Tenants could get tax refund.
"If you are entitled to it, this is the time to come forward and say so," said Parker, who is co-chair of the litigation department and a partner with Kleinberg, Kaplan, Wolff, & Cohen.
He has filed an "interpleader" action with the New York State Supreme Court, and pursuant to an order of Judge Lewis Friedman, is seeking the tenants of the building who would then "interplead" and have their rights to the monies determined.
Parker took on the project as receiver in November of 1993 and among his duties is the apportionment of the pool of money that totals over $1 million, before attorney's fees and monies to other claimants are distributed.
Those dozens of prior and current tenants of the building during the years 1984 through 1992 that may be entitled to a piece of the refund pie include Delta Airlines, Kiska Properties, Peter Duchin Orchestra, Allan Riley, S.K. Realty Consultants, and the retailer Crouch & Fitzgerald.
"We have no record of where all these tenants might be today," Parker said. "This is an opportunity to see if they are entitled to funds when we do distribute them."
While tenants in commercial buildings normally pay escalations based on increases in property taxes, many tenants are not entitled to refunds when years later, the owner wins a court case and overcharges are refunded. So the validity of refunds for tenants in the building will have to be determined based on the leases, most of which were kept by the managing agents of the building.
"The prior managing agent who was in place had leases going back many years and we were at least able to have lists of tenants," said Parker.
Israel Schechter, a tax certiorari partner with Podell Rothman Schechter & Banfield, who represented the building, explained that if the leases merely state the tenant pays an escalation for real estate taxes, "they are probably entitled to a refund." But most owners have taken a harder line and usually the lease states the monies are for "additional rent," so owners will not make the refund.
Part of the problem, too, is that these cases can drag on for many years, and as shown in this instance, it becomes nigh impossible to track down tenants and determine who is entitled to what.
"David Parker has been very concerned about getting the money to the tenants and he is going above and beyond what most receivers do," said Schechter.
There are also claims by former owners and mortgagors, including Maple Tree Associates and Heller Financial.
Unless extended, the cutoff date for interpleader claims would be February 16th.
"My job is to get the money and let everyone who has an interest in it make their pitch," explained Parker. "Ultimately it will be up to the judge."
Other real estate sources said the property was one of the syndications placed by Prudential prior to the change in the tax laws. A very high mortgage had also been put on the property, that was foreclosed on after the tax certiorari case was settled.
Schechter said at the beginning of the years under review, the income and rents were very high, but then the income started to drop due to competition from newer buildings like 380 Madison. The 400 Madison taxes, however, were higher.
"It was a typical, older office property that suffered from newer competition and falling rents," he said.
This tax certiorari trial was also the only trial in recent years of an Uptown office building.
"It was a pure cap case," recalled Schechter. "A lot of the tenants had left and the cap rates the judge finally used were pretty fair."
Parker, who said he didn't seek the receivership, was appointed by Judge Friedman. "The judge knew that since there were several pieces of litigation surrounding the property, he wanted someone who would take an active role," Parker said. "I think he chose me because I've appeared before him and he's met me at various places."
As part of that "active role," receiver Parker has been busy fixing up the property. "This building is certainly on the comeback," he said. "We've been doing a lot of leasing with Sandy Fagin at Newmark. We've also done a lot of work in the building."
That work includes Local Law 10 fix-ups; a clean-up of the lobby and outside; upgrade of the fire alarm system; and "a lot of general upkeep, so the building is looking and functioning better and the rents are starting to reflect that."
That has also been reflected in the interest in the property. The 400 Madison mortgage recently passed to David Werner, industry sources said.
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|Title Annotation:||New York|
|Publication:||Real Estate Weekly|
|Date:||Jan 31, 1996|
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