments of the parties on the merits as well as on the 15 process issues, and I have read the case law carefully. The 16 governing documents and the case law provide no support for 17 the conclusion that the appraisal is wholly irrational. 18 As discussed earlier, the Boards acknowledge that

19 it was proper for the appraiser not to consider the 20 encumbrances contained in the ground lease or the master 21 lease. Their contention is that the appraiser should have 22 considered the encumbrances contained in the design 23 guidelines, the condo declaration and bylaws, and the 24 various condo deeds, all of which require the building to be 1 hotel as well as residential units. However, the governing 2 documents do not support this contention. 3 First, the design guidelines: No showing has been 4 made that the design guidelines had any binding effect on 5 the parties other than through the incorporation of those 6 guidelines into the ground lease and/or the master lease. 7 But for those leases, the parties would not have been bound

8 to the design guidelines. Thus, a valuation of the land “as 9 unencumbered by [the ground] lease and the master lease” 10 means a valuation of the land as unencumbered by the design 11 guidelines. 12 Second, the condo declaration and bylaws: I’m 13 satisfied that, by their terms, those documents do not 14 purport to encumber the land underlying the building. 15 Rather, all they purport to encumber are the leasehold 16 rights held by the various parties other than BPCA under the 17 ground lease. 18 The Boards have argued that the declaration and

19 bylaws are not clear in this regard, and I recognize there 20 may be some ambiguity in the condo declaration and bylaws on 21 this point. But any ambiguity of that sort would not matter, 22 because the condo declaration and bylaws could not encumber 23 the land even if they purported to. Other than BPCA, the 24 parties had no rights to the land except the rights they had 1 their tenancy rights under the ground lease among themselves 2 through the condo documents. But by contracting among 3 themselves, they can't expand their rights vis-à-vis BPCA or 4 vis-à-vis the land. 5 The same is true of the deeds — the hotel unit 6 deed and the commercial unit deed, for example. These are 7 merely deeds to condo units. They're not deeds to the land.

8 For these reasons, it's clear that the decision of 9 the arbitrator is anything but wholly irrational. In fact, 10 based on my review of the documents and the law, the neutral 11 arbitrator appears to have been correct in his conclusions. 12 Let me address, finally, the Boards' argument that 13 the outcome that I'm approving is unfair. I am sympathetic 14 to the predicament my ruling poses for residential unit 15 owners. My understanding is that the valuation the appraiser 16 has blessed and I have now declined to overturn could result 17 in an enormous increase in the ground rent paid by the 18 building, which could translate into a large increase in the

19 maintenance payments paid by residential unit owners. 20 BPCA has said that it is committed to not 21 enforcing an outcome that will result in residents being 22 unable to afford their apartments, and I'm aware that for a 23 number of other buildings in Battery Park City, BPCA has had 24 negotiations with the buildings and has wound up reducing 1 rent. I am hopeful that BPCA will enter into very serious 2 negotiations with the residents of this building, as it has 3 promised to do. 4 I understand there may be reasons why BPCA has not 5 yet had extensive negotiations with this building, one of 6 which is that this building has been engaged in pretty 7 heated litigation with BPCA for a number of years now. It's

8 understandable that a party that's being sued may be 9 reluctant to make concessions that don't result in a 10 settlement of the claims against it. That said, if BPCA has 11 not already commenced serious negotiations with the 12 Residential Board to try to solve this pressing problem, it 13 is high time for those negotiations to begin. 14 However, these equitable considerations are not a 15 basis to overturn the appraisal. New York law simply doesn't 16 give a judge the ability to overturn an appraisal on the 17 ground that it would lead to results that are unfair or that 18 would cause grief for the losing party. Moreover, the

19 equities here are tempered by that fact that, at bottom, 20 this is a dispute over relatively high-end real estate, with 21 all the risks such investments entail. 22 I'm aware my decision does not address every 23 single argument that the Boards have made in their papers. 24 The papers were lengthy and made a lot of arguments. I've 1 to make clear, though, that I have considered and rejected 2 all of the Boards’ arguments, including those that my 3 decision does not specifically mention. 4 This completes my ruling. 5 6 7

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