Appendix — Penn Central Transp. Co. v. New York City
Supreme Court brief1978
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{ VUPICHIe UUUTL, UV. we
FILED
} JAN 18 1978
MICHAEL RODAK, JR., CLERK
APPENDIX —
IN THE
Suprenw Court of the United States
Octoser Term, 1977
No. 77-444
Penn CentTraL Transportation Company, THE New York
AND Hartem Rarroap Company, THe 51st Street REatty
Corporation, UGP Propertigs, Inc.,
Appellants,
v.
Tue Crry or New York, et al.,
Appellees.
On Appeal from the Court of Appeals
of the State of New York
os
Jurisdictional Statement Filed September 20, 1977
Probable Jurisdiction Noted December 5, 1977
EE re a ee
INDEX
Page
Docket Entries in the Supreme Court of New York
(Trial Term and Appellate Division) .......... 1
Docket Entries in the Court of Appeals of the State
RRR DRY ny ct La ga gd 5
Pleadings:
Pe WE kis cc bdwedccdceveceecs 7
Defendants’ Verified Answer .................. 21
Testimony:
i ee EES 27
Herbert Beckhard ...............ccccccccccce. 35
I 37
SP ee ene eae 51
i 53
OE SI Sa ch ode iwedeunbeuiebonedveck.. 60
Harmon M. Goldstone ........................ 66
I og OE ta sn. 5 67
Jacquelin T. Robertson ....................... 72
I 80
Exhibits :
OM” TING on vc ccccecccceceeec. eveces 90
Rr I ae ase oa 90
8. Assessed Valuation and Rates from Tax
Block 1280 Lot 1 and Grand Central Terminal
I a pe 91
9. Net Transferable Zoning Floor Area From
Grand Central Terminal Parcel A ........ 92
10. Diagram of Portion of Manhattan Island .. 93
Index Continued Page
Possessed by Penn Central Trans-
” whi a Company in Grand Central avon"
nal Area Subject To Long-Term Groun
Leases and Contracts of Sale .........---- 94
. h Flow From Barclay, Biltmore, Commo-
" Gore and Roosevelt Hotels (1965-1971) ..... 98
. Relating to Grand Central Terminal
= el of Revenues and Costs—Year 1969 100
35b. Grand Central Terminal Statement of Reve-
nues and Costs—Year 1971 ........+-+++++5 102
36. Deferred Maintenance Costs for Grand Cen- -—
tral Terminal ..........-00eeeeeeeeeeereeee
Defendants’ Exhibits ......-..-+eeeeeeeereeers 108
C. Photo of Grand Central Terminal ......... 108
D1. Photo of Grand Central Terminal ........-. 109
D4. Photo of Grand Central Terminal ......... 110
: . a
V. artial) Von Ancken Appraisal Report an
pce ie sat Central Terminal ........ 111
DOCEET ENTRIES IN THE SUPREME COURT OF NEW YORE
(TRIAL TERM AND APPELLATE DIVISION)
County Clerk, New York County
Clerk’s Minutes of Supreme Court Actions and Proceedings 1969
Inpex No. 14763
Penn Cenrrat Transportation Co., Plaintiff
AGAINST
City or New York, Defendant
Atrorneys: Dewey B., BP&W, 140 Brwy [Penn Central];
Corporation Counsel, Municipal Bldg. [City of N.Y.]
Month, Day, Year—Index Number Assigned
Oct. 7, 1969—Summons and Complaint
Oct. 7, 1969—Affidavit of Service
Dec. 24, 1970—Note of Issue
Aug. 18, 1971—Statement of Readiness
Aug. 24, 1971—Order P. I Time to Serve Interrogatories
Mar. 8, 1972—Consent to Withdrawal of Atty.
May 9, 1972—Order spec. File Brief Amicus Curiae
granted
Sept. 6, 1972—Def’ts Reply Memo, Supp’! Proposed
Findings, in File Folder
Jan. 21, 1975—Memorandum Decision and Large Envelope
Exhibits
Jan. 21, 1975—Minutes (6 Volumes)
Feb. 4, 1975—Judgment #3001
Feb. 28, 1975—Notice of Appeal
Mar. 7, 1975—Notice of Appeal
2 3
; Penn Centra. et aL UGI Properties,
April 18, 1975—Order of Severance Plaintiff-Respondent
June 24, 1975—Exhibits . against
July 28, 1975—[init. SP] 2 Order Exhibits to De Crry or New York, ET AL,
Apr. 8, 1976—Remittitur (4) Defendant-Appellant
Dewey, Attorney for P-R UGI
June 7, 1976—Notice Bernard Richland, Attorney for D-A
June 24, 1977—Remittitur (4)
White & Case, Attorney for P-R Penn Central
N.Y. Co. & Court—Saypol, J.
Index No. 14763/69
Notice of Appeal 3/7/75 & 2/28/75
Date—Aug. 14, 1975 Date—Aug. 15, 1975
Record Filed (22 copies); Printed 4 vols & 2 entered;
Judgment Order, 1 entered
Jan. 21, 1975—serving Pltf. cause of action
Feb. 4, 1975—awarding judgment to Pltfs.
Aug. 14, 1975—Note of Issue for Appellant Brief,
Oct. 75 Term
Sept. 25, 1975—Respondent Brief
Oct. 14, 1975—Reply Brief
Other—Aug. 28, 1975—Amicus; Sept. 2, 1975—Amicus
Sept. 3, 1975—[illegible]
Oct. 21, 1975—Argument (No. 1305, 1306), Stevens
Markewich Kufferman Murphy Lupiano
Dec. 16, 1975—Decision—O & J reversed on law. $60 C & D
to App. Opinion by Murphy, J; All concur except
Markewich, J, & Lupiano, J, (opinion) who dissent.
(SOON)
April 7, 1976—Order of reversal settled and filed.
April 7, 1976—Remitted (No. 628A) to 60 Centre St.
Sept. 8, 1977—Notice of Appeal
4
Motions
Date Date
Aug. 28, 1975—Amicus granted Oct. 31, 1975
Sept. 11, 1975—Adj. to Nov. 75 Term Nov. 13, 1975
—C/A. Affd Opinion by
ae ety we Nov. 13, 1975
Jacoss, Perstnczr & Parsons
5
DOCKET ENTRIES IN THE COURT OF APPEALS OF THE
STATE OF NEW YORE
[485] Penn Centrat Transp’n Co. & ors. (As)
vs.
Crry N.Y. & ano.
Order Appealed from 5 6 76 (1st)
Order Granting lv
Notice of Appeal 6 7 76 (s)
Statement 500.2 6 17 76 (OK)
Record 8 26 76 (4 Vol’s) (24+1)
File
Apptsbrf 8 26 76 (24+1)
Respbrf 1 17 77 (19+1)
AC (Com’e to Save Grand Central Sta) 2 11 77 (19+1)
Replybrf 3 30 77 (19+1)
AC AG 2 25 77 (19+1)
Requests 60 day card 7 6 76
Motions 1 6 77—Mot. withdrawn
92 AC (AG) granted—file in 20 days (Tu 8 Fe 77)
94 AC (Com’e Save Grand Central Sta) granted—file in
20 days (Tu 8 Fe 77)
Corres’e 2 9 77 Ltr fr A cfmext A to 3 14 77.
[ ATTORNEYS]
A Dewey, Ballantine, Bushby, Palmer & Wood
140 Broadway NYC 10005
139 344 8000
for UGP Properties, Inc.
John Friedman Jr. ce City Att’s
write confirming letter
White & Case
14 Wall Street NYC 10005
139 732 1040
for Penn Cent, NY & Harlem
Rys & 5ist St Realty
R. W. Bernard Richland
Corp. Counsel, NYC
Municipal Bldg.
NYC 10007
(485a] Penn Cenrrat Transp’N Co & ors (As)
vs.
Crry NY & ano.
ScHEDULED FOR ARGUMENT: 4 27 77
Arcuep By: A—John C. F. Wood (Both appellants)
R—Leonard Kaerner
Deciwep June 23, 1977
12 21 76 Ltr to Dewey &c. accepting stip’n received
inoffice 12 17 76 setting 1 14 77 for R and 2 1477 for reply.
Motion to preclude R is marked withdrawn.
Decision: Order affirmed, with costs. Opinion by Breitel,
Ch.J. All concur. 6/23/77
REM sent To: NY Co. Clerk
60 Center St.
NYC 10007
Date: 6/23/77
PR
7
Complaint.
SUPREME COURT OF THE STATE OF NEW YORK
County or New York
(SAME TITLE]
Plaintiffs Penn Central Transportation Com
pany, The
New York and Harlem Railroad Company, The 51st Street
Realty Corporation and UGP Properties Inc., by their at-
torneys, allege as follows:
Fist Cause or Action
1. Plaintiff Penn Central Transportation Company is a
corporation organized and existing under the laws of the
Commonwealth of Pennsylvania and has a general office
at 466 Lexington Avenue, Borough of Manhattan, City,
County and State of New York. All references to Penn
Central Transportation Company hereinafter made and
concerning any time prior to February 1, 1968, relate to
The New York Central Railroad Company which was
merged into the Pennsylvania Railroad Company (the
name of which was later changed to Penn Central Trans-
portation Company) as of February 1, 1968.
2. Plaintiff The New York and Harlem Railroad Com-
pany is, and at all times hereinafter mentioned was, a@ cor-
poration organized and existing under the laws of the State
= New York, and has a general office at 230 Park Avenue,
-~ rough of Manha ttan, City, County and State of New
ork. Approximately 95% of the stock of The New York
and Harlem Railroad Company is, and at all times herein-
after mentioned was, owned by P
ay y Penn Central Transporta-
8
Complaint.
3. Plaintiff The 51st Street Realty Corporation is, and at
all times hereinafter mentioned was, a corporation organ-
ized and existing under the laws of the State of New York,
and has a general office at 466 Lexington Avenue, Borough
of Manhattan, City, County and State of New York. The
51st Street Realty Corporation is, and at all times herein-
after mentioned was, a wholly-owned sub-subsidiary of Penn
Central Transporation Company.
4. Plaintiff UGP Properties Inc. is, and at all times
since its formation on December 5, 1967 was, a corporation
organized and existing under the laws of the State of New
York, and has a general office at 277 Park Avenue, Borough
of Manhattan, City, County and State of New York.
5. Defendant The City of New York (the “City”) is a
municipal corporation of the State of New York.
6. Defendant The Landmarks Preservation Commission
of the City of New York (the “Commission”) is a commis-
sion of the City of New York, established pursuant to Sub-
section 25-a of Section 20 of the General Citv Law, and
Local Law 46 of the City of New York for the year 1965,
which amended the Charter of the City of New York and
the Administrative Code of the City of New York so as to
add to each of them a new Chapter 8-A entitled “Preserva-
tion of Landmarks and Historic Districts” (the “Land-
marks Law”).
7. The subject matter of this complaint is Grand Cen-
tral Terminal (the “Terminal”) and the land on which it
stands (the ‘‘ Property”).
The ownership and leasehold interests in the Terminal —
and the Property, held by the respective plaintiffs, are as
follows:
(a) The New York and Harlem Railroad Company
owns the fee.
9
Complaint.
(b) Penn Central Transportation Company has a
lease, expiring in the year 2274 A.D., from The New
York and Harlem Railroad Company.
The interests referred to in the foregoing subparagraphs
(a) and (b) have been as there described at all times here-
inafter mentioned.
(c) The 51st Street Realty Corporation has a grant
of term, from Penn Central Transportation Company,
coterminous with the lease referred to in the following
subparagraph (d).
(d) UGP Properties Inc. has a lease, hereinafter
described, from The 5lst Street Realty Corporation,
under which UGP Properties Inc. is to erect and oper-
ate a multi-story office building on the Property.
Penn Central Transportation Company, The New York
and Harlem Railroad Company and The 51st Street Realty
Corporation are hereinafter collectively called ‘‘Penn
Central.’’ UGP Properties Inc. is hereinafter called the
‘ ‘Lessee. 9?
8. The Property is located in the heart of Manhattan,
in one of the most valuable commercial areas in the world,
and in the midst of a host of multi-story office buildings and
similar structures.
9. The Property, presently improved with the Terminal,
is in fact zoned for other structures as well, including in
particular multi-story office buildings. Penn Central’s
rights in regard to such utilization of the Property, includ-
ing in particular the space above the street grades, are
recognized and defined in the applicable zoning law and
regulations with mathematical precision. Application of
the prescribed mathematics, including the Floor Area
10
Complaint.
Ratio and the Height and Setback requirements, shows
that Penn Central is entitled to construct on the Property
an office building at least fifty-six stories high. The Ter-
minal occupies but a small fraction of the space, above the
street grades, which Penn Central is thus by law entitled
to utilize.
10. The entire mid-Manhattan area in which the Prop-
erty is located, running from about 40th Street to 57th
Street and from Fifth Avenue to Third Avenue, is likewise
zoned for multi-story office buildings. Owners and lessees
of many of the parcels of land in that area have already
utilized their rights in full or substantially so. Others are
now in the process of doing so, or are planning to do so.
11. Penn Central has determined to exercise its right
to improve the Property with a multi-story office building.
To that end The 5lst Street Realty Corporation has en-
tered into an Agreement of Lease (the ‘‘Lease’’) with the
Lessee, under which the Lessee is to erect and thereafter
to operate a multi-story office building on the Property.
The Lessee is to pay rent to The 51st Street Realty Corpo-
ration at the rate of $1,000,000 net per year in respect of
the period between the commencement date of the Lease
and the completion of the building; and thereafter is to
pay rent at a rate which will never be less than $3,000,000
net per year and may be more, depending upon the amount
of the Lessee’s income from the building. It is estimated
that the Lessee’s net income from the building, after its
completion, will be at least $5,000,000 per year. The Lease
is for a term of 50 years after its commencement date, and
the Lessee has an option to renew for another 25 years
thereafter. The Lessee has commissioned Marcel Breuer
and Associates, one of the world’s most renowned archi-
tectural firms, to design the building.
11
Complaint.
12. On August 2, 1967 the Commission, acting under the
purported authority of the Landmarks Law and having
previously held a hearing, and over Penn Central’s objec-
tion, designated the Terminal a landmark and the Property
as its landmark site.
13. Such designation having been made, the Landmarks
Law purports to make it unlawful, and subject to criminal
penalties, to do anything with either the land or the build-
ing which would in any way change the exterior of the
building, without the Commission’s permission.
14. Further, the Landmarks Law purports to impose
upon Penn Central an affirmative and apparently perpetual
obligation to keep the exterior of the Terminal in good
repair, at Penn Central’s own expense and without reim-
bursement or compensation.
16. Thus continuously since August 2, 1967 the Com-
snission, acting under the purported authority of the Land-
marks Law, has imposed prohibitions and restrictions on
Penn Central’s use of the Property. In particular, the
Commission has continuously since January 22, 1968 (the
date of the Lease) prevented and prohibited Penn Central
and the Lessee from going forward with the building pro-
vided for in the Lease.
16. The Landmarks Law makes available to the plain-
tiffs two procedures for seeking the Commission’s permis-
sion to construct a multi-story office building on the Prop-
erty. The plaintiffs have pursued and exhausted both of
these procedures. In both cases the Commission has re-
fused to grant the requested permission.
17. The first of such procedures is to request a ‘‘certi-
ficate of no exterior effect.’’ In order for the plaintiffs
12
Complaint.
to be in a position to make that request, the Lessee com-
missioned Marcel Breuer and Associates to design a struc-
ture which would leave the Terminal, including its exterior
as well as the Main Concourse, substantially undisturbed ;
but which, through an innovative architectural concept,
would rise above the Terminal without making any physi-
cal change in the exterior thereof.
This design (‘‘Breuer I’’) was not regarded by the plain-
tiffs as the most suitable structure from an economic point
of view. Rather, it represented a genuine effort by the
plaintiffs to afford to the Commission the opportunity to
accomplish the substance of the objectives of the Land-
marks Law, without attempting to inflict upon a single
piece of private property the enormous costs which give
rise to this present lawsuit.
On July 18, 1968 the plaintiffs submitted Breuer I to the
Commission and applied for a certificate of no exterior
effect to enable them to build it. After holding a hearing
the Commission on September 20, 1968 denied the applica-
tion.
18. The other procedure made available to the plaintiffs
by the Landmarks Law for seeking the Commission’s per-
mission to construct a multi-story office building on the
Property is to request a ‘‘certificate of appropriateness. R
On January 20, 1969 the plaintiffs applied for that cer-
tificate, and submitted a design for a building which, exter-
nally, would be entirely new.
This design (which with the minor modifications made
during the proceedings before the Commission is herein-
after called ‘‘Breuer II”) has been the subject of exten-
sive consideration and comment by the architectural pro-
fession and others, and widely acclaimed.
Marcel Breuer and the plaintiffs regard Breuer II as the
truly approproiate building, architecturally and commer-
13
Complaint.
cially, for this prime location at the center of the world’s
greatest city.
The plaintiffs, in their application for a certificate of
appropriateness, also resubmitted Breuer I to the Commis-
sion, as an alternative. While noting their strong prefer-
ence for Breuer II, the plaintiffs continued to express their
willingness to go forward with Breuer I in order to bring
— the accommodations referred to in paragraph 17
above.
After holding hearings the Commission on August 26,
1969 denied in its entirety, and as to both alternatives, the
plaintiffs’ application for a certificate of appropriateness.
19. The only other procedure provided for in the Land-
marks Law, for seeking the Commission’s permission to
build, is to make an ‘‘insufficient return’’ application—i.e.,
to request a ‘‘certificate of appropriateness authorizing
demolition, alterations or reconstruction on ground of in-
sufficient return.’’
By the terms of the Landmarks Law itself, this proce-
dure is available to others similarly situated but is not
available to the plaintiffs.
20. The ‘‘landmark”’ character of the Terminal is highly
debatable and at best doubtful. The aesthetic quality of
the south facade is obscured by its engulfment among nar-
row streets and high-rise buildings. It is hardly seen at
all except for a short distance to the south on Park Avenue,
and even here the view of the facade is intersected by the
encircling roadway and by the tall buildings that line Park
Avenue. Moreover the Terminal is set against the back
drop of the harsh and contrasting lines of the Pan-Am
Builing which appears to hang over the Terminal and to
dwarf it.
14
Complaint.
21. There is a widely held view that what is most nota-
ble and worth preserving about the Terminal is not its
exterior but its interior—i.e., the Main Concourse. In con-
nection with their application to the Commission for a cer-
tificate of appropriateness the plaintiffs specifically offered
to commit themselves not merely to preserve but also to
restore and maintain the Main Concourse. The Commis-
sion rejected the offer.
22. Essentially the only legislative standard contained
in the Landmarks Law, for the guidance of the Commission
in determining which of the thousands upon thousands of
structures in the City shall be designated as landmarks
(and thus subjected to the drastic prohibitions and restric-
tions of the Law) and which ones shall not, is that “any”
improvement, thirty years old or older, may be designated
by the Commission as a landmark if it “has a special char-
acter or special historical or aesthetic interest or value as
part of the development, heritage or cultural character-
istics of the city, state or nation.”
23. The Landmarks Law and the Commission’s acts in
purported reliance thereon deprive Penn Central of rent
at the rate of $1,000,000 per year in respect of the period
commencing on January 22, 1968 and continuing until the
date when the building provided for in the Lease would in
normal course and in the absence of such prohibitions and
restrictions have been completed.
24. The Landmarks Law and the Commission’s acts in
purported reliance thereon further deprive Penn Central
of rent at the rate of at least $3,000,000 per year, in respect
of the period after the building would in normal course
have been completed, and continuing until such prohibitions
and restrictions are set aside or restrained.
15
Complaint.
25. The Landmarks Law and the Commission’s acts in
purported reliance thereon deprive the Lessee of income at
the rate of at least $5,000,000 per year commencing as of
January 22, 1968 and continuing until such prohibitions
and restrictions are set aside or restrained.
26. With respect to other owners of landmarks a point
is reached, under the procedures provided for in the Land-
marks Law, where just compensation is to be paid by the
City for the takings of private property for public use
that are involved in the application and enforcement of the
Landmarks Law. Unless such compensation is paid, the
Commission is required to permit the otherwise lawful
pec of the property, through issuance of a “notice to pro-
ceed.”
With respect to the plaintiffs, these procedures are un-
available, and no point ever can be reached under the
provisions of the Landmarks Law at which compensation
to the plaintiffs is to be provided for and paid; nor has
the City or the Commission in any other way provided for
or offered to pay compensation to the plaintiffs.
27. The deprivations of property described in para-
graphs 23, 24 and 25 above constitute the real economic
cost of preserving the exterior of the Terminal as a land-
mark and thus of forwarding the objectives which the Com-
mission deems to be embodied in the Landmarks Law.
! Such benefits, if any, as may derive from such preserva-
tion are for the public as a whole; but the Landmarks Law
and the actions of the Commission thereunder extract the
entire cost from the plaintiffs alone.
28. On September 2, 1969 the demands and claims upon
which this action is founded were presented by the plain-
tiffs to the Comptroller of the City of New York for ad-
justment; and for more than 30 days after such present-
16 .
Complaint.
ment the Comptroller has neglected and refused to make
an adjustment or payment thereof.
29. As applied to the plaintiffs, the Landmarks Law
and the actions of the Commission thereunder go beyond
the scope of any permissible regulation and constitute a
taking of the plaintiffs’ private property for public use
without just compensation, in violation of the Constitution
of the United States, most particularly Amendments 5 and
14, and the Constitution of the State of New York, most
particularly Article I, Section 7.
30. The plaintiffs have no adequate remedy at law for
the irreparable harm inflicted upon them.
Seconp Cause or ACTION
inti the allega-
31. The plaintiffs repeat and reallege each of
tions contained in paragraphs 1 through 28 and 30 of this
complaint.
32. The Landmarks Law and the actions of the Commis-
sion thereunder have heretofore deprived, are now de-
priving and until set aside or restrained will continue to
deprive the plaintiffs of their property without due process
of law, in violation of the Constitution of the United States,
most particularly Amendment 14, and the Constitution of
the State of New York, most particularly Article I, Sec-
tion 6.
Turrp Cause or ACTION
33. The plaintiffs repeat and reallege each of the alle-
gations contained in paragraphs 1 through 7, 12, 13, 28
and 30 of this complaint.
~~
‘rte edat Wen ee oe a
of genet er
17
Complaint.
34. The designation of the Terminal as a landmark and
of the Property as its site, and resulting subjection thereof
to the prohibitions and restrictions contained in the Land-
marks Law, constitutes a taking of the plaintiffs’ private
property for public use without just compensation, in viola-
tion of the Constitution of the United States, most particu-
larly Amendments 5 and 14, and the Constitution of the
State of New York, most particularly Article I, Section 7.
Fourts Cause or Action
35. The plaintiffs repeat and reallege each of the alle-
gations contained in paragraphs 1 through 28 and 30 of
this complaint.
56. The Landmarks Law denies to the plaintiffs the
equal protection of the laws in violation of the Constitution
of the U. .ted States, most particularly Amendment 14, and
the Constitution of the State of New York, most particu-
larly Article I, Section 11.
Firra Cause or Action
37. The plaintiffs repeat and reallege each of the alle-
gations contained in paragraphs 1 through 28 and 30 of
this complaint.
38. The Landmarks Law attempts to provide for an ad-
ministrative prescription of the aesthetically good, and is
unconstitutional because it fails to provide adequate legis-
lative standards by which the Commission is to make such
decisions or by which the action of the Commission can be
judged, and is an unlawful delegation of legislative author-
ity, in violation of the Constitution of the United States,
18.
Complamt.
most particularly Amendment 14, and the Constitution of
the State of New York, most particularly Article I, Section
6 and Article ITI, Section 1.
Srmtu Cause or AcrIon
39. The plaintiffs repeat and reallege each of the alle-
gations contained in paragraphs 1 through 7, 12, 13, 14, 28
and 30 of this complaint.
40. Within the Terminal there are various railroad facil-
ities, including passenger terminals, passenger ticket
offices, switch yards, and other transportation equipment
and facilities, which Penn Central uses in intrastate and
interstate carriage of passenges.
41. The railroad facilities located within the Terminal
and used in both intrastate and interstate commerce are
subject to the regulatory jurisdiction of the New York Pub-
lie Service Commission pursuant to the provisions of the
Public Service Law of the State of New York and of the
Railroad Law of the State of New York, and the regulatory
jurisdiction of the Interstate Commerce Commission pur-
suant to the provisions of the Interstate Commerce Act,
U.S.C.A., Title 49.
42. Under Section 50 of the Public Service Law of the
State of New York, the Public Service Commission is given
the power to order repairs or changes in terminals or ter-
minal facilities. The legislative body of the City of New
York is expressly forbidden, under Section 11 of the Muni-
cipal Home Rule Law, to adopt any law which applies to
or affects any provision of state law providing for regula-
tion or elimination of terminal facilities within the City
of New York.
eee pethin Shes ~teet. Se
BO ek ak ares OP ah Mh I Re Ce, OT ha
oD ae ge
19
Complaint.
43. The Landmarks Law has no application in respect
of the Terminal or the Property, and the Commission’s
actions are null and void.
Seventy Cause or Action
44. The plaintiffs repeat and reallege each of the alle-
gations contained in paragraphs 1 through 28, 30, 40, 41
and 42 of this complaint.
45. The Landmarks Law, as applied in respect of the
Terminal and the Property, has a substantial adverse effect
upon Penn Central’s operations and charges as an inter-
state carrier, and constitutes an unreasonable burden upon
interstate commerce, in violation of the Constitution of the
United States, most particularly Article I, Section 8.
Waueneror:, the plaintiffs pray that this Court enter its
judgment:
1. Declaring that the Landmarks Law, as applied to the
plaintiffs, violates the Constitution of the United States
and the Constitution of the State of New York; that neither
the City nor the Commission had or has any power or ju-
risdiction to enact or enforce such Law, through designa-
tion of the Terminal as a landmark or otherwise; and that
such Law is null and void and of no force or effect in re-
gard to the plaintiffs or the Terminal or the Property.
2. Permanently enjoining the defendants from using or
threatening to use the Landmarks Law or any provision
thereof or any action or regulation thereunder to prevent,
impede, obstruct or in any way have any bearing with re-
spect to the construction, use and occupancy, on the Prop-
erty, of Breuer I or Breuer II or any other structure which
20
Complaint.
may otherwise lawfully be erected on the Property or any
other use which may otherwise lawfully be made of the
Property.
3. Declaring that the prohibitions and restrictions im-
posed by the defendants, during the period between the
designation date (August 2, 1967) and the date when all
such prohibitions and restrictions shall have been finally
set aside pursuant to this Court’s order, constitute a tem-
porary taking of the Property for which just compensation
must be paid by the City; and ordering the City to pay
such compensation, computed at the rates set forth in para-
graphs 23, 24 and 25 of this complaint.
4. Granting to the plaintiffs such other and further re-
lief as to this Court may seem just and reasonable.
Dated: New York, New York
October 7, 1969
Dewey, BaLLantine, Bususy, Patmer & Woop
Murray DraBKIn
Waite & Case
Attorneys for Plaintiffs
21
Verified Answer.
SUPREME COURT OF THE STATE OF NEW YORK
County or New Yorx
(SAME TITLE}
Defendants, answering by their attorney J. Lee Rankin,
Corporation Counsel, respectfully allege:
First: Deny that they have any knowledge or informa-
tion sufficient to form a belief as to each and every allega-
tion set forth in paragraphs ad bak oe “ug” “6g” a ha “g??
“10”, “11, “93”, ‘694” and “25” of the complaint.
Seconp: Deny each and every allegation contained in
paragraphs “13”, “14”, and “15” of the complaint, and re-
spectfully refer the court to § 207-4.0, § 207-9.0, § 207-10.0
and § 207-16 of the Administrative Code of the City of New
York for the full text and meaning thereof.
Tump: Deny that they have any knowledge or informa-
tion sufficient to form a belief as to each and every allega-
tion set forth in paragraph ‘‘17” of the complaint, except
admit that on July 18, 1968 plaintiffs submitted “Breuer
I” to the Commission and applied for a certificate of no
exterior effect to enable them to build it, and that after
holding a hearing the Commission on September 20, 1968
denied the application.
Fourtu: Deny that they have any knowledge or informa-
tion sufficient to form a belief as to each and every allega-
tion set forth in paragraph “18” of the complaint, except
admit that on January 20, 1969 plaintiffs applied to the
Commission for a certificate of appropriateness and sub
mitted “Breuer II” and resubmitted “Breuer I”, and that
22
Verified Answer.
after holding hearings the Commission on August 26, 1969
denied in its entirety, and as to both alternatives, the plain-
tiffs’ application for a certificate of appropriateness.
Firra: Deny each and every allegation contained in
paragraph “19” of the complaint, and respectfully refer
the Court to § 207-8.0 of the Administrative Code of the
City of New York for the full text and meaning thereof.
Sixto: Deny each and every allegation set forth in
paragraphs “> “'. a ot a ot < “34”, -
“38” “43”, and “45” of the complaint.
SeventH: Deny each and every allegation set forth in
paragraph “21” of the complaint except admit that the
Commission rejected plaintiffs’ application for a certificate
of appropriateness.
EicutH: Deny each and every allegation contained in
paragraph “26” of the complaint, and respectfully refer
the Court to § 207-8.0 of the Administrative Code of the
City of New York for the full text and meaning thereof,
except admit that neither the City nor the Commission has
in any way provided for or offered to pay compensation to
the plaintiffs.
Nintao: Except as hereinbefore admitted or otherwise
pleaded, deny each and every allegation repeated and re-
alleged in paragraphs gu”, “33”, “35”, -— sw" “39”, and
“44” of the complaint.
AS AND FOR A FIRST FULL, COMPLETE AND SEPARATE DEFENSE,
THE DEFENDANTS ALLEGE:
TentH: The membership of the Landmark Preservation
Commission includes among others architects, realtors, an
historian, a city planner, and an attorney.
23
Verified Answer.
ELEVENTH: The Landmark Preservation Commission has
conducted extensive studies of places and buildings in the
City of New York for the purpose of designating such
places and buildings as landmarks and historic districts.
TweELFTH: An exhaustive study of Grand Central Station
was conducted by the Landmarks Preservation Commission
for the purpose of determining if Grand Central merited
designation as a landmark.
: THIRTEENTH: A public hearing on the proposed designa-
tion of Grand Central was held on May 10, 1966, and was
continued to subsequent meetings of the Commission and
closed January 31, 1967.
FourteentH: The plaintiff New York and Harlem Rail-
road Company, and New York Central Railroad Company,
appeared by its attorney, at the public hearing and fully
presented its views to the Landmarks Preservation Com-
mission regarding the proposed designation of Grand Cen-
tral as a landmark.
FIFTEENTH : A memorandum to the Commission where- —
in the plaintiff’s position regarding the proposed designa-
tion was extensively set forth was submitted.
SrxTEeNTH: The Landmarks Preservation Commission
after considering all of the evidence found that among all
its important qualities, Grand Central is a magnificent ex-
ample of French Beaux Arts architecture, that it is one of
the great buildings of America, that it represents a creative
engineering solution of a very difficult problem, combined
with artistic splendor, that as an American Railroad Sta-
tion it is unique in quality, distinction and character, and
that this building plays a significant role in the life and
development of New York City.
24
Verified Answer.
SEVENTEENTH: On August 2, 1967 the Landmarks Pres-
ervation Commission designated Grand Central a land-
mark.
EIGHTEENTH: On October 7, 1969, the Landmarks Pres-
ervation Commission and the City of New York were
served with a copy of the complaint.
NINETEENTH: The right to review the factual determina-
tion made by the Commission in designating Grand Central
a landmark, in that it found that Grand Central has a spe-
cial character, special historical and aesthetic interest and
value as part of the development, heritage, and cultural
characteristics of New York City, did not accrue within
four months before the commencement of this action, and
is, therefore, barred by the limitation of time contained in
Section 217 of the Civil Practice Law and Rules which
provides that a proceeding against a body or officer must
be commenced within four months after the determination
to be reviewed becomes final and binding upon the inter-
ested party.
AS AND FOR A SECOND, FULL, COMPLETE AND SEPARATE DEFENSE,
THE DEFENDANTS ALLEGE:
TwentretH: The defendants repeat and reallege each
of the allegations contained in paragraphs ‘‘10’’ through
‘17’ of this complaint.
Twenty-First: On July 18, 1968 application was made
to the Landmarks Preservation Commission by plaintiffs
for a Certificate of No Exterior Effect for work to be done
at Grand Central Terminal (hereinafter referred to as
‘*Breuer I’’).
Twenty-seconp: After holding a hearing, the request
was denied by the Commission on September 20, 1968.
ct, a wield be a Arid
ne a eee Rt a Ant Be Lis Ato dealt si itt Sie AAD B®
25
Verified Answer.
TweNtTy-THIRD: On January 20, 1969 the Landmarks
Preservation Commission received the application of
plaintiffs for a Certificate of Appropriateness for the work
that had been proposed under the application of July 18,
1968 (‘‘Breuer I’’), as well as for an alternative proposal
(hereinafter referred to as ‘‘Breuer II”).
Twenty-FourTH: On April 10, 11 and 14, 1969 a hearing
was held as advertised and testimony was presented as to
‘*Breuer I’’ and ‘‘Breuer IT’’.
TwentTy-FirtH: Plaintiffs submitted further revised
proposals to the Commission on June 23, 1969, and a final
and complete set of drawings was received on August 1,
1969 (hereinafter referred to as ‘‘Breuer II” Revised).
Twenty-sixtH: A hearing was held on August 5, 1969.
TWENTY-SEVENTH: It was agreed that, except insofar as
testimony was directed towards an element in which
‘‘BreuerLl’’ specifically differed from ‘‘Breuer II’’ Re-
vised, all oral and written arguments received at or sub-
sequent to the April 1969 hearing might be considered by
the Commission in reaching its determination.
Twenty-EichtH: The Commission, after careful con-
sideration, on August 26, 1969 denied plaintiffs’ applica-
tion for a Certificate of Appropriateness as to both
‘*Breuer 1’’ and ‘‘Breuer II’’ Revised.
Twenty-NIntH: The proceedings of the Landmarks
Preservation Commission in designating Grand Central as
a landmark, and in denying plaintiffs’ applications for a
Certificate of No Exterior Effect and a Certificate of Ap-
propriateness were in all respects in accord with the law.
26
Verified Answer.
Wuererore, defendants ask for a judgment of this
Court declaring:
1. The designation of Grand Central a landmark is valid
and constitutional.
2. The Landmark Law as applied to plaintiffs is valid
and constitutional.
3. That the Landmark Law is valid and constitutional.
4. That the defendants have the costs and disbursements
of this action and such other relief as this Court deems
just and proper.
sa a J. Lez Rankin
Corporation Counsel
Attorney for Defendants
Dated: New York, N.Y.
November 5, 1970
(Verified by Harmon Goldstone on November 5, 1970.)
SO ee hes tae ee Ot abe
27
TESTIMONY
[20] Frepertck Rover, residing at 2 Gramatan Drive,
Yonkers, New York, called as a witness on behalf of
the plaintiffs, having been first duly sworn, testified as
follows.
Direct ExaMINaTION
By Mr. Stewart:
Q. Mr. Rovet, what is your present occupation? A. I
am Assistant Vice President real estate of Penn Central
Transportation Company.
Q. Do you hold any other positions with the Penn Cen-
tralf A. I’m an officer and director of the 51st Street
Realty Corporation. I am also president of the Realty
Hotels, Inc., the eompany which operates Penn Central’s
four hotels, the Biltmore, Barclay, Roosevelt and Commo-
dore Hotel.
Q. Do you hold a position with the New York & Harlem
Railroad Company? A. No, I do not.
Tue Court: I don’t think he was around then.
Tue Wrrness: I was an officer and director in April of
this year and I resigned. :
[21] THe Covrt: But you weren’t around when it was
New York & Harlem Railroad?
Tue Wrirwness: It still is.
Q. Are you a lawyer? A. Yes, sir.
Q. When were you admitted to practice? A. In Decem-
ber of 1956.
Q. And was that in New York? A. Yes, sir.
Q. When did you join the Penn Central? A. August 6
of 1956 I joined the General Counsel’s office of the New
York Central Railroad Company.
Q. And what jobs have you had since then down to date?
A. I was an attorney from December of 1956. Two years
28
after that I received different titles, but remained an attor-
ney until October 31st of 1968 in the General Counsel’s
office of the New York Central Railroad Company and then
subsequent to merger, the Penn Central Transportation
Company.
[24] By Mr. Stewart:
Q. And what building did these plans provide for? A.
Provided for an office building over the existing Grand
Central Terminal.
Q. How many stories? A. I believe it was 20 stories.
Q. Was any provision made in the terminal [25] building
itself for supports for this building? A. Yes. The present
terminal building has foundations which were designed to
accommodate the 20-story office building over the terminal.
They are still located in the Grand Central Terminal today.
[64] THe Wrrness: If I may try to describe it more ac-
curately, your Honor, you’re concerned with the place
where OTB now occupies the former ticket windows, you’re
concerned with the westerly side of the ticket windows that
you referred to before, you’re concerned with the interior
of that ticket office, until you reach the waiting room on
the southerly side. The tower would proceed, under the
terms of the lease——
Tue Court: All right, those rented facilities are subject
to termination in the event of the consummation of this
lease.
Tue Witness: Yes.
Tue Court: That’s your testimony.
Tue Witness: Yes.
[66] Q. Does the Railroad pay any real estate taxes on
the land on which Grand Central Terminal is located? A.
Dee ee ee” ee
ee ie See
Pa Ab 00) tan htt lea A Ba Rd one 9%
ee ed
Laer R> Agta gh BOE LRB ON PO, lepine
a ALERT wait ANd whet ee eh
29
The Railroad presently is not paying real estate taxes pur-
suant to an order of the Federal Court in Philadelphia,
pursuant to which the Penn Central is in reorganization.
+ e *
[70] Q. Under the lease, Exhibit 2, who is responsible for
paying real estate taxes? A. UGP Properties, Inc. would
be obligated to pay as additional rental 100 per cent of the
tax on the new building, 100 per cent of the tax on that
portion of the old building which is within an area defined
under the lease as the enclave, and 100 per cent of the tax
rate applied to the total assessment on the land of Parcel A.
[84] Tse Court: And so between the two million [85]
four total available here, total usable area, legal usable
area, and the actual area used, you’re got about two million
plus square feet to give away?
Tue Wrrvess: Yes, your Honor.
Tue Court: All right.
Now, I understand it.'
Mr. Stewart: This chart, your Honor, just to make it
probably unnecesarily clear was prepared not primarily
to indicate what size building could be put on the Grand
Central site, but, rather, to indicate what rurtion of the
air rights could be transferred to another location.
[96] Q. I hand you Plaintiffs’ Exhibit 11 for identification
and ask you, Mr. Rovet, who prepared that? A. This ex-
hibit was prepared under my jurisdiction and supervision.
Q. And is the information contained therein true and
correct? A. The information is correct.
Q. And taking the first page or the heading on the left as
‘“‘property subject to long-term ground leases,’’ which
properties are those on the plaintiffs’ exhibit?
30
Tue Covrt: I can see at once, Mr. Stewart.
If I may interrupt you, the details of the occupancy shown
on Plaintiffs’ Exhibit 10 are detailed, as I say, on Plain-
tiffs’ 11 for identification; is that the short of it?
Mr. Stewart: That is correct, sir.
[99] Tse Covrtr: That is shown on the legend. I take it
the only available properties for transfer of their air rights
are in red. They are not subject to ground leases or con-
tracts of sale?
Tue Wrrness: That’s correct, your Honor.
Tue Covrt: You have complete control there. All right.
The only ones available for transfer are the red build-
ings. The Biltmore is one of them. That is No. 2 in Plain-
tiffs’ Exhibit 10?
Tue Witness: Yes, your Honor.
[101] Tse Covrr: Just clear me on this.
In what circumstances is the transfer, air rights transfer,
available, adjacent properties?
These rights cannot be sold, is that right? They cannot
be conveyed, as a matter of bargain and sale?
Tue Wrrness: I think they can be conveyed, your Honor,
provided the owner, as defined in the zoning law, which
includes not only a fee owner but an owner of a term of
50 years with one renewal of 25 years, provided that owner
and the ownder [sic] of the candidate for transfer are the
same.
Tue Covrt: In other words, the idea is to obviate hard-
ship.
Tue Wrrness: Yes.
POE en eee ee ee ee ree ee le ew a ee Se ee ee eee Pee See eee
ae Ai 86 i teh AARNE ash ih a mL Re. i hh wa tg SO
31
Tue Court: Is that singular to the Landmark Law or is it
applicable in other circumstances?
THe Wiryess: It may be applicable in other circum-
stances.
[102] Tse Court: In other words, forget for a moment
that we’re involved with the landmark problem.
As the owner of Grand Central Station, as a matter of
hardship, could you conceivably or legally avail yourself of
that unused area?
Tae Wrrness: We could.
Tue Court: —With some other adjacent site?
Tue Wrrness: We could do that without using the Land-
mark Law.
Tue Court: Assume Grand Central Station was not des-
ignated as a landmark area——
Tue Wrrness: Yes, sir.
Tue Court: —could you utilize the unused air rights on
some other property that you own, on some other adjacent
property that you own, increasing the otherwise available
area?
Tue Wrryess: Yes, your Honor, only in one case, and
that would be the Commodore Hotel, which is marked as
No. 7 on this exhibit.
Tue Court: As an adjacent site.
THe Witness: Yes.
e s o
[140] Te Covrr: Let’s take the Biltmore.
7 aa e
(141] Tue Covrt: Now, if you took the Grand Central
rights and transferred them, what did you do?
Tue Wrrness: You could add the two million one over
Grand Central to that seven seventy-nine, assuming that
32
you could get bonuses, and you’d have a monumental figure
of two million eight.
Txe Court: That’s a pretty big building.
THe Wrrness: Yes.
Tre Covrt: A lot of space.
Tue Wrrness: It would be like an obelisk.
{142] Tue Court: What’s wrong with that?
Tue Wrrness: It would be infeasible to go beyond a cer-
tain number of floors because you’d have to have one ele-
vator bank going all the way up to the top and you’d find
that the lower floors were almost fully covered by elevators,
so there comes a point of no return in building a structure
like that.
It seems to me that you have to stop at 59 stories or 60,
and beyond that it’s economically infeasible to go.
[148] Q. With respect to the Roosevelt Hotel, Plaintiffs’
Exhibit 14 indicates that the lot area is the same as that for
the Biltmore.
Do the same considerations apply with respect to the
transfer of the air rights to the Hotel Roosevelt site as you
have testified applied in the case of the Hotel Biltmore
except for this series point? A. Yes, sir.
[151] THe Covrtr: You said that would be with a 52-story
building?
Tue Wrrness: More than 70, your Honor.
Tue Court: What about the Roosevelt in 1968?
THe Wirvess: The considerations are almost exact, your
Honor, as the Biltmore.
— ell
alee WP ee ail) eed ae 2 op?
33
[169] Q. In your direct testimony, Mr. Rovet, you testi-
fied that in 1962 the Railroad considered the use of the
waiting room for a bowling alley, is that correct? A.
That’s what I testified to, yes.
Q. Now, since that time, has the Railroad ever consid-
ered the use of the waiting room for [170] any other com-
mercial purpose? A. No, we regarded ourselves as being
frustrated.
Q. You regarded yourself as being frustrated since 1962,
is that it? A. Yes.
[183] Q. Isn’t it a fact that the decision to [184] build
on the Biltmore site was not made public because of the
feared effect upon the labor force in the Biltmore Hotel?
Is that a fact or not?
A. There was no decision ever to build on the Biltmore
site.
Q. Has there been any attempt, since 1970, to discuss
building on the Biltmore site with any of the defendants?
A. Yes.
Q. When were those discussions had, if you know? A.
In the latter part of 1970 and the early part of 1971, UGP
Properties, Inc., and the Railroad attempted to negotiate
a lease of the Biltmore site, but the lease never came to
fruition, we never came to terms.
Tue Court: You mean a lease with a prospective builder.
[185] Tse Wrrness: With UGP Properties, Inc., your
Honor.
Q. Are those the only discussions had with respect to
building on the Biltmore site other than what you just told
ust A. Yes, absolutely.
Tue Court: Who are the principals in UGP?
Tue Witness: Morris Saady is the President of the UGP
Properties, Inc.
34
Tue Court: He has no connection with the plaintiffs as
such.
Tue Wirvyess: Other than being the President of one of
the plaintiff companies.
Tue Court: Not part of the New York Central complex.
Tse Wrrness: No, sir.
Tue Court: When these discussions went on with Saady
of UGP about building on the Biltmore site, did that in-
clude a consideration of the transfer of the Grand Central
air rights?
Tue Wirwness: Oh, yes, sir.
[186] THe Court: Go ahead.
How far did those discussions get, can you tell me that?
Tue Witness: They were bogged down in considerations
of the rent. Saady would not pay the $5,000,000 rent that
I referred to previously in my testimony, your Honor, be-
cause he felt it was too high to make the project feasible.
Tue Court: What were the details of the project, do you
know? What did he propose to do? What did he have in
mind? Did he say?
Tse Wrrness: He had in mind making the transfer,
knocking down the Biltmore and putting up a large office
building on the Biltmore site.
Tue Cover: How large? How high?
Tre Wrrvess: I’ve forgotten, your Honor. I believe it’s
something like 59 to 61 stories.
Tue Court: Office building?
Tue Wirness: Yes, your Honor.
—
LS ne i SL ss Ne Or
Soil he, ee LL ia
oe eT eS a
ee eee eal Nar ee a ee ee
g
|
:
4
35
[187] Tse Court: You wanted $5,000,000.
Tue Witness: We wanted $5,000,000 for the combina-
tion.
We also wanted certain indemnities in the event that the
project would not go through, in order to make us whole
on the Biltmore Hotel.
Tue Court: You mean five million a year.
Tue Wrrwness: Yes.
Tue Court: How many years?
Tue Witness: We would want that $5,000,000 for an ini-
tial term of at least 50 years with a renewal of 25 years
subject to increasing for hedges against inflation over the
term.
Tue Court: The other parties make a counter-offer?
Tue Wrrness: They made counter-offers from time to
time but we regarded them as——
Txe Court: How near five million a year did they come?
Tue Wrirness: Not close at all.
Tue Court: Do you know how much [187A] was offered?
Tue Wrrvness: Three million seven, three million eight.
{200] Henrserr Becxuasrp, residing at Red Spring Lane,
Glen Cove, Long Island, New York, called as a wit-
ness on behalf of the plaintiffs, having been duly sworn,
was examined and testified as follows:
Dmect ExaMrInaTIoNn
By Mr. Stewart:
Q. Mr. Beckhard, what is your occupation? A. I’m an
architect.
36
Q. Where do you work? A. I work in the firm of Marcel
Breuer & Associates, located at 635 Madison Avenue, New
York.
Q. Is that a partnership? A. It is.
Q. Are you a partner? A. I’m a partner.
Q. When did you become a partner? A. In 1964.
Q. When you you join the organization? A. In 1951.
Q. Would you tell us your professional training? A. I
went to the Pennsylvania State University, studied archi-
tectural engineering there and did graduate [201] work
at Princeton University in 1949 and ’50.
[382] Q. Did you prepare any plans for any construction
on any alternate site in the Grand Central area for UGP
other than the site on Grand Central Terminal? A. Yes.
Q. Where was that site? A. We investigated several
sites, starting with the Commodore, then the Roosevelt
Hotel site, 466 Lexington Avenue site, and lastly, the site
of the Biltmore Hotel.
Q. Did you prepare plans for all these sites? A. To
varying degrees of thoroughness.
Q. Was the Biltmore site the most advanced set of plans
you had? A. Yes.
Q. What degree of planning did you reach with [383] the
Biltmore plans? A. A state comparable to these three
projects.
Q. And what date did you prepare those plans? A. I
don’t recall the exact date.
Excuse me, you have the drawings in evidence. If you
would let me look at the drawings, I could give you the
date.
These drawings bear the date 15 December 1969.
Q. Are those the only drawings you prepared for con-
struction on the Biltmore site? A. These were not draw-
ings for construction.
Cats Sahih ik tae Oat AE RI adalah s (0 asin Dl ete eo BRE OA) Ge ene
ath
wee Te
37
Mr. Nespote: Question withdrawn.
Q. Are those the only plans you prepared for building
on the Biltmore site? A. Well, we prepared quite a few
sketches and we discussed with the Planning Commission
whether or not we would have a park on Madison Avenue
or one of the side streets. We went through quite a few
sessions with them in deciding things of that nature.
We discussed a bridge with them, and so on, and this
represents the final product, I guess.
Q. Do those plans reflect the total number [384] of
floors? A. Yes.
Q. Do they reflect the distribution of arcades, plazas,
and so forth? A. Yes.
Q. Were these part of the conversations had with the
representatives of the City Planning Commission? A. Yes.
Q. According to plans, what was the gross building size
for the building on the Biltmore site? A. Again it was
approximately two million.
[385] Q. Did these plans assume the transfer of the devel-
opment rights over Grand Central Terminal to the Bilt-
more site? A. Yes.
[434] Murray Drasxrn, residing at 1814 24th Street, N.W.,
Washington, D.C., called as a witness on behalf of the
Plaintiffs, having been first duly sworn, testified as
follows:
Drrect EXAMINATION
By Mr. Stewart:
Q. What is your occupation? A. I’m a lawyer.
Q. When were you admitted to the Bar? A. I was ad-
mitted to the Bar of the District of Columbia in 1953 and
to the Bar of the State of New York, I believe it was in
1966.
38
Q. Are you an officer of UGP Properties, one [435] of
the plaintiffs in this case? A. Yes, I am.
Q. What is your position? A. I’m vice president and
secretary to the corporation, and general counsel.
[444] Q. Taking that procedure in account, was UGP
in a position to use that procedure to attempt to obtain
permission to transfer? A. Not at any point. It is neces-
sary to have not only an originating site—and by that I
mean the [445] landmark site which generates the air rights
—which, of course, UGP had under its lease with the Rail-
road, but it also must have what I would call a transferee
site,
UGP’s only property interest in Manhattan throughout
this entire matter has been its leasehold interest on Grand
Central Terminal. It did not have at any point, and does
not have now, a possible transferee site.
. . .
[463] Tue Wrrness: Yes, we are co-plaintiffs in this, and
the discussions were with myself and UGP.
Tue Court: Whatever you say, using the word ‘‘amen-
able,’’ applies to Penn Central.
Tae Wrrness: We work as a team, the Penn Central
people and ourselves.
Tax Covert: All right, that would not have been an ob-
stacle, if something agreeable had been arrived at.
Tae Wrrness: Correct.
Tue Cover: What happened after that?
You now have this zoning resolution, is that right, and
does it contain the provisions that were directed toward
this problem?
i ee ee ee eee
a.
39
Tue Wrrness: The Planning Commission staff then went
about getting the resolution adopted, and our position was,
that is, we made no commitment that we would, in fact,
build this building or that building.
[464] We investigated various buildings with them and we
said, if it was feasible, we would do so, and so in Decem-
ber of '69, the change in the law was, in fact, enacted, and
after it was enacted we continued to investigate in con-
siderable depth and considerable expense the possibility of
transferring the air rights to any number of alternative
sites.
Tue Court: It never worked out.
Tue Wirness: Every site we investigated turned out to
have obstacles which resulted in it not being an acceptable
substitute, even a reasonable substitute for what we have.
Indeed, it turned out that none of them were really feasible.
Tue Court: The transfer of air rights is available if you
picked a suitable site.
Tue Wrrness: Well, they’re available, I think, in a highly
risky and speculative way.
Could I take a moment and go through some of the prob-
lems that confronted us in this regard?
To say that the transfer is available is [465] easy, but
when you start trying to work it out, you really run into
some very serious problems.
[467] Now, we, as a developer, have to make a choice about
whether we’re going to try to transfer air rights.
We have 2,000,000 square feet of air rights on Grand
Central Terminal, and we start thinking about where we
could possibly transfer and how long and what are the
problems.
40
First of all, it requires a special permit from the Land-
marks Preservation Commission, from the City Planning
Commission.
In order to get that special permit, we first have to
satisfy the Landmarks Commission that this is a program
for continuing maintenance of the landmark, which is satis-
factory to them, and what that constitutes and what the
cost of it will be is entirely up in the air and conjectural.
Secondly, we have to satisfy the City Planning Commis-
sion that the transfer will not result in undue density or
not result in an increase in bulk or any of these other
things [468] that are stated in the statute; and then, if
we've satisfied the staff as to that, the matter then goes to
the City Planning Commission, which by majority vote can
decide either way on the thing,
If it survives the City Planning Commission, it then is
subject to hearings before the Board of Estimate, and the
decision by the Board of Estimate as to whether it will
authorize the transfer.
Now, in that kind of proceeding, there is often many a
slip between the cup and the lip, and for the developer such
a procedure is fraught with peril and risk.
When you add to that the fact that the transfer, once
made, is irrevocable, you have some real problems which
are far less than a full right to develop.
{[469] Tue Covrr: Who made the suggestion?
Tae Wrrness: Mr. Robertson of the Planning Commis-
sion that we transfer F.A.R. to the Biltmore or Roosevelt
Hotel or 466 Lexington Avenue or the Commodore Hotel.
We systemmatically [sic] examined every one of these
proposals. Let’s look at the Biltmore and Roosevelt and
these present very similar problems.
ee ee ee
—
41
Suppose, in fact, we had managed to get all of the ap-
provals required by this statute, we would have then pro-
ceeded to build a building of some 2,000,000 square feet or
attempted to build a building of some 2,000,000 square feet
on a site which was 43,000 square feet. That means that
that building would have had to have gone out to the build-
ing line on at least three sides, and it would have had to go
up about 60 stories.
I think the number was, in fact, 63, if my recollection
serves me correctly. The streets around the Biltmore and
the streets around the Roosevelt are narrow streets, if you
will recall 45th, 46th, Vanderbilt and Madison, and it seemed
[470] to us that there was a tremendous risk that an owner
of a neighboring building would take a look at this statute,
and so, well, how could we say that this building does not
unduly increase the bulk of a new development with regard
to air rights? How can we not say that the transfer of air
rights to this new site does not result in density of popula-
tion or undue density in the use of the block, with the re-
sult, your Honor, that we would have been confronted with
taxpayers’ suits by neighboring property owners, which
would either have prevented or totally impeded or totally
prevented this development.
Now, I mentioned earlier irrevocability. We would then
find ourselves in the net position of having transferred the
air rights from Grand Central, and if the taxpayer—a tax-
payer’s suit, with air rights irrevocably transferred to that
site, and never be able to develop these, with risks which
seemed to us that a developer ought not to take. They were
— not a substitute for what we had at Grand
entral. ,
Tue Court: Continue.
[471] Q. I take it from your testimony that during 1969
and 1970 you were actively considering the possibility of
transferring air rights.
42
You indicated two reasons which suggest how UGP felt
about this, that is, the delays and uncertainty in the admin-
istrative process and also the risk, serious risk of tax-
payers’ suits,
Are there any other general considerations that went
into your planning? A. Yes. Another important consid-
eration, of course, was that of obtaining vacant possession.
At Grand Central we had a site in which we could obtain
vacant possession in which we could proceed with develop-
ment within 90 days.
Each of the concessionaire leases at Grand Central have
a clause which allows the railroad to terminate on 90 days’
notice. So, once we had the go ahead we could begin con-
struction no later than 90 days thereafter.
On the other hand, if you look at the alternative site, you
don’t have that kind of thing. At the Roosevelt Hotel, if
my recollection serves me correctly, I believe there were
then leases outstanding until——
(472] Tue Court: We have that in the record. We already
have that.
Tue Wrrness: There were also problems of vacant pos-
session in the Biltmore and at the Commodore. So that—
and at 466, where I believe there were also space leases
outstanding.
Q. With respect to the Hotel Commodore, did you en-
counter any problems with respect to the possible transfer
of air rights to that site?
[473] Tue Wrirness: There were, of course, the general
problems to which I have already alluded, the problems of
getting vacant possession, the administrative obstacles, the
possible taxpayers’ suits and the Commodore presented a
special problem in its sub-surface conditions.
43
As was mentioned earlier, the Commodore sits astride
the loop track of the Penn Central system. It also sits
astride two levels of the subway system, the Flushing line
and the Lexington Avenue, and these presented enormous
problems in construction and in time and course, which
seemed to us to be insurmountable.
By Mr, Srewart:
Q. Were there any other considerations with respect to
the Biltmore site other than those you just mentioned?
Were there any financial considerations? [474] A. Yes.
There were certainly very serious financial considerations
at the Biltmore site. The Biltmore is a going hotel. It is, in
fact, one of the most profitable of hotels which is owned by
the railroad. Its earnings over the past few years range
anywhere from about—I think the low is probably around
a million two up to perhaps a million eight; in that range;
and if we were to build an office building on that site it
would have been necessary for us to, in fact, acquire a going
business; it would have been necessary for the railroad to
give up a going business,
Now, people are willing to give up going businesses if
they get a good enongh price for them, and this was, in fact,
reflected in the railroad. It’s a position on the Biltmore.
We conducted extensive and serious negotiations with
the railroad in the hope that we could acquire a site and
make this thing work. Our attitude was not negative about
it. Our attitude was constructive and positive. We wanted
to make it work, we wanted to go ahead with the building
if we could [475] possibly do it. So we spent an awfully
long time dickering back and forth with the railroad to try
to work out a lease that we could live with, and when
the whole thing broke down finally, the last figure that we
had was $5,000,000 a year rental for the Biltmore Hotel.
That, plus the other obstacles, just made it a completely
unacceptable risk.
44
Q. Did the—— A. Excuse me. My I just add one thing
which might give us some perspective? ya
At Grand Central we were talking about a rental which
was around three million as opposed to a rental of around
five million for a site which we could not consider to be
nearly as attractive.
The economics of it are more important not only in terms
of what it cost us but also in terms of what we could hope
to get out of it. We start out with a big minus on the Bilt-
more site and we start out paying perhaps $2,000,000 a
year more in rental.
On the other side of the ledger it was our view that we
could get anywhere from 50 cents to a dollar a square foot
more rent on the Grand Central Terminal site. Well, let’s
say it isn’t 50 cents or [476] a dollar. All right, take the
difference of perhaps 75 cents a square foot. So, two mil-
lion square feet times 75 cents a square foot is a million
and a half dollars a year.
It was our view that the Grand Central Terminal site
would produce perhaps a million and a half dollars a square
foot more than the Biltmore, in addition to which the Bilt-
more would cost us $2,000,000 more in rental. So there was
a three and a half million dollar disadvantage that you
start out with on the Biltmore site compared to Grand
Central.
I would add a couple of more considerations. We were
prepared to go ahead with Grand Central in 1968. The zon-
ing transfer which would have allowed us to move ahead
on the Biltmore, if it were feasible, did not pass until the
end of 1969. If everything had gone perfectly and if we had
been able to go ahead with the Biltmore, it would not have
been until well into 1970 because of the administrative pro-
cedures that we had to go through.
By that time real estate ratings had gone up, operating
costs had gone up; none of these things [477] could have
45
been reflected in escalation clauses as they would have been
at Grand Central, with the result that there would have
been a substantial additional difference in the cost of doing
the Biltmore, in the course of operating the Biltmore, all
of which would have inured to the detriment of the land-
lord, and, finally, at the Grand Central site we had this
building with the spectacular views down Park Avenue
right on top of Grand Central Terminal, a unique and a
very distinguished office building, and we think—we think
that the vacancy problem which you have to take into ac-
count with these buildings, of course, would have been con-
siderably jess than it would have been at the Biltmore.
So we are talking in hard dollars and cents, an economic
disadvantage on the Biltmore site, which was well over
$4,000,000, plus the intangibles of vacancy rates, and things
of that sort, all of which militated against it.
Overall, in economic terms, this was just a completely
unacceptable level of risk and it could hardly be considered
to be a substitute for Grand [478] Central Terminal for
which it was offered.
Q. Did the Railroad indicate that they would want any
indemnity with respect to the Biltmore? A. Yes, the Rail-
road did indicate that, and this is another one of those
problems that confronted us in the course of these negotia-
tions. The Biltmore is a going hotel. The Railroad took
the position that once it became public knowledge that the
Biltmore would get torn down, the hotel business would
completely deteriorate, and the reason for this is that that
hotel, like the Biltmore, there is considerable dependence
on the convention business, and that kind of business is
booked one to three years in advance.
If a convention manager is faced with the prospect that
a hotel is going to—may be torn down, he isn’t likely to book
his convention there. So the Railroad took the position, with
considerable justification, that they could not possibly take
46
the risk that a transfer would not materialize or that the
developer, for some reason, would otherwise be unable to
go forward with the project.
The Railroad, therefore, insisted that before it would
allow a transfer of air rights from [479] Grand Central to
the Biltmore or the Roosevelt, the developer would have to
enter into an indemnity or a liquidated damages provision,
if you will, which would compensate them for the possible
loss of business as a result of the announcement that the
building might get torn down.
And I think the amounts that we talked about were very,
very large. They ranged anywhere from a half million to
$2,000,000, depending upon the period of time involved. So
that if we had applied for the transfer and for any reason
the Planning Commission or the Board of Estimate had
turned us down, UGP would have had to pay over to the
Railroad as much as a half million dollars to $2,000,000.
Q. Were the considerations with respect to the Roose-
velt any different from those with respect to the Biltmore?
A. They were substantially the same, Mr. Stewart, with,
perhaps, one position additionally, and that is the Roose-
velt is further away from the transportation hub. It does
not have as ready access to Grand Central, although there
is a rather narrow passageway to the Terminal, but it was
certainly a less attractive site in items of proximity to the
[480] transportation hub.
Q. And you mentioned one other building, 466 Lexing-
ton Avenue.
What about that one? A. 466 Lexington Avenue is the
old headquarters of the New York Central Railroad. We
looked into that problem. We instructed our architect to
look into 466 as we, indeed, instructed them to look into
all of those other sites, and it soon became very apparent
that the Railroad had substantial problems with giving up
that building because of the location there of the very ex-
ON VIDE een UO Mr eee OTe ete Oe eT ne —
47
tensive railroad communications and computer network,
which, I think, was discussed at some length here before, I
don’t see any need for me to dwell on it.
Q. Mr. Rovet testified that when the Railroad—that the
Railroad offered all of its properties in the Grand Central
Terminal area for sale last year and that UGP had sub-
mitted bids on the Roosevelt and the Biltmore.
Did you, in fact, submit bids on the Roosevelt and the
Biltmore?
. * .
[481] Q. Did the Railroad offer its properties in the Grand
Central Terminal area for sale in 19717 A. Yes, it did.
Q. Approximately when? A. I believe it was about the
middle of the year.
Q. And did UGP submit bids on any of those [482] prop-
erties? A. Yes, UGP did submit some bids.
Q. And what were your bids? A. UGP submitted two
alternative package bids. The first—the first package bid
was for the—for the fee interest in air rights at Grand
Central—the fee interest in the Grand Central develop-
ment site. It has all those things which were included in the
enclave in parcel A, and the Biltmore, that is—it was a
package bid for the Grand Central Terminal area, plus
the Biltmore.
The second alternative bid, in the event that the first
was rejected, was for the Grand Central development site
and the Roosevelt. These were both package bids in the
sense that both the air rights and the hotel would have to
be accepted, or neither.
Q. How much did you bid on each? A. We bid three
and a half million dollars for the Grand Central develop-
ment area or the air rights. In each bid—It was the same in
both bids, and we bid $11,650,000, I believe, for the Biltmore,
and we bid $9,000,000 for the Roosevelt.
Q. And were your bids accepted? [483] A. Both of our
bids were rejected.
48
Q. Why did you submit these bids? A. We submitted
the bids for these reasons: Our present interest in Grand
Central Terminal is that of a lessee. The Railroad was
putting on the block—strike that—was putting up for sale
the fee interest in those rights. It seemed to us that this
was a 00d occasion to try to round out our interest in those
air rights in the development at Grand Central.
The lease relationship is a complicated one. Much turns
on its administration. We know who we had when we had
the railroad and we had worked out a pretty good working
relationship. We do not know who we would get if somebody
else acquires the air rights, so we though it would be a
protective measure and perhaps a good opportunity to pur-
chase the fee interest. We thought we would rather be our
own landlord, so we bid on the air rights, and that was our
primary interest in making these bids.
Q. Why did you include in each of your bids the two
hotels, or one hotel, and one bid and the other hotel in the
other bid? [484] A. Well, the reason we included the hotel
—the hotels is that we recognize that litigation is uncer-
tain. We hope that we will prevail in our challenge to the
Landmarks restrictions.
On the other hand, we were concerned with the possi-
bility that we might not prevail. We have invested thus
far a very large amount of money in developing the Grand
Central site, in architectural fees, in development fees of
various kinds, in the course of a $1,000,000 deposit which
we have had with the Railroad now since 1968, I believe.
This has been an expensive undertaking and it was our
thought that if we were ultimately unsuccessful, we would
like to be able to salvage something out of this long-term
effort of ours so that our bid for the hotel was really in the
nature of a salvage operation.
It would have allowed us to, at least, have a hotel on the
site. It would have allowed us a number of options. We
might have been able to do a building, perhaps a smaller
ee a eet) Te kT et eee Mee ELIE eo Ok ieee se
49
building, on the site, but, at least, it would have given us
some sort of salvage out of this effort. It was not a substi-
tute for Grand Central Terminal.
[513] Tse Court: Can we sum it up this way, that in or-
der to avoid the confiscatory experience, this availability
of air rights as was proposed, it was your position that
after air rights became available as a matter of amend-
ment to this statute, the position of your people was that
economically you couldn’t utilize them, you couldn’t utilize
the air rights, the transfer of air rights from your economic
advantage, so you remained in the same position as you
were originally economically, and the position is that the
property was being taken without compensation?
Tse Wrrness: Your Honor, I wish I could have said it
that briefly. That is essentially it.
[530] Q. When did your discussions with representatives
of the City Planning Commission and the Office of Mid-
town Planning commence in respeet to developing the con-
cept of building on the Biltmore site, do you know? A.
Well, first, I think we have to make a distinction which I
can’t make, and that is the distinction between the City
Planning Commission staff and the Office of Midtown Plan-
ning did not exist when this project was initiated. I believe
that the Office of Midtown Planning was created somewhere
down the road, and the same players were involved on both
teams, so I don’t know at which point they were wearing
which uniform.
Q. When did your discussions with the representatives of
the City Planning Commission commence in respect to de-
veloping the concept of building on the Biltmore site? A.
As near as I can put it, there were generalized discussions
about building on a number of alternative [531] sites which
included the Biltmore site, and I think those discussions
began around the time of the hearings on our certificate
50
of appropriateness before the Landmarks Preservation
Commission.
Q. UGP retained Mr. Max Siegel of 1841 Broadway, did
it not, to assist in the formulation of the zoning resolution
regarding transfer of development rights? A. Yes.
Q. When did you retain Mr. Siegel? A. Mr. Siegel had
been retained—well, I think I should revise that answer.
Mr. Siegel was not retained for the purpose of assisting in
the drafting of the zoning resolution. Mr. Siegel had been
retained by UGP before I came aboard. He had been re-
tained—he was already retained by UGP when I became
associated with the project, and he was retained as a zoning
consultant to UGP to provide it with advice on what it
could or could not do on designing the building.
Q. When was he retained, do you know? A. He was
retained before April 1968. Whether it was in January,
February or March, I don’t know. I wasn’t there.
Q. You say you reviewed a certain draft of Mr. [532]
Siegel with respect to a proposed amendment to Section
74-79, is that correct? A. I think I reviewed more than
one draft.
Q. Do you know if Mr. Siegel ever submitted a draft of
a proposed resolution to the City Planning Commission for
their consideration? A. I believe that he did.
Mr. Nespote: May I have this marked for identification,
your Honor? If the Court pleases, may I also have the en-
velope marked?
Tue Court: Is it important? Do you need it?
Mr. Nespote: The man’s name is on it.
Tue Covrt: If there will be no issue as to its source, then
it seems unnecessary.
Mr. Nespoue: All right.
(Draft of Zoning Resolution by Max Siegel, marked De-
fendants’ Exhibit A for identification.)
51
Q. Mr. Drabkin, would you take a moment and look
through Defendants’ Exhibit A for identification.
(Short pause.)
Q. Have you read through Defendants’ Exhibit A for
identification, Mr. Drabkin? A. Yes.
[533] Q. Is that the draft that Mr. Siegel submitted to
the City Planning Commission in respect to the proposed
amendment to Section 74-79? A. I don’t know whether
this is the draft that Mr. Siege] submitted or not. This is
pretty much the law as it is now.
Q. You don’t know of your own knowledge if that is the
draft that was submitted with your approval. A. I don’t
know whether this was the draft that Mr. Siegel submitted
or not. I recall that Mr. Siegel submitted to me a draft
which was substantially the same as this or may have been
the same as this, which I reviewed and which I said under
the circumstances would be acceptable to us.
[559] Wri F. L. Turrzz, residing at Mayfair Lane,
Greenwich, Connecticut, called as a witness on be-
half of the plaintiffs, having been duly sworn, was
examined and testified as follows:
Drrect ExaMINAaTION
By Mr. Stewart:
Q. Mr. Tuttle, what is your occupation? A. I am presi-
dent of Collins, Tuttle & Company, a real estate company.
Q. Could you tell us a little bit more about the operations
of Collins, Tuttle & Company? Where is it located and
what does it do? A. Collins, Tuttle & Company is a Dela-
ware corporation. Our main office is at 261 Madison Av-
enue. It’s a trademark for a series of corporations which
engage in the real estate business and brokerage manage-
ment, investment, and promotion. We have operations out-
side of New York, in Chicago, Illinois, in Los Angeles, and
52
in Paris, France. We are specialists in the, among [560]
other things, specialists in the development and promotion
and management of the construction of speculative office
buildings. .
Q. When did you join Collins, Tuttle & Company? A.
I formed a predecessor partnership called Collins, Tuttle
& Company with my late partner, Arthur Collins, on July
1, 1954, I assumed the presidency of the company in 1958
upon his death.
. 7 .
[584] Q. With respect to those three factors, I want to
ask you how they apply with respect to the proposed build-
ing on the Grand Central Terminal site—first, with the
location. A. There is no location in the United States of
{585] America, in my judgment, which will be more attrac-
tive to the headquarters of major national corporations, to
law firms, accounting firms, the companies that serve and
support those major national corporations, There would
be no more attractive location in the United States of
America, in my judgment, than this building and its ad-
dress.
. ° 7
[617] Q. So what was your conclusion as to the economic
feasibility of going ahead at the Biltmore site? A. I
wanted to finish with the financing. I couldn’t get, without
tenants, I couldn’t get financing, particularly, again, the
three factors, I had to get a much higher rental level. The
market was nowhere near as good. The site was nowhere as
good and a very important factor is that the ground rent
was $2 million higher and that became, by a long shot, the
highest ground rent ever paid, and that was a serious
factor, mitigating, and I was unable, and I tried for two
years—the companies with whom I worked, not just the
companies who were willing to furnish me the financing
in 1968 for 175 Park Avenue, but I went to just about every
source that was imaginable, domestic and even foreign. I
went to the City of New York’s [618] Comptroller’s Office,
53
I went to the State of New York’s Investment Office, I
went to the New York State Teachers’ Retirement Associ-
ation, I went to the fifty major insurance companies, I tried
to put together a consortium of savings banks, New York
savings banks. They have an organization. I tried to get
them to do it on the basis that they would be helping New
York by having this building built.
I tried just about every imaginable way—I tried every
way that I could imagine, and I have a good imagination,
I think, to get this——
Tue Court: Shall we stop and take a vote?
Q. I think you’ve made the point, Mr. Tuttle. So, is it a
fair statement—a fair summary of what you have been
saying that it was your conclusion that this proposal was
not economically feasible? A. Yes, sir.
- * co
[684] Lawrence Garnes, residing at 140 Fallon Avenue,
Elmont, New York, called as a witness on behalf of
the Plaintiffs, having been first duly sworn, testified as
follows:
Drrect Examination
By Mr. Stewart:
Q. Mr. Gaines, what is your occupation? A. Vice presi-
dent for Cushman & Wakefield, Inc., 529 Fifth Avenue.
Tue Court: A little louder, please.
Tue Wrirness: 529 Fifth Avenue, New York, New York,
primarily engaged in the appraisal of real property in the
Metropolitan area of New York and throughout the country.
[727] Q. Now, I hand you Plaintiffs’ Exhibit 10. You will
notice that many of the buildings are colored in yellow,
which, of according to the code at the [728] top of the page
are properties subject to long term ground leases.
54
Would it be feasible to purchase the ground lease—strike
that question.
You'll also notice that all of the properties colored in
orange are also subject to long term ground leases except
for No. 4, which is 52 Vanderbilt Avenue.
Now, if you will look at building No. 20, 245 Park Avenue,
would it be feasible to purchase the ground lease at that
site and then using air rights from the Grand Central
Terminal site, redevelop that location, that is, 245 Park
Avenue, with a new building? A. No.
Q. In this connection I also hand you Plaintiffs’ Exhibit
11 where the ground lease at 245 Park Avenue is described.
A. No. This is a new office building over a million square
feet in it, I believe, and it certainly would not be feasible
to purchase the ground lease for redevelopment.
Q. Why not? [729] A. We have the highest and best use
of the property, in my opinion, with the existing structure.
Q. Would you explain that, please? A. Well, it’s the best
use that you could put to the land site, and it would return
the greatest return on your investment. You would derive
the greatest future benefits from that.
Q. Now, would you also look at Exhibit 10, at the other
sites on Park Avenue, which includes No. 21, No. 22, 24,
and then running across to the other side of the street,
12, 13, 14, 15, 16 and 17, and would you also examine Ex-
hibit 11 which describes the ground leases on those locations
and tell us whether it would be feasible to buy the ground
leases at those locations and redevelop the site, using air
rights in Grand Central Terminal? A. It would not be
feasible to purchase the air rights under these Park Av-
enue buildings for the purpose of redevelopment——
Q. You said to purchase the air rights. A. The underly-
ing ground lease. For the purpose of redevelopment of
property and demolishing these massive structures, includ-
ing new office buildings, we have long term which they them-
selves are undoubtedly encumbered profitably, I presume,
ee ae co One
55
with long term leases to major corporate tenants, and then
redevelop the same site with the same building, it would be
the same type of building—would be suicide.
(738) Te Courr: We’re still sitting here the same as we
started this talk between us, and that is, I take ‘t, really,
you wouldn’t know what to do with these air rights outside
of the plan to utilize it over Grand Central Station.
Tue Wrrwess: Outside of the plan to utilize the air rights
over Grand Central Station, the owner of these air rights
would have a problem conveying them—I should use the
word ‘‘conveying’’ them—utilizing them—on another site
at a price anywhere near the price which he could receive
from the conveyance or leasing of the air rights over the
existing site.
This results from the lack of marketability at the time
of the particular market because of the particular market
in 1969 and °70, the discounting effect which we would have
to discount these air rights over the term of years that
would be required to actually utilize them, [739] because
there isn’t a builder around that’s going to pay you the
full amount for those air rights until he’s got a building up
and producing income.
We've got to confront ourselves with a long period of
time on each one of these sites. The minute we get into the
area of pulling away from our immediate site, which is im-
mediately available, which is the best site, in the best loca-
tion available, at that particular time, and one of the bases
for builders and one of the reasons that a market heats up
is timing. A builder will build at an appropriate time. He
will not build when timing is against him. This is the im-
portant aspect of putting up a building or an apartment
house or anything. It’s timing. You can’t get away from
timing. I’m putting my money up. I’ve got to produce a
building within a certain length of time. If I’ve got to wait
56
four or five or six or seven or eight or nine or ten years to
put that building up, I could put that money in the bank
and accumulate an awful lot of money.
So, therefore I can only pay a discounted amount for that,
and that discounting would run [740] havoc with the amount
of money that somebody would be willing to pay for the total
package that’s available for sale over the period of years
that it would take to develop it.
The idea that you can go in and just take two or three
million square feet of available air rights and put it out
immediately on the market and sell it immediately is a very
difficult thing for me to comprehend.
(741) Q. Mr. Gaines, going back to the hypothetical ques-
tions which the Judge was asking you just before our re-
cess, if UGP had come to you in '69 or 1970 and asked you
your advice as to whether or not it was feasible to consider
transferring these air rights to any of these sites which we
have been discussing for redevelopment, what would your
answer have been? A. That it was economically not feas-
ible to do so.
Q. Now, will you take the Biltmore sites, specifically,
and explain your answer. A. In the case of the Biltmore
site, we have a 22-story operating hotel which is producing
an income for the Railroad, and the Railroad’s fee—not
fee, but the Railroad rental would include the replacement
to them of the loss of income from this hotel, were it con-
veyed to a third party who’s to redevelop it. I was advised
that the rental in total to any developer as at June 1970
would be approximately $5 million, which is over $1.00 a
square foot more, I believe, or approximately $1.00 a square
foot more than the rental that would be charged over the
Terminal.
In addition to that, this would involve the erection [742]
of a major structure on a lot of 44,000-some-odd square
—
57
feet fronting on substantially narrower streets, as compari-
son to the development of the Grand Central Terminal
site, which involved the erection of a building on a 146,000-
plus square foot lot.
The Biltmore site not only involved the demolition of a
substantial 22-story building, but it involved the elimina-
tion of certain leases which were in existence at that time
and could delay the development of the project—protract
it.
The economics with reference to operating expenses,
rental value that might be attainable, the leasehold rent
that was prescribed by the Railroad, or the owner of these
rights, and the cost of construction, were of such a combi-
nation as to preclude the demolition and redevelopment of
that site at that particular moment in time.
Q. What, in your opinion, is the maximum size of a viable
building for that site? A. In my opinion, there was sub-
stantial FAR available within the site——
Q. Substantial—— A. —F AR, floor area ratio, so that
you could develop without any air rights almost 800,000
square feet of area [743] above grade—I think, approxi-
mately, 760,000-some-odd feet, adding in your lower area
another 50 or 100,000 square feet additional, so you’re going
over 100,000 square feet.
To go over the million mark would put a burden on the
site. Most buildings that run into a million four, a million
five and a million two, or two million square feet, are
situated on sites substantially larger than this site. This
would require, from a point of view of construction, a sub-
stantial variance in the zoning code, and it’s my under-
standing that this particular aspect of the project was dis-
cussed and that preliminary plans, or interim plans, were
drawn which would have provided a tower structuring
covering approximately 80 percent of the lot area, which
was approximately 100 per cent more than you would nor-
mally be permitted under the existing code, or normal con-
58
struction, would run in the area of approximately 40 per
cent.
This, in itself, creates a bulk hazard and confronts us
with the probability, and a very reasonable one, that we
would have objection, strenuous objection, from people
in the area—Canadian Pacific Building and other Madison
Avenue buildings, to this project, and at the very least
[744] would have caused six months to a year delay which
would have thrown us smack into the worst part of the
rental market—in addition, the worst part of the mortgage
market.
Confronted with these problems, a builder would have
found himself in a position of making practically no re-
turn on his money. He’d have done better if he went into
a bank and put it in a savings account as far as his net
overall return was.
These are some of the factors that concern us with the
Commodore Hotel, and this does not take into considera-
tion an important factor, which we must never lose sight
of, is the superiority of the location over Grand Centra!
Terminal with its broad vista looking down Park Avenue,
with its great distance from the Pan Am Building, with
its unique stature as an office building potential, as an
image-building for corporate headquarters, and also the
flexibility because of 146,000 square-foot lot, of laying out
a building for executive offices, in comparison with the
laying out of a building on the Biltmore site, which would
have more of a square shape, substantially more depth be-
tween the wall and the core, and substantially more lower
real space, which would be—I mean, [745] lower rent in
the sense of the type of client that would purchase that
space, would want to pay a lower rental as the result of
that one factor, also.
So that in any projection for the Biltmore site, we
would have to reduce the rent, raise the ground rent, in-
Se —
59
crease the construction cost, increase the financial] aspects
of the project, and increase the vacancy allowance—and
also throw in the probability that we are not ready to move
ahead immediately as we were in the Grand Central Ter-
minal, and in that respect we’re talking about timing,
which is the essential of the industry.
The availability of a piece of property, the ability to
move ahead with your project, the ability to deliver within
a prescribed period of time, these are very important func-
tions to a builder, to a project developer, to a tenant rent-
ing space.
Q. Are the considerations for the Hotel Roosevelt the
same as those you’ve just now stated with respect to the
Biltmoret A. I would say the considerations are relatively
the same except that the Biltmore Hotel has a closer prox-
imity to Grand Central, 42nd Street. It’s somewhat closer
to subway transportation and it might command a slightly
[746] better rental value than that which might be derived
from the Roosevelt Hotel.
I don’t recollect what the lease problems are, but there
might be some longer term leases at the Roosevelt. I don’t
recollect.
Q. And what about the Hotel Barclay? A. Well, the
Hotel Barclay, in this location, is a viable property, as I
can see, and it is in a good location, it has good potential
for development, in its present form—upgrading, or what-
ever else they might want to do.
It does not have the Park Avenue frontage because there
is a new office building fronting on Park Avenue which
blocks its development out in conjunction with a new Park
Avenue building, which might have given some impetus to
a higher rental.
Also, the fact of timing and leases preclude the economic
development of the site in the latter part of ’69 or at the
60
time we’re talking about, ’70, ’71, because of the problems
which might ensue.
Also, the fact that here again arises, that we have narrow
streets on Lexington Avenue; we don’t have as good a
rental probability on Lexington Avenue that we even do on
Madison Avenue, no less than that of 175 Park Avenue,
[747] so that these are basic problems for a project that
can not just be shunted off. You just cannot go out, pick
up air rights and scatter them throughout the city with-
out giving very intensive thought to the basic underlying
economics of each individual building that these air rights
are to be transferred to.
It’s fundamental economics that’s involved. It’s dollars
and cents and the bottom line that has to be reached. Many
forces come into play in this, and one of the primary things,
and I must go back to that, is timing. When you have a site
that’s available to go, you pretty well know what your
problems are and you can face them. When you have sites
that are not available to go, you don’t know what’s going
to happen.
o *
[883] Frank Mrinano, residing at 29 Turner Lane, Mt.
Kisco, New York, called as a witness on behalf of the
plaintiffs, having been duly sworn, was examined and testi-
fied as follows:
Drrect ExaMINATION
By Mr. Stewart:
Q. Mr. Milano, what is your occupation? A. I’m the
regional controller of the metropolitan region of Penn
Central Transportation Company.
Tue Court: Say that again, please.
Tue Wirness: Regional controller of the metropolitan
region, Penn Central Transportation Company.
a
ba a ee om ge
. so ee
61
Q. What is the metropolitan region? A. The metropoli-
tan region is concerned with the operation of passenger
trains in and out of Grand [884] Central Terminal. It in-
volves a service as opposed to strictly a geographical area.
Q. What are your responsibilities in that position? A.
I’m responsible for the accounting costs and revenues in
the metropolitan region.
Q. Does that include Grand Central Terminal? A.
That’s correct.
* * °
[887] A. They were prepared by members of my staff
under my supervision at my direction.
o . .
Q. Now, the heading of each of these is ‘‘Grand Central
Terminal.’’ Exactly what is meant by that phrase? A.
For purposes of this exhibit, it would include the station
building and the subsurface area of the station building,
including the platform.
Q. The title also refers to ‘‘Revenues & Costs.’’ What
costs are included? [888] A. Basically, these are costs
of maintenance and maintaining and operating the station
building.
Q. Does it include any revenues or costs with respect to
transportation operations? A. No, sir.
[890] Q. Will you refer, please, to 35-B, the chart for the
year 1971.
Please explain the first item, ‘‘Rents and Concession
Revenues.’’ A. These are the amounts that are received
from tenants and concessionaires situated in Grand Central
Terminal.
Q. Then turning to ‘‘Costs’’—first, let me ask you, are
there any other revenues or rents which are received from
any source from the Terminal building, or is this all that
there is? A. Well, there are revenues which are derived
62
from the sale of tickets, but, of course, they’re not included
in this statement.
Q. Turning now to ‘‘Costs of Maintenance & Operation,’’
the next heading, would you take each item under the head-
ing label and explain what each one is? A. The first item
involves a force of employees who are concerned with main-
taining and repairing the [891] station structure.
Tue Court: Excuse me. These things are self-explana-
tory. I don’t think we have to have any detail, Mr. Stewart.
Mr. Stewart: I think that’s correct, your Honor. Let
me just review them. There may be one or two that need
explanation.
Tue Court: I think this is fully explanatory, Mr. Stewart,
for the purposes of your case.
[896] Q. When was Plaintiffs’ Exhibit 35A and 35B pre-
pared, Mr. Milano? A. In the early part of this year.
Q. In the form that Exhibit 35A is before the Court,
was that document in existence prior to that time? A. In
this form? No, sir.
Q. Same as to 35B; is that correct? A. That’s correct.
Q. You went through certain records of the Railroad
and culled certain information, is that correct, from those
records to put it together; is that correct? A. That’s cor-
rect.
. * .
[898] Q. Tell me, has the Railroad ever considered uti-
lizing the waiting room for commercial purposes? A. I
understand it was considered several years ago, yes:
Q. Do you know when it was considered? A. I really
don’t know. I was in Detroit at the time it was under con-
sideration, I believe.
Q. As controller of the Metropolitan Region, do you
know if the Railroad has considered any plans for com-
63
mercial use of the waiting room space in the last five years?
A. I know of no specific situations, no.
[909] Q. Do you know that the Railroad has received that
exemption since 1959? A. Yes, I do.
[910] Q. Under the column entitled, ‘‘labor, maintenance
repair and service plant operation,’’ under 35B, what spe-
cific crafts are included in that account? A. That includes
such people as pipe fitters, sheet metal workers, iron work-
ers, painters, carpenters, electricians. Most of them.
Q. Any other craft, sir? A. Ventilation cleaners or vent
cleaners, plumbers, machinists, refrigeration operators, ele-
vator machinists, masons—Did I mention that?
[913] Q. What are the recurring items of maintenance
and repair that that labor account reflects? A. Recurring?
Q. Yes. A. There’s always something that has to be
done. I don’t quite understand your question, Mr. Nespole.
Q. What items recur on a regular basis that are incor-
porated as a labor cost under that account? A. We’ve got
plumbers, we’ve got carpenters. There is always something
that has to be done. Just replacing light bulbs, I would
imagine is quite a job.
Q. Doesn’t that maintenance and repair item include
costs related to the platforms? A. It may, yes.
Q. There are platforms that do not exist completely
under the terminal, isn’t that correct? A. The platforms
do extend out possibly as far as 45th Street, but under ICC
accounting the platforms are considered part of the station
facility.
Q. Does the maintenance and repair account for labor
there include costs for any work on any structures located
outside of Grand Central Terminal [914] building? A.
Outside of the building?
64
Q. Yes, sir. A. Well, we already talked about the pos-
sibility that they might work on the platforms, we talked
about the possibility that they might be servicing the steam
lines, which, of course, extend beyond the building boun-
daries. There is that kind of work that is included there.
Q. Are there any yard expenses subsumed in that ac-
count? A. There should not be.
Q. I agree there should not be, but are there any yard
expenses subsumed in that account; do you know? A.
There may be, Mr. Nespole. There may be some small
amount where some of these people had to get out into,
let us say, one of the towers, but they would be reasonably
insignificant charges.
Q. Where are the yards located, Mr. Milano? A. I guess
we’ve got a yard there around 49th Street. There’s a yard,
we call it the Madison Avenue yard, near below ground in
the terminal complex.
[915] Q. How far north does the yard on Madison Avenue
run, sir? A. I couldn’t say.
Q. Does the Railroad use any space in the building for
offices? A. In Grand Central Station? Yes, we do.
Q. Does the Railroad use any space in the building for
storage? A. Probably some subsurface areas may be used
for storage, yes.
Q. Do you use space for employee amenities? A. There
are some small areas. There might be a locker room, I
believe.
Q. Does the maintenance repair and service item include
any costs related to maintenance of these areas that the
Railroad uses in Grand Central Terminal? A. Yes, they
would.
Q. Will you tell me approximately how much of that item
is so included? A. No, I couldn’t, but again I think it would
be a relatively minor amount.
Q. Mr. Milano, in terms of the accounting [916] method-
ology employed here, does the maintenance repair and
service account reflect the cost of only those items which
65
can be attributable to the income generated by the com-
mercial use and concession use of the terminal? A. No, but
I don’t think they should be.
[919] Q. Were these statistics prepared for purposes of
this litigation? A. Yes, sir.
[920] Q. Does the cleaning item reflected there relate to
any costs involved in cleaning platforms? A. Probably not
the platforms. I would probably—it probably would include
the ramps to the platforms and possibly the stairs to the
platforms.
Q. How about railroad cars? A. No, sir.
Q. Ticket booths? A. No, sir.
Q. Is there any space that the railroad utilizes in the
building for its own purposes that you indicated earlier?
A. Well, I guess it would include, for example, the cleaning
of the station master’s office and——
Q. Does the cleaning item there reflect only those items
of cost which are attributable to the income generated by
the rental and concession use of Grand Central Terminal?
A. These costs represent the cost of cleaning Grand Cen-
tral Station.
Q. The whole terminal, right? A. The whole terminal.
Q. The top to the bottom, right? [920-a] A. Yes.
Q. Are there any areas outside of the terminal that are
cleaned which is subsumed in that account? A. I would
say not.
* * °
[931] Q. Can you tell me what portion of that account is
reflected in respect to cleaning the transportation portion
of the terminal? A. How do you describe the transporta-
tion——
Q. Tell me, Mr. Milano, has there been any effort to al-
locate to the commercial use of the terminal a percentage
of the total amount of water that’s consumed in that ter-
minal? A. No, sir.
66
Q. I direct your attention to ‘‘Other Direct Costs.’’ I
notice on the second sheet that item includes rubbish re-
moval. Where is the rubbish removed from in Grand Cen-
tral Terminal reflected in that cost item? A. All over the
terminal building.
. . .
[933] Q. As to the ‘‘Overhead Charges,’’ Item (E) on the
second page, sir, those represent labor costs for supervisors
involved in supervising the labor that is distributed under
the Labor column, is that correct? A. Basically, that’s it,
yes,
Q. There has been no allocation of the supervision cost
item there in respect to the commercial use of the terminal,
has there, Mr. Milano? A. No, it followed the direct cost.
[942] Q. I believe you also testified that it was conceiv-
able that some of the labor in this item might have been
done in the yard.
Can you give us an example of the kind of work you were
thinking off A. Well, it would certainly not include any
work on the tracks. There might have been a yard structure,
a replacement of a light bulb in the yard structure, the re-
placement of a doorknob; something [943] of that nature
could conceivably have been performed by some of these
people under maintenance repairs and service plant opera-
tion.
Q. Is there any way to separate out such items of work
if they had occurred? A. Under our present code structure
there is not, but we considered it so minor that we never
made the attempt to segregate such costs. They are rela-
tively minor,
. 7. .
[997 } By Mr, Nespo.e:
Q. Mr. Goldstone, what is your position with the City
of New York? A. I am Chairman of the New York City
Landmarks Preservation Commission.
ee eT ee enna OT. ua Oe
67
Q. And when were you appointed chairman? A. On
October 21, 1968.
. . .
[1006] Q. In respect to his Honor’s question, Mr. Gold-
stone, in regard to thirty years from now, every [1007]
building presently existing in the City of New York is
eligible for landmark designation. Can you answer that
question that the Court posed to you at this point, sir? A.
I can answer it very clearly and both from policy and ex-
perience.
The Commission is highly selective in what it designates.
I would imagine if I made a count through our files, we have
rejected at least as much as we have designated, constantly
getting requests to designate buildings that may have some
local interest or some sentimental interest to a particular
community or group, but are not of sufficient importance or
not the best representative example or not the most viable
example of the period that the Commission wants to main-
tain.
+ . os
[1175] Donaip H. Ex.iort, Chairman, City Planning Com-
mission, City of New York, 2 Lafayette Street, New York,
New York, called as a witness on behalf of the defendants,
having been duly sworn, was examined and testified as
follows:
Drrect ExaMINATION
By Mr. Nespoie:
Q. How long have you been Chairman of the City Plan-
ning Commission, Mr. Elliott? A. Since November of 1966.
[1186] Tse Covrr: Had Breuer I been passed upon at
the time of that amendment?
68
Tue Wirness: I don’t believe it had.
Tue Court: Let’s start it this way.
As I understand it here, preceding the Grand Central
Breuer No. I, by statute, by resolution of the Board of
Estimate, an alternative was involved for the benefit of
landowners who might be affected by the landmarks—by
a landmark designation, in effect, to give such a landowner
an opportunity to utilize the air rights which otherwise
would be affected—which would be enjoined by the appli-
cation of the landmarks law.
Tae Witness: That’s correct, your Honor, but it was
after—I believe it was after Breuer I was first made public.
[1197] Q. Commissioner Eliott, the 1969 amendment was
intended to expand the number of sites that could be the
recipient of the Grand Central Terminal air right, [1198]
was it not? A. It clearly was.
Q. There was no effort to, in any way, limit, was there?
A. No, it did not. We certainly did not intend that.
Q. Are you familiar with the circumstances leading up
to the enactment of the 1969 amendments to Section 74-79
of the Zoning Resolution? A. I am.
Q. Did the City Planning Commission have any discus-
sions with representatives of the Penn Central or UGP con-
cerning any proposals to amend Section 74-79 prior to its
actual amendment in 19691 A. Yes.
Q. Can you tell us when these discussions were had and
with whom? A. Well, there were numerous discussions
which went on all through 1969 and in the latter part of
1968, and they were held between members of my depart-
ment and representatives of Penn Central and of the de-
veloper and with the office of Midtown Planning & Develop-
ment, and, of course, discussions also with the Landmarks
Preservation Commission staff.
a me
ee Sm EM
[1199] Q. Did any representatives of UGP or Penn Cen-
tral ever submit to the City Planning Commission a pro-
posed draft of the amendment? A. Yes. A representative
of those organizations did submit such a proposal.
Q. Is that representative Mr. Max Siegel? A. He was.
[1202] Q. Mr. Elliott, did there come a time that Mr.
Siegel told the City Planning Commission the purpose of
the submission of Defendants’ Exhibit A [1203] in evi-
dence? A. We had been working with him and with other
representatives of the plaintiffs on the details of this trans-
fer legislation. That is why he redrafted the proposal, and
there was a meeting which included a substantial number
of the persons interested in this matter in September of
1969 when agreement was reached on the legislation.
[1205] Q. Has the City Planning Commission ever ap-
proved an air rights transfer under the 1969 amendment
to Section 74-791 A. I’d have to check the records to be
sure.
Tne Court: Do you know of any now?
Tar Witness: We have discussed a number of them.
Q. Was the Amster Yard transaction ever approved?
A. Yes, it was.
[1206] Q. And where is the Amster Yard located, sir?
A. It’s in—it’s right in midtown Manhattan, and I can’t
give you the exact block, but it is on Second Avenue, and
in a very—it’s a sophisticated, very much loved historic
district, low-rise district, and we did approve a transfer
off of that district.
° . 7
Q. Can you tell us the circumstances, as you recall them,
of the Amster Yard transfers? A. The Amster Yard had
a very substantial amount of unused air rights. It’s a court-
yard with small two story buildings around it, and the trans-
70
fer was to [1207] take the air rights off of that and to trans-
fer them to an office building on the end of the block so as
to—well, it’s to use the rights which made it easier to pre-
serve the Amster Yard and to continue its maintenance just
as the statute provides.
Q. The transfer was approved, was it not? A. It was
approved.
Q. The building was not built, however; is that correct?
A. That is correct. The building was not built but the
transfer was approved and was greeted very enthusiastic-
ally.
7 7 *
[1217] Q. After the amendment to Section 74-79 of the
zoning resolution, did the City Planning Commission ex-
pect an application to transfer from Grand Central Ter-
minal to the Biltmore site? [1218] A. We did. We worked
out virtually all of the details of that application prior
to the time the legislation was taken, the hearing, and sub-
sequently passed.
Tre Court: You may tell me what the record is in your
department of those activities and their status at the time
the amendment was proposed. How far had it gone?
Tue Wrrness: Well, it had gotten down to the discussion
as to the location of the plazas, the location of the escala-
tors, the question of whether there should be a one or two-
foot setback on certain streets. What I would consider
design details had been discussed at length by members of
my department and presented to the Planning Commission
for its review prior to the time that we took the legislation
to public hearing.
Tur Court: Let me ask you this.
Assuming consummation of such an agreement between
the pe. ties, as the Landmarks Commission on the one hand
and the plaintiffs on the other, the agreement to utilize the
air (1219) rights over Grand Central on the Biltmore site,
71
did that require any formal action on the part of your
Commission?
Tue Wrrwess: It would.
Tue Court: Would it require a hearing, too?
Tue Wrrwess: It would.
Tue Court: A public hearing.
Tue Wrrwess: A public hearing.
Tre Covrr: All right. It got to the point where, assuming
that the amendment was adopted, you’d be ready to go toa
hearing on the plaintiffs’ proposal.
Tue Witness: The proposal had been made in generali-
ties in April of ’69 and our testimony before the Landmarks
Preservation Commission. The statute, when it was taken
to hearing, was unopposed at the public hearing and passed
the Board of Estimate in the same manner, and we were
confident that any application which flowed from it would
be treated exactly the same way.
Tue Court: So that now the situation is [1220] this, as
far as the City is concerned—when I say the City, I mean
the Planning Commission and the Landmarks Authority—
were ready to have the proposal effectuated and then some-
thine happened, as a result of which nothing happened, is
that it?
Tae Wrrness: That is correct.
Tne Court: Go ahead, Mr. Nespole.
By Mr. Nespoie:
Q. Mr. Drabkin, counsel for UGP in this case, the plain-
tiff, has testified that the transfer of development rights,
once effected, is irrevocable.
Is such a transfer irrevocable under Section 74-791 A.
If they use the rights on a transferee site, they can’t come
back and use them over again on the landmarks site.
72
Q. Other than under that set of circumstances, is the
transfer ever irrevocable? A. If they don’t use them, then
it is not.
7 . -
[1254] Jacquvetin T. Rosertson, Director of the Office of
Midtown Planning & Development, City of New York, 220
West 42nd Street, New York, New York, called as a witness
on behalf of the defendants, having been duly sworn, was
examined and testified as follows:
[1255] Direct EXAMINATION
By Mr, Nespo.e:
Q. Mr. Robertson, what is your present position? A.
I’m the Director of the Office of Midtown Planning & De-
velopment.
Q. How long have you held that position, sir? A. Since
April of 1969.
Q. Were you employed by the City of New York prior to
that time in any other position? A. I was a principal urban
designer in the City Planning Commission.
Q. How long were you so employed, sir? A. Since the
spring—May of 1967.
Q. What is your academic background, sir? A. I’m an
architect. I was trained as a political scientist. I have a
Bachelor of Arts degree in political science; a Master’s
degree in politics, philosophy and economies; and Bachelor
of Architecture. That’s it.
Q. Are you a licensed architect, sir? A. I am.
Q. Licensed by the State of New York, sir? A. Yes.
[1267] Q. Did you attend any meetings with representa-
tives of Penn Central and UGP regarding construction over
Grand Central Terminal? A. I did.
Q. When did these discussions commence? A. I think
my first meeting was in March of 1968, and these meetings
continued through until the end of 1969.
73
Q. Who attended these meetings? A. Aside from mem-
bers of my own staff and the City Planning Commission,
Norman Marcus, Richard Buford, the members of the Penn
Central Railroad, real estate division, Sam Hellenbrand,
the architects, Mr. Breuer, Mr. Beckhard, Murray Drabkin,
representing the developer, Max Siegel, a zoning consultant
for the developer.
Q. Did Mr. Saady ever attend any of these meetings,
sir? A. Yes.
Q. How many of those meetings did he attend, do you
recall? [1268] A. One that I’m sure of, and I know that I
met with Mr. Saady on at least two other occasions.
[1288] Q. Did there come a time during the course of the
discussions that representatives of the Railroad in UGP
that transferring the developments from Grand Central
Terminal to another site was discussed? A. Yes, there
did.
Q. When was that discussion had? A. Specifically—the
first specific proposal was on September 11th——
Q. And what——
A. —1969.
Q. What sites were discussed? A. The Biltmore site.
[1289] Q. Who was present at the meeting? A. Mr.
Saady, Mr. Drabkin, Mr. Hellenbrand, I think Max Siegel,
the architect, myself, Mr. Marcus, Mr. Ba ‘ell, my deputy.
There may have been someone else. That is the best of my
recollection.
Q. Did there come a time during the course of that meet-
ing that an agreement was reached in respect to transfer-
ring the development rights from Grand Central Terminal
to the Biltmore site? A. Yes.
Q. What was that agreement, if you recall? A. The
agreement was that we would—we, being the City, would
move to—as quickly as possible to get the necessary trans-
fer legislation through the Planning Commission of the
74
Board of Estimate. The agreement on the part of the de-
veloper was that he would move along the lines of develop-
ing a transfer of about, as I remember, a million three, a
million four, from Grand Central site to the Biltmore site,
the Biltmore would be demolished, a new building would
be built on the Biltmore site and he would make an applica-
tion for that building once the legislation was approved.
There are a lot of details that we [1290] worked out.
Tre Court: To whom do you attribute that accord? Who
particularly said that?
Mr. Nespo.e: May we get to that next at this point?
Tue Court: That is what I am interested in knowing.
The witness said the developer agreed. I wonder who
spoke for the developer.
Q. Which member of the developer’s party indicated this
agreement to you? A. Mr. Saady.
Q. And how did he indicate the agreement to you, Mr.
Robertson? A. At the end of the meeting we shook hands
that each would do his part to bring this to fruition.
Q. And what was the understanding in respect to the
obligation of the developer and what was the understand-
ing in respect to the obligation of the City? A. The City
was to prepare the necessary transfer legislation—legis-
lation that was subsequently approved. The developer was
to develop along the [1291] lines that we discussed during
that meeting, a specific proposal which he had brought to
that meeting to build a building on the Biltmore site of,
roughly 2,100,000 square feet.
Tue Court: What you are telling me by ‘‘legislation,’’
you’re referring to eventually the amendment of the zoning
resolution to incorporate the extension of the transfer of
air rights to a so-called adjoining owner? ~
Tue Wrrness: That’s correct.
Me eR ee ee eee cies
75
Tue Court: You are speaking specifically of the 1969
amendment?
Tre Wirvess: Right.
Tue Court: And on that question is it your position and
do you say that that amendment was entirely or mainly
the product of these discussions and the agreement to which
you’ve referred?
Tue Wirness: Yes, sir.
Q. Did Mr. Saady tell you at that time that he thought
a building on the Biltmore site was not economically feas-
ible?
Tre Witness: No, he did not.
[1292] Q. Did they operate under any assumption in re-
spect to the feasibility of the Biltmore building? A. Not
that I know of. They expressed willingness to put a lot of
detailed work into trying to make that viable proposition.
Q. Did there come a time when you saw certain plans
proposed by the developer in respect to the Biltmore site?
A. We saw detailed plans over a two-month period of time.
Q. Did there come a time as to whether or not any agree-
inent—withdrawn.
Did there come a time that any agreement was reached
in respect to specific proposals about a building on the
Biltmore site? A. Yes.
Q. What kind of an agreement was reached and in respect
to what proposal, sir? A. Well, the agreements were,
roughly, in relation to the open space, the Plaza that is—
that would qualify the site for Plaza bonuses where the
Plaza would be its size, the kinds and numbers of trees
that would be planted in it, the kinds of access that [1293]
would be made to the subway and the Grand Central Station
concourse, the potential of building a bridge above the
street level connecting into Grand Central Station itself.
A whole variety of detailed architectural planning questions
76
was discussed and agreed upon as we went along in these
negotiations.
Q. Approximately what period of time are we talking
about now, Mr. Robertson? A. Between September and
the end of October.
Q. Did Mr. Hellenbrand, whom you have indicated was
the representative of the Railroad, ever state that he ap-
proved of the agreement to build on the Biltmore site?
A. I can’t remember whether he ever said that he approved.
He certainly negotiated in the vein that would lead us to
believe that this was his intention. Yes, we worked pretty
hard on those negotiations.
[1294] Q. Was the decision to build on the Biltmore site
announced publicly? A. No, it was not.
Q. Why was it not announced publicly? A. It was mu-
tually agreed, at the request of the developer, that it would
be inadvisable to talk about tearing down the Biltmore at
that time, there were certain union contracts and problems
associated with those and they didn’t want to alert anyone
to the fact that they may be tearing down the Biltmore.
Q. Was that in respect to the union, sir, representing the
employees of the Biltmore Hotel? A. That’s correct.
Q. During the course of these negotiations, were there
any other sites other than the Biltmore discussed? A. As
I said earlier, we looked at a variety of sites: the Com-
modore, the Roosevelt, 466 Lexington, any number of pos-
sible sites to which Grand Central square footage could be
transferred, yes.
Q. Were you present this morning when Mr. Elliott tes-
tified? A. Yes, I was.
[1312] By Mr. Nespo.e:
Q. Based upon your experience as Director of the Office
of Midtown Planning, Mr. Robertson, can you tell us what
major American corporations have their headquarters on
Madison Avenue?
77
Tue Court: Wouldn’t it be a form of free advertising?
We know there are a lot of big corporations there.
A. Union Carbide, IBM, Look, Newsweek.
[1330] Q. Prior to the passage of the amendment in
August, 1969, of Section 74-79, did you or anyone under
your direction make any effort to determine if the air rights
over the Grand Central Terminal were marketable? A.
Yes.
Q. What efforts did you make? A. Dick Buford and I
contacted a major real estate developer in New York, to
see if he would be interested, theoretically, in that kind of
transfer deal.
[1331] Q. Who did you contact? A. Harry Helmsley.
[1344] THe Court: Let me interrupt you.
At that stage, you were then to go forward with remedial
legislation.
Tue Wrrness: Yes, sir.
Tue Court: To possibly accomplish the air rights.
Tue Witness: Yes.
Tse Court: To have a building on the present site of
the Biltmore.
Now, what happened after September of 1969?
Tae Witness: It was the 11th. That was the first meeting
at which the Biltmore was discussed as a real alternative.
Tue Court: What happened?
THe Witness: We worked mutually with the Breuer
firm and with Mr. Drabkin and Mr. Hellenbrand on details
of that specific project, and on our end we refined the
legislation, introduced it for public hearing to the Planning
Commission in October.
78
It was approved by the Planning Commission, [1345] if
I’m not mistaken, in November, and by the Board of Esti-
mate in December.
At that time, we had expected that there would be an
application by the developer to carry out the project on
the Biltmore site.
Tue Court: How did you become aware of that?
Tue Witness: Well, he didn’t come in to us with an
application.
Tue Court: To what extent did they follow the course
of the amendment through the Board of Estimate?
Tue Wirness: They did follow it.
As Chairman Elliott testified this morning, there was no
objection at the hearing before the Board of Estimate.
Tue Court: Representatives of the plaintiffs.
Tue Witness: Yes, and it had been understood, obviously,
by us and the owner and his team of consultants that they
would of course not object to the hearing before the Board
of Estimate, since this was what was going to allow them
to move ahead.
7 * 7
[1409] Q. Mr. Robertson, can you tell us under Zoning
Resolution Section 74-79 what total F.A.R. is permitted to
be transferred to the Biltmore site from the Grand Central
Terminal site? A. I think it’s about two million one. That
may be inaccurate. I think it’s close to that, as I recall it.
Q. If Breuer I or Breuer II were to be constructed on
Grand Central Terminal site, would the building—would
the railroad be able to utilize the total permissible zoning
bulk under the Zoning Resolution on that site? A. They
would not.
Q. And why not, sir? A. They could not benefit from
plaza bonuses on that site.
ee ee
79
[1410] Q. If the Railroad were to proceed on the Biltmore
site, could they utilize the total permissible zoning bulk
under the Zoning Resolution on that site? A. Provided
that they provided the plaza.
Q. Approximately, how much F.A.R. would that equal,
sir? A. Well, it is three F.A.R., depending on whatever
the total of the site is.
. - o
[1423] Q. Does it refresh your recollection as to whether
or not the City had plans in July to go ahead with legis-
lation amending the zoning resolution? A. Yes. I think,
as I indicated, we were inclined to move in that direction.
Txe Court: I suppose we can ask now, is the contem-
plated amendment of this resolution tailored to meet this
situation? Is it intended specifically for the Grand Central
situation, or was it in contemplation [1424] in respect to
additional matters or other matters?
Tue Wirness: The latter.
Tue Court: I must assume, then, that the amendment
to the zoning—I must accept, rather than assume, that the
amendment to the zoning resolution was motivated and
directed directly towards ameliorating the Grand Central
situation.
Tue Witness: We had been moving, during this ertire
time, with all of our zoning resolutions, towards policies
which would give us more flexibility in dealing with this
kind of situation specifically.
Tue Court: The Grand Central situation [1430] brought
it to a head.
Tue Witness: It brought it to a head.
Tue Court: Doesn’t that dispose of that, Mr. Stewart?
Mr. Stewart: I think so, your Honor.
I have one question.
80
By Mr. Stewart:
Q. Would the legislation have come into being if there
hadn’t been any Grand Central situation? A. I don’t know.
[1440] Q. Mr. Von Ancken, what is your occupation? A.
I’m a real estate appraiser with the firm of William A.
White and Sons, where I’m vice-president of the company
and in charge of the real estate appraisal department.
[1462] Q. What in your opinion is the rent that Penn
Central could get by leasing the development rights over
Grand Central Terminal to other sites eligible [1463] under
Section 74-79 of the Zoning Resolution to receive such
rights? A. The rent that I think that is a fair and just
rent is $1.70 a square foot. However, in this analysis I have
not used the $1.70 a square foot. I have applied a discount
factor of 15 per cent to that $1.70 and came up with an
estimated rental value for the air rights of $1.45 a square
foot.
Now, the discount factor was applied in order to stimu-
late interest, immediate interest in the purchasing or leas-
ing of the air rights. There is also another basis for the
discount factor, and that is an analysis of the extra profit
that is generated by an individual who would lease one, or
one million or two million square feet of development rights.
There is a certain inherent profit that the individual gene-
rates from leasing an extra square foot of office space.
Let me give you an example.
In the Biltmore site you can presently build on the site
a building of approximately 800,000 square feet without
any air rights. If you purchased 1.2 million square feet of
air rights or leased them, [1464] you would have a building
comparable to what was proposed by Breuer of 2,150,000
square foot net. The rent that you could get for this build-
81
ing in the market place, I will estimate at $10.50 a square
foot.
Now we can work this on a per square foot basis and
work backwards and find out what is left over to pay for
the air. Mainly, you have operating taxes—operating costs
and taxes, which would come to approximately $3.70 in
today’s market, you have a construction cost for the build-
ing of, say, $45 a square foot, which is higher than what is
indicated in the report, but for rounding purposes we’ll use
the highest figure, and your constant mortgage rate would
be 9.5 per cent, which would equal a payment for the mort-
gage and for the construction of the building of $4.27 a
square foot.
Adding those two figures together you come up with the
$8 a square foot of rent that’s required to make the building
pay for itself.
Now, over and above $8 you have two factors. You have
profit and payment for air rights. If you estimate your
profit at 10 per cent of the total [1465] package, that
leaves you—that would be $1 approximately, and it leaves
you with $1.50 a square foot as payment for the air rights.
Q. In other words, Mr. Van Ancken, your analysis pro-
ceeds on the assumption that the air rights used on another
site generates additional income on that site; is that cor-
rect? A. That’s correct.
Going back to the Biltmore site it would generate on the
Biltmore site approximately $1,200,000 additional income
that they wouldn’t get from developing an 800,000 square
foot building.
Q. So that the value, the market value you placed on the
development rights through the transfer is directly cor-
related to the amount of income that that would generate
plus the cost involved in generating that income; is that
correct? A. That’s correct.
[1532] Tse Court: Yes. I say, well, here you have the
owner of the air rights saying, I have a chance—the owner
of Grand Central is saying to you, as a broker, or as an
expert in the field, as an appraiser—I have the chance here
to use my air rights on my Biltmore property by demolish-
ing the Biltmore Hotel and substituting it with a multi-
story skyscraper.
You’ve considered all of the respective factors. What
would you advise him? Go ahead.
THe Witness: I would say, go ahead, with one qualifi-
cation. Only lease approximately half of the air rights
available over the Terminal and let the Terminal have the
balance to rent to other sites; because in my estimation, it
wouldn’t make any sense to build a 3,000,000 square foot
building—I think the optimum is 2,000,000 square foot build-
ing over the Biltmore.
* . *
[1574] Q. Can you compare the Biltmore site to the Grand
Central Terminal site in terms of, say, the flexibility re-
garding the plazas, arcades, setbacks, building shape, place-
ment of stores, for us? A. Yes. Well, under the Breuer I
—no I changed t? t. The lease to UGP Properties, Inc.
limits the type .1 development that could be placed over
the Terminal. This limitation is not—would be placed on
the Biltmore site. You could place the building in any area
of the plot; you could have your stores facing on four sides,
you could have ingress traffic for pedestrian ingress from
four sides, which you could not have on the Terminal site.
You would have four views, when the Terminal site—
you are actually restricted to three views, two [1575] nar-
row views and one view looking south.
The northerly view would be greatly blocked by the Pan
Am Building, which would be only 250 feet away. You have
more flexibility in allowing for your plazas, the placement
of the plazas, the lobby space, the entrance space, where it
is to be placed on the plot.
Q. In terms of the streets surrounding each site, namely
the Biltmore site and the Grand Central Terminal site, as
a real estate appraiser how would you evaluate these adja-
cent streets as to their respective prestige factors? A.
Well, Vanderbilt Avenue is similar for both sides. Madison
Avenue is far superior to 42nd Street.
Q. 42nd Street would be the southernmost street on the
Grand Central Terminal site building, would it not? A.
Yes, it would be. It would be the place where people enter
into the building.
. . 7
[1578] Q. What is the address that Mr. Breuer lists for
the Biltmore site building? A. 333 Madison Avenue.
[1579] Q. Is Madison Avenue as prestigious a street, or
more prestigious than 42nd Street? A. My answer is it’s
far more prestigious, more distinguished, has better quality
than 42nd Street.
Q. What is the basis for that opinion, Mr. Von Ancken?
A. Madison Avenue has major corporations located along
—such as the IBM, Union Carbide, Newsweek, Look, Occi-
dental Petroleum, Carrier Corporation, Johns-Manville,
Sperry-Hutchison, Litton Industries, Associated Transport.
And then it has the major advertising companies, such
as Batten, Barton. Durstine & Osborne and Young & Ru-
bicam.
[1580] It has a better quality of tenancy.
The stores are of high quality.
The rents are higher than the rents that they receive on
42nd Street.
. * .
[1582] Can you compare the view from a building on the
[1583] Biltmore site, as contrasted to a building on top of
Grand Central Terminal? A. Yes. The view on the Bilt-
more site would be superior. You’d have a four-way view
84
as opposed to a three-way view in Breuer I and Breuer II
Revised. The northerly view of Breuer I and Breuer II
Revised would be facing the Pan Am Building. The Breuer
buildings would be just as wide as the Pan Am Building
and would look directly at it. It would be a rectangular
building and a large portion of the rectangle would be
facing the Pan Am Building; but the Hotel Biltmore would
be more of a square shape building, where you have more
utilization of the floor space and better views in comparison
to the shape.
Q. Mr. Von Ancken, there’s been testimony in this case
that the rectangular shape of the building to be built on
top of Grand Central Terminal was preferable to the
square building that would be built on the Biltmore site.
Do you agree or do you disagree with that opinion, and
why? A. I disagree with that opinion. The square shape
site has an equal access to the central elevator bank, where-
as [1584] the rectangular shape—normally, the elevators
are placed at the center, they’re a long distance away from
the outer wall on the small sides of the rectangle. Also, in
this particular case, it’s a view factor. They have a broad
wall, over 300 feet long, that faces the broad wall of the
Pan Am Building.
Q. Did the building on top of Grand Central Terminal
provide for any plazas and other open space? A. No,
there was no provision for plazas.
Q. Did the Biltmore site plans, introduced here by the
plaintiff, provide for any plazas or open space? A. Yes,
there was a plaza off Madison Avenue.
Q. Is there any advantage in terms co! rentability of a
building to have plazas and open spaces? A. Yes.
Q. What is that advantage? A. Well, it gives a more
open effect to the building. It enhances the entranceway
into the building and the lobby appearance of the building.
Q. Does it bear any relationship to the extent of commer-
cial space that’s available? A. Well, sometimes it does.
pr wer
Te ee ee vee
85
You could do what they did for the General Motors Build-
ing on Fifth Avenue and 59th
[1635] Q. Shouldn’t the expense of removing rubbish
from the track area which might create a fire hazard
properly be included as one of the expense items in your
chart on pages 12 and 13? A. Absolutely not. It’s a Rail-
road expense item. It’s necessary for the Railroad to remove
the trash to avoid injury to the passengers, which might be
near the tracks or on the platform. It’s the Railroad’s
absolute necessity to clean their own tracks in order that
any cars that may be on the tracks might not burn up if
trash caught on fire located underneath the cars, or if an
engine exploded underneath the Terminal, due to a piece of
trash catching on fire. It’s the Railroad’s duty to remove
that in order to cut down on their own insurance [1636]
premiums.
Q. You’re saying, I take it, then, that you disagree with
Mr. Milano that the Railroad had any duty to remove such
trash to the extent that it might create a fire hazard for
the Terminal as a whole?
Mr. Nespote: Objection, Judge. It’s not what he’s saying.
He’s saying they had to remove the trash in order to make
the trains run safely.
Mr. Stewart: All I am suggesting, your Honor, is that
there are two reasons for removing the trash: One, the
operation of the railroad cars; and the other, the operation
of the building.
I will pass on to the next question.
[1664] Q. I will accept that. Now, if in 1971 the air rights,
or a portion of the air rights over Grand Central Terminal
had been transferred to those three sites, and if they were
developed or redeveloped, wouldn’t the Railroad have lost
that two million five hundred thousand dollars of revenue,
of cash flow? A. Absolutely not, because you would have
a basic payment for the hotels themselves and you would
have an excess payment of the three million, four huncred
thousand dollars that I’ve indicated for the air rights.
For instance, there was an offer made for these hotels,
say fifteen million dollars a piece. Now, the fifteen million
dollars a piece totals forty-five million dollars. If you were
to rent these hotels for land purposes under a long term
lease, an individual might be willing to accept a nine percent
return under a land lease for these hotels, so that would
be nine percent of [1665] forty-five million dollars or four
million, five hundred thousand dollars that the Railroad
would get just by leasing these hotels, just as hotels, based
on their offer.
Q. You’re assuming, I take it, that the Railroad would
require an amount in the ground lease of these hotels which
would reflect, among other things, the income lost. Is that
what you’re saying? A. No, I’m saying that—if we deal
with the Hotel Biltmore, it currently derives an income
of cash flow income of $450,000 a year. If there was an
offer made for the Hotel Biltmore of $15 million, $15 million
as a sale, and we can interpolate that sale into a lease
price, just using nine percent on $15 million, as a fair return
under a net lease, and that would indicate a return per year
for the hotel of a million, three hundred fifty thousand
dollars, just for the hotel, with the eight hundred thousand
square feet of air over the hotel as compared to $450,000
that is currently generated, which is about $900,000 dif-
ference.
* . *
[1675] Tse Court: Do you know of any active interest
in the acquisition of these air rights on the part of de-
velopers or brokers or both?
[1676] Q. You say you have heard of interest in air rights?
87
Tue Witness: I know that there are people who are
bidding on the hotels who are also interested in using the
air rights.
I know that the owners of the—
Tue Court: Give us names and details.
Tue Wirwness: I can tell you of one specific case. The
owner of the East Side Airlines Terminal Building, which
is a 20,000 square foot plot located on 42nd Street and
Park Avenue, it’s a four-story building, the owner is Gold-
man-DiLorenzo. Those people would be very interested in
renting the air rights over the Terminal.
Tue Court: Who told you that?
Tue Witness: The person who told me that was Louis
‘*Madback,”’’ president of our company, who in turn talked
to Goldman-DiLorenzo, [1677] to Sol Goldman, about air
rights over the Terminal.
Tue Court: How long ago?
Tue Witness: This was about a month ago.
Tue Court: Has anything been done to try to arrive at
a deal?
Tae Witness: No because that is the biggest stumbling
block, because we as brokers cannot represent Penn Central
when there’s a case still pending and they don’t know
whether these air rights would still be available or not.
Te Court: That’s been a deterrent to this firm, you say?
They could go out and get another broker, couldn’t they?
Tue Witness: No, it would be a deterrent to any broker
because the broker would have to get clearance from Penn
Central to represent Penn Central in their negotiations.
88
[1680] Q. How long would it take, in your opinion, to
transfer all of the air rights to other locations to which
they can be transferred? [1681] A. I would estimate
approximately two to three years.
Tue Court: I don’t quite get that. Is your question, how
long would it take—and I add: to effect a transfer?
The witness says two or three years.
Mr. Stewart: Let me ask another question, your Honor.
Q. How long would it take to consummate agreements
with respect to the transfer of all of these air rights to
lessees or purchasers, and is your answer still the same?
A. The initial bulk of the air rights would be immediately,
but the disposition of the last 500,000 or 800,000 square
feet would be over a period of two to three years.
Q. What do you mean by the ‘‘initial bulk’’? A. The
bulk that’s required to build on one of the hotel sites,
approximately a million—
[1732] Q. Would you turn to page 29 of your report,
please?
What is the purpose of this comparison? A. The pur-
pose of the entire comparison is to indicate what the—
what the net rent would be if Breuer I or Breuer II was
constructed in order for the building to have a profit and in
order for the building to break even.
Q. And why is the Biltmore included? A. The Biltmore
is included on the schedule to indicate that if the Biltmore
building was built today the rent per square foot would be
less than what was the proposed rent for Breuer I and II
in late 1968.
Q. Are you suggesting by this analysis that it would not
have been possible to construct the building at an economic-
ally feasible cost in the middle of 1968?
Tue Court: Do you mean the Biltmore?
Mr. Srewaat: No, sir. I meant to say on top of the Grand
Central Terminal.
Tue Wirness: I am saying it would cost far more to build
the building over the Terminal, [1733] over the southerly
section of the Terminal, than it would cost to build a normal
office building.
91
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92
Exhibit 9
Net TRANSFERABLE Zontnc FLoor AREA
From
Granp CENTRAL TERMINAL Parcet A
Area of Grand Central Terminal Lot:
Maximum Permitted Zoning Floor Area as
of Right (Lot Area X Floor Area Ratio
of 15): 2,013,030 sq. ft.
402,606 sq. ft.
Bonus Areas:
Total Zoning Floor Area with Bonuses
(Lot Area X Floor Area Ratio of 18): 2,415,636 sq. ft.
264,642 sq. ft.
2,150,994 sq. ft.
Existing Zoning Floor Area:
Net Transferable Zoning Floor Area:
134,202 sq. ft.
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_————
93
Exhibit 10—Diagram of Portion of Manhattan Island
Properties subject te leng tere
around leases.
te lene tere around leases
for $2 Vandertilt Avenue °
Properties not subjeet te ground
leases or contracts of sale.
4
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94
Exhibit 11
Property Possessep By Penn CenTRAL TRANSPORTATION
Company In Granp CenTraL TerminaL Arga Sussect To
Lono-Term Grounp Leases anp Contracts oF Saez
Property Sussect To Lonec-Term Grounp LEasEs
Property
51 East 42nd Street
Yale Club
Pan Am Building
Lexington-43rd Street
Driveway Area
Graybar Building
383-5 Madison Avenue
250 Park Avenue
270 Park Avenue
320 Park Avenue
277 Park Avenue
Lot Area
(Sq. Ft.)
10,251
9,105
150,701
9,000
68,303
43,313
24,970
80,332
16,600
81,337
Description
17-story office building
22-story club
59-story office building
Parking lot
29-story office building
13-story office building
20-story office building
52-story office building
Portion of 33-story
office building
50-story office building
Ground Tenant
51 East 42nd Street
Corporation
The Yale Club of
New York City
Grand Central
Building, Inc.
Lexington-43rd, Inc.
Metropolitan Life
Insurance
Company
The Manhattan
Savings Bank
250 Park Avenue
Corporation
Union Carbide
Corporation
Uris 320 Park
Corporation
Stahl Equities
Corporation
95
Lease Expiration
Date (Subject to
Renewals)
Jan. 31, 1987
Sept. 30, 1997
Apr. 30, 1997
May 31, 1976
May 31, 1976
Apr. 30, 1987
Mar. 31, 1987
Dec. 31, 1975
Dec. 31, 1990
June 30, 1991
Renewals
None
None
Two 21-year renewal
terms
One 11-year, 7-month
renewal term and
two 21-year re-
newal terms
One 11-year, 7-month
renewal term and
two 21-year re-
newal terms
None
Two 21-year renewal
terms
Two 21-year renewal
terms
Two 21-year renewal
terms
Two 21-year renewal
terms
* Subject to Landlord’s right to refuse second renewal term on
paying the then value of building.
** Subject to Landlord’s right to terminate as of March 31, 2018
upon payment of the then value of building.
Property
299 Park Avenue
Waldorf-Astoria Hotel
96
Exhibit 11
Lot Area
(Sq. Ft.)
Description
40,166 42-story office building
81,337 44-story hotel
Property Suspsect To Contracts oF SaLe anp Lono-TERM
Grounp LEASES
280 Park Avenue
West Building
280 Park Avenue
East Building
350 Park Avenue
230 Park Avenue
245 Park Avenue
12,000
24,970
15,062
69,154
81,337
16-story office building
30-story office building
Portion of 30-story
office building
34-story office building
47-story office building
Property Sussect To Contract oF Sate ONLY
52 Vanderbilt Avenue
9,105
20-story office building
Ground Tenant
Fisher-Park Lane
Company
Hotel Waldorf-
Astoria Corpo-
ration
Sigmund Sommer
Rose Associates
Manufacturers
Hanover Trust
Company
The New York Bank
for Savings
Uris 245 Park
Corporation
97
Lease Expiration
Nete (Subject to
Renewals )
Oct. 1, 2015
Nov. 30, 1977
Jan. 1, 2018
Nov. 30, 2006
Dec. 31, 1990
Oct. 14, 1983
May 14, 2002
Renewals
One 25-year renewal
term
One 21-year renewal
term
One 25-year renewal
term
One 21-year renewal
term ft
Two 21-year renewal
terms
One 25-year renewal
term
Two 30-year renewal
terms
*** Subject to Landlord’s right to terminate as of September 30,
2035 for $1,000.
eee? Subject to Landlord’s right to refuse renewal term on pay-
ment of ‘‘sound value’’ of building.
t Subject to Landlord’s right to refuse to renew on payment of
the then value of building.
tt Subject to Landlord’s right to refuse second renewal term on
payment of the then value of building.
ttt Subject to Landlord’s right to terminate as of May 14, 2032
upon paying the then value of building.
98
Exhibit 12
Casu Fiow From Barciay, Br.tmore, COMMODORE AND
Rooseve.t Horexzs (1965-1971)
(in dollars)
The Barclay Hotel
1965 1966
Net Operating Income 1,710,817 1,835,205
Capital Replacements 241,226 616,480
Cash Flow 1,469,591 1,218,725
The Biltmore Hotel
1965 1966
Net Operating Income 1,767,851 1,640,464
Capital Replacements 200,636 303,954
Cash Flow 1,567,215 1,336,510
The Commodore Hotel
1965 1966
Net Operating Income 1,545,612 812,154
Capital Replacements 114,317 32,011
Cash Flow 1,431,295 780,143
The Roosevelt Hotel
1965 1966
Net Operating Income 1,534,702 1,339,241
Capital Replacements 768,896 631,189
Cash Flow 765,806 708,052
99
1967 1968 1969 1970 1971
2,276,193 2,614,394 3,228,424 2,956,526 2,025,446
577,594 437,883 602,180 466,937 74,996
1,698,599 2,176,511 2,626,244 1,489,589 1,950,450
1967 —s«- 1968 1969 1970 1971
1,846,969 2,113,841 2,183,272 1,352,193 580,296
300,739 577,404 639,711 193,063 129,824
1,546,230 1,536,437 1,543,561 1,159,130 450,472
1967 1968 1969 1970 1971
1,350,110 1,338,050 1,790,175 1,012,233 (263,746)
545,900 1,018,428 1,611,639 1,379,946 652,311
2,154,323 319,622 178,536 (367,713) (916,057)
1967 1968 1969 1970 1971
7,774,488 1,963,251 1,953,613 1,469,460 564,294
519,099 564,841 483,510 370,830 433,645
1,255,389 1,398,410 1,470,103 1,098,630 130,649
(A)
(B)
(C)
(D)
100
Exhibit 35 A
Nores Reiatine to Granp CentTraL TERMINAL
STaTEMENT oF REvENvES aNnp Costs—YEaAR 1969
The following equivalent positions are included in the
Operation of the Terminal:
Station Master and Staff 17
Information Clerks 9
Gate Ushers 12
Elevator Operators 5
Maids and Matrons 4
47
Materials and Supplies includes those used in mainte-
nance $75,154. and cleaning $23,254. of the Terminal.
Analysis of Cost of Steam, Electricity and Water pur-
chased less credit for sales and consumption b, ten-
ants and other users in Grand Central Terminal.
Year 1969
Steam Electricity Total
Gross Cost $1,262,447 $1,143,831 $2,406,278
Deduct sales and con-
sumption by others 875,255 1,094,989 1,970,244
387,192 48,842 436,034
Deduct additional sales
of brine, air condition-
ing ete. not included
above 65,656
Water &
Sewer $223 .443
Less Sales 53,218 170,225
Net UTILities $ 540,603
Other Direct Costs includes the following
items:
Rubbish Removal $ 45,648
Other General Expenses 8,285
101
(E) Supervision: Departmental Overhead Costs
as follows:
Maintenance, Repairs and Building
Service $ 19,904
Cleaning 30,230
Terminal Operation 30,448
Policing 53,193
Track Cleaning 5,122
$ 138,897
(F) Amounts billed to tenants represent the
following items:
Recoverable Cost of Maintenance for the
Account of Concessionaires and others $ 86,443
Recoverable Cost of Policing a Joint
Passageway 14,470
Recoverable Cost of Cleaning a Joint
Passageway 12,307
$ 113,220
102
Exhibit 35 B
Granp CENTRAL TERMINAL
STaTEMENT OF REVENUES AND Costs
Year 1971
Rents and Concession Revenues ©
Costs of Maintenance and Operation
Labor:
Maintenance, Repairs
and Service Plant
Operation $1,141,679
Cleaning 632,753
Terminal
Operation (A) 600,392
Policing 438,566
Track Cleaning 57,188
Total $2,870,578
Other Costs:
Material and
Supplies (B) 69,692
Utilities (C) 660,710
Other Direct
Costs (D) 69,485
Real Estate Taxes 598,494
Gross Earnings Taxes 135,000
Depreciation 264,500
Insurance 18,990
Total 1,816,871
Overheads:
Supervision (E) 205,029
General Administrative
Expenses 350,301
Total 555,330
Deduct amounts billed
to tenants (F) 166,055 CR.
Net Cost of Maintenance and Operation 5,076,724
Net Dericit
$2,174,257
$1,902,467
103
Exuusit 35 B
Notes Reiatinc To Granp CentraL TERMINAL
STATEMENT OF REeveNvEs AND Costs—Yxrar 1971
(A) The following equivalent positions are included in the
Operation of the Terminal:
Station Master and Staff 17
Information Clerks 9
Gate Ushers 12
Elevator Operators 5
Maids and Matrons 4
47
(B) Materials and Supplies includes those used in mainte-
nance $51,657. and cleaning $15,761. of the Terminal.
(C) Analysis of Cost of Steam, Electricity and Water pur-
chased less credit for sales and consumption by tenants
and other users in Grand Central Terminal.
Year 1971
Steam Electricity Total
Gross Cost $1,530,170 $1,327,434 $2,857,604
Deduct sales and con-
sumption by others _1,060,881 1,270,746 2,331,627
469,289 56,688 525,977
Deduct additional sales
of brine, air condition-
ing ete. not included
above 72,800
Water &
Sewer $272.425
Less Sales 64,892 — 207,533
Net Urmtiss $ 660,710
(D) Other Direct Costs include the following items:
Rubbish Removal $ 46,008
Other General Expenses 23,477
$ 69,485
104
(E) Supervision: Departmental Overhead Costs as
follows:
Maintenance, Repairs & Building Service $ 22,605
Cleaning 43,090
Terminal Operation 40,887
Policing 92,631
Track Cleaning 5,816
$ 205,029
(F) Amounts billed tenants represent the
following items:
Credits for Policing Off Track Betting
Location and Joint Passageway $ 89,320
Recoverable Cost of Maintenance for the
Account of Concessionaires and others 57,771
Recoverable Cost of Cleaning a Joint
Passageway 18,964
$ 166,055
105
Exhibit 36
DereRRED MAINTENANCE Costs ror Granp CenTRAL TERMINAL
I. Dererrep StructuRaAL MAINTENANCE
Estimated
Cost
Renewal of roof over Main Concourse,
Main Waiting Room and North Balcony
in kind including drainage, copper ridge
roll, eave flashing and gable flashing
1. Removal of skylights on fourth
floor roof and substituting roofing $ 20,000
2. Replacing copper roofing on re-
mainder of roof 283,800
3. Renewal of roof drainage system 22,500 $326,300
Point up brickwork on outside of sev-
enth floor parapet wall adjacent to and
south of cooling towers 1,500
Point up joints in granite work as nec-
essary from street level to overhead
roadway level on 42nd Street from Com-
modore Hotel to Vanderbilt Avenue and
on Vanderbilt Avenue from 42nd Street
to Pan Am Building line 4,000
Repair of stone and terra cotta balus-
trade along 42nd Street from Commo-
dore Hotel to Vanderbilt Avenue 3,000
Repair, clean, red lead and paint the
steel wainscoting on the northeast por-
tion of the northbound overhead road-
way over 45th Street, also renew 700
feet of sidewalk on 42nd Street east of
Vanderbilt Avenue 6,500
Repair various leaks along overhead
roadway up to 46th Street, including
new leaders, new drains, new track pans,
ete. 5,000
Renewal of expansion joints along over-
head roadway up to 46th Street 20,000
Total $366,
106
Exhibit 36
Il. Dererrep Operatinc MAINTENANCE
Estimated
Cost
Paint ceilings, walls and piping in refrig-
eration plant, heating and water supply
plan and various operating shops $ 26,000
Renovation of refrigeration plant and
heating and water supply plant
1. Refrigeration plant $105,000
2. Heating and water supply plant 100,000 205,000
Emergency lighting system (required
by City law by July 1, 1972) 141,200
$372,200
107
Exhibit 36
III. Dererrep NonoperaTInG AND NonsTRUCTURAL
MAINTENANCE
Estimated
Cost
Steam clean elevations from overhead
roadway up to roof parapet, south, east
and west side of Terminal $ 75,075
Chemically clean the interior Caenstone
in the Terminal 37,600
Paint and redecorate the barrel vaulted
ceiling in the Main Concourse including
the plaster ornamentation
1. Restoration of ornamental plaster $ 45,600
2. Painting of arched ceiling
Scaffolding 179,000
Artwork 115,000
Company force work 87,360 426,960
Total $539,635
Deferred Structural Maintenance $ 366,300
Deferred Operating Maintenance 372,200
Deferred Nonoperating and
Nonstructural Maintenance 539,635
Total Estimated Cost $1,278,135
108 109
Exhibit C
: Exhibit D 1, Photo
Photo of Grand Central Terminal of Grand Central Terminal
110 111
Exhibit D 4, Photo Appraisal Report & Analysis
of Grand Central Terminal Grand Central Terminal
Exhibit V
WM. A. WHITE & SONS
ESTABLISHED 1868
REAL ESTATE
51 East 42nd Street @ New York, N. Y. 10017
Telephone: 682-2300
May 22, 1972
James Nespole, Esq.
Assistant Corporation Counsel
Municipal Building
New York City, N.Y.
Dear Sir:
Pursuant to your request, we have prepared an appraisal
and Highest & Best Use Study of the property known as
Grand Central Terminal, located in the City and State of
New York.
——
We have considered the proposals known as Breuer I
and Breuer II Revised, dated August, 1968 and July, 1969.
We have considered the lease that is now in effect be-
tween the 51st Street Realty Corporation, hereafter known
as Penn Central and U. G. P. Properties, Inc. dated Janu-
ary 22, 1968.
“ea
saci
}
We have considered the office market in midtown from
1968 through 1972. We have considered rental rates of new
office buildings and mortgage interest rates over the same
4-year period.
We have considered an alternative plan which provides
more income to Penn Central than Breuer Plans I or II
Revised, while at the same time, not defacing any part of
the Terminal Building.
4:
¥ cg ae Oe oe Peay oe
a
er
Lnewtet=e oo se ewee tad ‘
112
We have analyzed the proposals of Breuer I and II Re-
vised and find that the construction of the proposed office
tower would not provide any net income to the developer,
U.G.P. Prperties, Inc.
We find that there is an abundance of vacant new office
space in the Grand Central area. We find that rents in new
office buildings are below the rental rate which is necessary
to make the development over the Grand Central Terminal
a profitable business venture.
Specifically, we find that the alternative approach con-
sidered in the body of the attached report provides $800,-
000 more in net income to Penn Central than the net rental
under Breuer Plants I or II Revised.
There are various ancilliary benefits created by the
preservation of the Terminal building which accrue to
those buildings that surround it. The light, view and air
over the Terminal will be preserved. The southerly views
from the Pan Am Building will also be preserved.
Attached hereto is a report indicating our findings.
Very truly yours,
/s/ Rospert Von ANCKEN
Robert Von Ancken,
Senior Realty Appraiser
Vice President
RVA :eg
Encl.
eS
113
Exhibit V
Alternative Use of Development Rights
In 1971 the Terminal earned $1,045,000 net income from
those commercial uses located within that area of the Ter-
minal that would be demolished or lost under Plan I and
Revised Plan IT. This income would be lost to Penn Cen-
tral, the landlord, with the implementation of the Breuer
proposals. Subtracting the rent loss of $1,045,000 from the
projected net rent for the development space of $3.6 million
reduces the true net income to the Terminal under Breuer
Plan I and Reviser Plan II to $2,555,000.
Further, a considerable portion of the upper floor space
on the first through third floors on the southwesterly office
bank is now occupied by Penn Central and related railroad
uses for which no rent is being collected. The railroad
would have to rent alternative facilities and thus further
reduce their actual net income through the present leasing
plan with U.G.P. Properties, Inc. The estimated rental
value for this space is $33,600 ($4. per sq. ft.). Further, the
Breuer plans do not substantially reduce the operating
cost of the Terminal for railroad and commercial uses. The
present Jease for Breuer I and II Revised is $1.68 and $1.72
per square foot of gross zoning area. The rent is about
20% less than the average because of the extra foundation
problems and costs borne by the lessee.
There are 2,353,400 square feet of development rights over
the Terminal that could be put in an ‘‘air bank’’ and trans-
ferred to those owners adjoining the Terminal through a
common chain of ownership (See Zoning section for further
data). Various blocks of air space could be rented or sold
to adjoining sites at a rate that would induce those inter-
ested parties to participate. The projected rent for the
available development rights is $1.45 per square foot of
permitted zoning building bulk, 15% less than the average
gross economic rent per square foot of zoning area for
114
Breuer I and II Revised of $1.70 per square foot. $1.45 per
square foot X 2,353,400 square feet available for transfer=
$3,412,486 rounded to $3,400,000.
This 15% reduced rental on top of an originally low
economic rent would unquestionably be sufficient induce-
ment to adjoining property owners to rent or buy the de-
velopment rights over the Terminal and use it for their
own office sites. This does not include any payment that
the Pan Am Building might pay for protection of their
southerly exposu
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