Park51, the organization looking to develop the $100 million “Ground Zero Mosque” at the site of the old Burlington Coat Factory in New York City, has become embroiled in a remarkable “retroactive rent” dispute with Con Ed.
Park51 owns the five-story building that takes up half of the Burlington Coat Factory site, while the utility company owns the other half. Con Ed has been leasing its half to the mosque developers for $2750 per month, but in August they decided to raise the rent just a tad, as reported by the New York Post:
Park51, which leases the substation from Con Ed, wants the two buildings so it can knock both down and build a $100 million, 15-story community center.
But the plan hit a major obstacle in August when Con Ed raised the rent from $2,750 a month, a rate set in 1972, to $47,437 a month, retroactive to July 31, 2008, The Post has learned.
When the mosque failed to fork over the $1.7 million, the utility fired off a letter demanding the money by Oct. 4 and threatening to evict.
Park51 principals responded with a lawsuit to stop the increase, calling Con Ed’s rent demands “outrageous.”
(Emphasis mine.) I’m no fan of the Ground Zero Mosque project, but… a $1.7 million retroactive rent increase? I’m almost afraid to ask, but does that sort of thing happen a lot in New York City?
Tom Liddy of DNAInfo.com offers some more background on this exciting adventure in Big Apple property management:
The dispute hinges on the appraisal of 51 Park Pl., which is owned by Con Edison, but leased by Park51. The group, which operates an interfaith center on the first floor of 45 Park Pl. next door, had hoped to build a $100 million center in place of both buildings.
After Park51 exercised an option to renew the lease in August 2008, the sides could not agree on the fair market value of the building, which is a factor in determining rent, the documents say.
So they brought in a third-party appraiser, which determined that the market value was $10.35 million.
Based on that, Con Ed argued that Park51 owed more than $47,437 a month for the property more than 17 times the rent that it had been paying of $2,750, according to the suit. That amounted to $1.7 million since the lease was renewed, discounting the rent the group had paid to date at the old rate.
In a letter on Sept. 17, the utility said that Park51 was in default and had 20 days to pay, the documents say.
And it said that if Park51 did not pay, the “Landlord may exercised all remedies available under the Lease, including…recovery of the premises demised thereunder, which would also terminate and render void the purchase option.”
Park51 primarily disputes the method used for appraising the property’s value, and thinks its rent should be only $25,875 per month, which would still be almost ten times what they’ve been paying, and leave them hundreds of thousands of dollars in debt for back rent. I gather some aspect of the original agreement involved paying a low rent until the true value of the property could be appraised, so a big increase and back rent payments were always in the cards.
Ironically, the imam behind the Park51 project, Feisal A. Rauf, knows a thing or two about being a lousy landlord. NorthJersey.com notes that he’s been sued for mortgage fraud in the past, with the case “quietly settled” after a few years of wrangling. He owns quite a bit of property, and is not well-loved by his tenants:
In conjunction with others, Rauf is now taking on the largest project of his life with a track record showing that, despite government subsidies, he has had trouble maintaining small apartment buildings in North Bergen, Palisades Park and Union City.
Page after page of municipal health records examined by The Record show repeated complaints ranging from failure to pick up garbage, to rat and bedbug infestations and no heat and hot water.
Cynthia Balko, 48, of Union City — a longtime tenant of Rauf’s — said she’s had to live with rats, leaks and no heat: “I don’t have anything nice to say about the man.”
She finds it hard to believe Rauf’s going to build a world-class Islamic community center, with fitness facilities, auditorium, restaurant, library, culinary school and art studios, as well as a Sept. 11 memorial and space for Muslim prayer services.
“He can’t even repair the bells in the hallway. He doesn’t take care of his properties. But he’s going to take care of a mosque?”
A judge has issued a restraining order against Park51’s eviction from the Con Ed property until hearings can be held in mid-November.