City gives Kalikow 'eminent migraine'

Real Estate Weekly, April 18, 2001 by Parke Chapman

By definition, eminent domain is the right of the government to acquire property for necessary public use by condemnation. The owner must be fairly compensated, of course.

But the "fairly compensated" part is debatable, even flawed, says one commercial property owner who claims he was jilted.

Last April, The Kalikow Group acquired a building in Ozone Park. Their plan was to upgrade and redesign the space in order to lease it to a national self-storage REIT.

But Edward Kalikow, president of The Kalikow Group, said he didn't know that the previous owner had been approached by the School Construction Authority (SCA) prior to the sale. At that time, the SCA had expressed an interest in the property. Kalikow claims the previous owner neglected to mention this to him, however.

Now Kalikow's property belongs to the SCA, which, he maintains, has not even offered to pay fair market value for it.

"One month after closing on the property, the SCA contacted us. We were running full steam ahead," said Kalikow.

The 100,000 SF self-storage facility was built inside the former Singer Sewing Machine facility in Ozone Park, Queens. It was designed to be a state-of-the-art facility with 740 units.

According to Kalikow, the city did not recognize the costs of the project and low-balled him on the offer. Kalikow scoffed at the way that the SCA has handled the condemnation proceedings.

According to Kalikow's attorney, the SCA's offer came to only about half of what Kalikow spent in buying the property and upgrading it.

Kalikow characterized his plight as "a clarion call" to all property owners and, more importantly, those in the market for property, to avoid the eminent migraine the process has given him.

"We will be in court with the city for a couple of years trying to recover the cost. For now, we are in limbo," said Kalikow, whose firm has owned property in New York City for the past 70 years.

Kalikow's attorney, Michael Rikon, has been advocating eminent domain reform for years and only works eminent domain law.

The eminent domain procedure law in New York State was adopted back in 1977. Unlike other states, New York's condemnation claims are tried without a jury.

"There is nothing in the constitution that authorizes eminent domain," said Michael Rikon, a partner at Goldstein, Goldstein & Rikon. "The public-use definition is so broad that it, too, becomes problematic."

He admitted that he had no problem with taking over a property for a truly public use. But Rikon faulted the SCA for condemning so many properties and being "so litigious."

As proof that the SCA is abusing their eminent do-main rights, Rikon brought up the fact that in subsequent court hearings the city has historically ended up paying the property owners more money.

"Prospective owners must be aware that their property may be condemned. A title search just isn't enough," said Rikon.

Part of the problem, said Rikon, is that these decisions are rarely embraced by property owners, explaining why the SCA makes these decisions in such a clandestine fashion.

In a recent article in The New York Times, Milo Riverso, the chief executive of the SCA, said of eminent domain proceedings: "It's not a very popular thing to do. Some people are not going to be satisfied with any compensation because of the disruption in their life."

The same article quoted the SCA stating that seven out of every ten sites for new schools have to be acquired through eminent domain proceedings. A spokesperson for the SCA would not elaborate on how often the organization uses eminent domain.

But the SCA isn't the only city agency using eminent domain to acquire sites. It is therefore in the best interest of property seekers to thoroughly research the property to make certain that no agencies have an interest in condemning it for the public good. Rikon suggested that anyone looking to purchase property in the city should contact the City Planning Department as well as running a title search to make sure the target property is not a subject of future eminent domain proceedings.