Parking Auth. v. Estate of Rubin

• Decision Date: 11 February 2020
• Docket Number: DOCKET NO. A-5335-17T3
• Parties: PARKING AUTHORITY OF THE CITY OF CAMDEN, a body corporate and politic of the State of New Jersey, Plaintiff-Appellant/Cross-Respondent, v. ESTATE OF MILTON RUBIN, a/k/a MICKEY RUBIN, fee owner, Defendant-Respondent/Cross-Appellant, and V & T INC., tenant, Defendant. ESTATE OF MILTON RUBIN, Plaintiff, v. PARKING AUTHORITY OF THE CITY OF CAMDEN, Defendant.
• Court: New Jersey Superior Court – Appellate Division

PARKING AUTHORITY OF THE CITY OF CAMDEN,

a body corporate and politic of the State

of New Jersey, Plaintiff-Appellant/Cross-Respondent, v. ESTATE OF MILTON RUBIN, a/k/a MICKEY RUBIN,fee owner, Defendant-Respondent/Cross-Appellant,and V & T INC., tenant, Defendant.

ESTATE OF MILTON RUBIN, Plaintiff, v. PARKING AUTHORITY OF THE CITY OF CAMDEN, Defendant.

DOCKET NO. A-5335-17T3

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION

Argued December 2, 2019

February 11, 2020

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

Before Judges Fasciale, Moynihan and Mitterhoff.

On appeal from the Superior Court of New Jersey, Law Division, Camden County, Docket Nos. L-3605-14 and L-2436-14.

Michael J. Ash argued the cause for appellant/cross-respondent (Carlin & Ward, PC, attorneys; Michael J. Ash, of counsel and the briefs).

Robert Baranowski argued the cause for respondent/cross-appellant (Hyland Levin Shapiro LLP, attorneys; Robert Baranowski and Megan Knowlton Balne, on the briefs).

PER CURIAM

Plaintiff Parking Authority of the City of Camden appeals from four orders related to a condemnation action through which it acquired a property previously owned by defendant Estate of Milton Rubin, a/k/a Mickey Rubin. A jury trial was held to determine the property's value. Plaintiff's expert valued the property at $180,000, while defendant's expert valued it at $9,000,000. The difference between these valuations was, in part, due to defendant's expert's opinion that defendant would have been able to rent the entire property, uponrenovating it, to a tenant in receipt of significant tax incentives. After hearing testimony from both parties' experts, the jury awarded defendant $3,000,000. On appeal, plaintiff contends that the jury should not have heard defendant's expert testimony as to the property's value because it was speculative. Plaintiff also contends that the judge erroneously set the valuation date as the date of the taking, rather than the date on which plaintiff initiated the condemnation action. Defendant cross-appeals, arguing that the judge should have applied the prime interest rate to its condemnation award. Having reviewed the record, and in light of the applicable law, we affirm.

I.

We recite the relevant facts from the record. In 1979, Milton "Mickey" Rubin acquired a roughly .22-acre property located in the City of Camden Center City Zone. The property was improved by an eight-story, approximately 80,000-square-foot building that was constructed in 1932. For several years, Rubin leased the first floor to retailers and leased the remaining seven floors to Glassboro State College and the civil service training center for use as office and classroom space. In 1986, he sold the property for $2,700,000, holding a $2,000,000 mortgage for the buyer. The buyer subsequently sold the property to an investor group for $2,900,000, and Rubin still held the mortgage. In 1992,the college and civil service training center moved out, and soon after, the mortgagor ceased making payments. The mortgagor also failed to pay the utility bills, which caused the pipes to break throughout the building, damaging the carpet, walls, and ceilings. Thereafter, defendant¹ initiated a foreclosure action and paid the back taxes, insurance expenses, and maintenance and repair costs. In 2006, defendant obtained title to the property again, after the execution of a sheriff's deed.

During October 2007, defendant agreed to sell the property for $4,500,000. Defendant extended the time for closing through 2012, but the sale never closed. In 2013, defendant listed the property for sale through a broker, for $4,500,000. From 2007 through 2014, defendant continued to maintain the property and pay the property taxes, which, during the last four years, were based on a valuation of $1,662,400.

In March 2014, plaintiff notified defendant of its intent to purchase defendant's property to construct a public parking garage. Plaintiff first offered defendant -$200,000. Consequently, defendant filed a complaint, seeking to preclude plaintiff from "initiat[ing] condemnation proceedings unless and until[it] makes a proper, good faith, bona fide offer to pay just compensation." The parties entered into a consent order to stay any condemnation proceedings, and they agreed to negotiate in good faith.

Thereafter, plaintiff hired Pamela J. Brodowski of BRB Valuation & Consulting Services. As of July 11, 2014, Brodowski valued the property at $180,000, after concluding that the property's highest and best use was "its existing retail use as an interim use, with one retail tenant on the first floor." Relying on this valuation, plaintiff offered defendant $180,000, but defendant rejected the offer. Consequently, on September 18, 2014, plaintiff initiated a condemnation action against defendant.²

Meanwhile, in May 2014, defendant hired Richard F. Wolf of Valbridge Property Advisors. On August 29, 2014, Wolf requested information from the State about the "possibilities of renovating the [property] using . . . tax incentives," and he received an immediate response from Joseph Constance, Business Advocate of the Business Action Center of New Jersey Department of State. On September 8, 2014, defendant and Wolf met with Constance, and theydiscussed defendant's property as well as several programs that could potentially offset future renovation and occupancy costs. Constance agreed to meet with them again after defendant obtained "renderings of the building '[a]s [r]enovated' to use as marketing materials." After the meeting, Constance sent defendant documentation about various cost-saving programs, including the Grow New Jersey Assistance Program (Grow NJ).

Grow NJ was established "to encourage economic development and job creation and to preserve jobs that currently exist in New Jersey but which are in danger of being relocated outside of the State." N.J.S.A. 34:1B-244(a). The program provides tax incentives to eligible businesses for up to ten years. Ibid. To be eligible to apply for these incentives, a business must, among other things, "make, acquire, or lease a capital investment . . . at a qualified business facility" where it will retain and create new full-time jobs. N.J.S.A. 34:1B-244(a)(1). The amount of the capital investment and the number of new jobs required vary depending on the project and geographic location. N.J.S.A. 34:1B-244(b), (c).

Defendant and Wolf met with Constance again, on October 15, 2014, after obtaining the requested renderings. Constance informed them that "based on the plans presented and the ability to deliver a turnkey building in approximately twelve months, a rent of $35.00 per square foot, on a net basis, for the first tenyears and $25.00 per square foot for the following ten years was achievable." Constance also told defendant that he was aware of two potential tenants that would be interested in renting the renovated property.

On December 3, 2014, final judgment was entered in the condemnation action. The judge awarded plaintiff "immediate and exclusive possession" of the property and required plaintiff to deposit $180,000 with the court. The judge also appointed three commissioners to appraise the property. On December 5, 2014, plaintiff filed a declaration of taking and deposited $180,000 with the court. The following February, the appointed commissioners held a hearing and awarded $180,000 to defendant. Defendant appealed the award, and the judge ordered a jury trial to determine the property's value. On July 27, 2015, Judge Robert G. Millenky issued an order setting December 5, 2014 as the valuation date.

In late 2015, the parties exchanged valuation reports. Plaintiff obtained a second report from Brodowski to account for the December 5, 2014 valuation date. Brodowski maintained that the property's highest and best use was "its existing retail use as an interim use, with one retail tenant on the first floor" and again valued the property at $180,000, using the income capitalization approach and incorporating comparable rental rates into the analysis. Brodowski'svaluation did not account for any potential benefits of Grow NJ, as she opined that there was no indication of the program's impact on the Camden real estate market.

Defendant obtained a valuation report from Wolf (the Wolf Report). Wolf concluded that "[t]he highest and best use of the . . . property, as improved, is for renovation of the shell into Class A office space." He valued the property at $9,000,000, using the income capitalization approach and integrating the cost approach. Like Brodowski, Wolf also incorporated comparable rental rates, but the rates differed from those used in Brodowski's valuation. Wolf opined that the property was in a "very unique position" in the Camden market, due to the Grow NJ tax incentives "recently available to companies" located in Camden. He also relied on his and defendant's communications with Constance the previous year.

Plaintiff moved to strike the Wolf Report, and a hearing was held before Judge Millenky on February 19, 2016. Plaintiff claimed that Wolf's methodology was speculative because there was no more than a mere possibility that a tenant of the renovated property would receive Grow NJ tax incentives, and the report also failed to account for the risk associated with obtaining site approval for future renovations. Plaintiff requested an N.J.R.E. 104 hearing, butJudge Millenky declined to hold one after finding that the Wolf Report contained sufficient evidence to allow the jury to find that there was a reasonable probability that Grow NJ had impacted the Camden real estate market. However, he agreed with plaintiff's concern about the lack of analysis regarding the reasonable probability of land use...