Appellate Court Ruling Provides Temporary Relief for Carnegie House Tenants

The appellate court's recent ruling has granted a temporary reprieve to 324 residents of Carnegie House located at 100 W. 57th St. This decision also affects the building’s commercial space, which encompasses nearly 30,000 square feet of retail space on Sixth Avenue owned by Georgetown Company. Georgetown, which leases to 10 stores in the building, is responsible for 25% of the annual ground rent. The proposed increase would raise the retail rent from $1.1 million to $6 million. Any increase in rent paid by Georgetown would be passed on to the store tenants, which include a small bike-rental shop and a larger, two-level Duane Reade. A panel of appellate judges unanimously rejected a proposed $24 million ground rent increase that had been approved by a lower court, citing misconduct by an arbitrator who failed to disclose a job offer made by the landowners' lawyer. The Duane Reade store occupies approximately 20,000 square feet, while smaller tenants include Fresh & Co., Zibetto Espresso Bar, a dry cleaner, and a souvenir shop. Of the total ground rent, 65% is paid by residents, 25% by the retail condo, and 10% by an in-house garage. The land is owned by a partnership that includes tech mogul Michael Dell and real estate investors Rubin Schron and David Werner. Their spokesman, James Yolles, stated that they believe the next arbitrator will reach the same conclusion regarding the ground rent. Georgetown representatives did not respond to requests for comment. Richard Hirsch, president of the co-op board, described the appellate court's decision as a “critical victory” for residents but noted it is only a “temporary stopgap.” Some observers expressed surprise that the arbitrator's error led to the dismissal of the entire $24.6 million award. Resident Scotty Sheriff, a lawyer familiar with real estate, remarked on the importance of avoiding even the appearance of impropriety.