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Trial puts focus on Midtown
February 12, 2010
Rochester Business Journal
Will Astor
To the city of Rochester, Midtown Plaza may be a dinosaur whose reduction to rubble cannot come soon enough. But others still see some $20 million in gold to be extracted from the moribund downtown mall. At the top of the list is the plaza's former owner, Midtown Rochester Properties LLC, which is in court to seek a total of $18.1 million from the city. The amount includes $5.9 million already paid by the city.
A trial in which the former plaza owner is seeking the $12.2 million balance started Feb. 1 before acting state Supreme Court Justice Renee Minarik. Adjourned after two days of hearings, it is slated to resume next month.
Others filing damage claims include Xerox Corp., the Rochester-Genesee Regional Transportation Authority and JPMorgan Chase Bank N.A.
The plaza, which was constructed in the early 1960s as one of the nation's first enclosed downtown malls, is slowly being dismantled. The city, which took over the property in a 2008 condemnation proceeding, hopes to see
new structures rise on the 8.8-acre site.
Minarik ultimately will have to decide between competing appraisals of the vacant property's worth-the city's, which calculated the plaza's worth at the time of its seizure at $5.9 million, or that of Midtown's former owner, which
values the property at $18.1 million.
The city's $5.9 million payment to Midtown Rochester Properties came at the direction of state Supreme Court Justice Thomas VanStrydonck, who initially presided over the condemnation proceeding. In a 2008 decision, VanStrydonck said a Rochester City Council vote to cap the city's Midtown Plaza payout to all condemned parties at $5.9 million was out of step with the state's eminent domain law.
The city would have to honor an agreement to pay Midtown Rochester Properties $5.9 million, but only a court could determine the property's worth or say what parties with damage claims should be paid, the judge said.
Some former tenants and neighbors of the plaza have filed damage claims, and some could work out settlements with the city. If they do not, their claims would be heard individually in court sessions separate from the Midtown Rochester Properties hearing. None is currently scheduled.
Alleging that it has suffered damages of "no less than $2 million," RGRTA has stated the largest such claim. How much more than $2 million the bus company might seek is unclear. The RGRTA claim, which at its filing in November 2008 stated the actual damages suffered by the bus company
as unknown, is short on details. It lists a $250 wall heating unit and a $3,480 air conditioner as losses suffered in its eviction from the plaza.
RGRTA attorney Philip Spellane of Harris Beach PLLC described the RGRTA claim as a placeholder primarily meant to establish that the authority, which provides bus service to Rochester and surrounding communities, has a right to collect damages.
The Rochester bus company leased a corner of the mall, which it used until the plaza's seizure, as the final city stop and departure point for some suburban routes. RGRTA also had a retail outlet in Midtown, where it sold bus
passes and handed out schedules. It subleased several bays to Adirondack Transit Lines Inc., the company that operates the long-distance bus company, Trailways of New York.
Claims for damages not yet determined have been filed by Xerox and JPMorgan Chase Bank. Both the bank and the document company occupy multistory office towers adjacent to the shuttered mall. The Chase and Xerox towers remain connected to the vacant plaza by large pedestrian bridges that formed part of a series of indoor passages known as the Skyway. With the mall's demise, the two towers' Skyway links have
become bridges to nowhere that will have to be removed, leaving large holes in the Xerox and Chase buildings.
Jonathan Penna of Nixon Peabody LLP, the lawyer for Xerox and the wholly owned JP Morgan Chase subsidiary that owns the bank's Chase Tower building in downtown Rochester, Clintstone Properties Inc., declined to
comment, deferring to his clients. A JPMorgan Chase spokesman in New York City also declined to comment.
Xerox spokesman William McKee said Xerox filed the damage claim to preserve its right to recover costs related to the pedestrian bridge's removal. The case has been dormant for a year and will remain so until the city finalizes redevelopment plans for the Midtown tract, McKee said.
Other damage claims in the plaza condemnation have been filed by:
MCImetro Access Transmission Services LLC, a Verizon Communications Inc. fiber-optic cable subsidiary; Rainbow USA Inc., a former operator of three clothing stores at Midtown with unspecified damages; Carrols Corp., which formerly ran a Burger King restaurant at Midtown; and Rochester District Heating Cooperative.
The city is hopeful of amenably working out arrangements with such claimants out of court and is in active talks with several parties now, Rochester corporation counsel Thomas Richards said.
Built by the owners of then-flourishing downtown department stores, Midtown was meant to be a bulwark against suburban malls. The strategy worked for a while, but by the 1990s the plaza was in decline. In 1998, California developer Peter Arnold bought Midtown for some $26 million.
After he put the property into bankruptcy in 2000, it was taken over by Blackacre Bridge Capital LLC, which held Arnold's Midtown mortgage.
Blackacre then struck a deal with developer Laurence Cohen, who took over the property in exchange for an ownership stake in Midtown. Cohen formed Midtown Rochester Properties, hired local managers and attempted a
turnaround but was unable to stop the mall's slide.
The city's plans to condemn and demolish Midtown were made in 2007 after Paetec Holding Corp. said it would be willing to put a new headquarters on the site once existing structures were razed. The Perinton telecommunications firm's commitment helped the city line up state aid for the demolition, which is estimated to cost $45 million.
Paetec chairman and CEO Arunas Chesonis at first said the company would build a tower of more than 10 stories. When it unveiled its initial plan for the headquarters, however, the design called for a nine-story structure. Paetec
now is considering a smaller structure that would partly use the existing Seneca Building, Paetec spokesman Christopher Muller said.
The new headquarters plan is still in flux, Muller said. Paetec expects to unveil a final version whose shape would depend to a degree on the outcome of ongoing talks among Paetec and city and state officials, he said.
Muller blamed the continuing economic downturn and iffy downtown commercial real estate market for the latest plan revision. Paetec initially hoped to build extra space to accommodate 600 or more new hires and to lease several floors to other tenants until it needed the space. Now it plans to consolidate its 1,000 local employees at a downtown headquarters that would accommodate an additional 200 workers. If more space is needed, Muller said, the company would lease offices in nearby buildings such as Bausch & Lomb Inc.'s world headquarters.
2/12/10 (c) 2010 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email
service@rbj.net.
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