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September 3, 2008
"Brooklyn real estate big-wigs" battle it out in Cleveland
Two days ago, we noted a Cleveland Plain Dealer article that Forest City Enterprises, the parent company of Atlantic Yards developer Forest City Ratner, was in a pickle after an appeals court upheld the "gold-clause" on the lease for the land under the Halle building in Cleveland. If pegged to the current value of gold, the $35,000/year lease could skyrocket to $1.4 million.
Yesterday, Brownstoner covered an angle to the story that we entirely missed:
Venner vs. Ratner Plays Out In Cleveland
A couple of Brooklyn real estate big-wigs have been embroiled in a bitter battle over the enforceability of the terms of a century-old lease in the heart of downtown Cleveland. The lawsuit, which has worked its way through the appeals system since it was filed back in 2006, pits Stuart Venner, who owns a number of buildings in Brooklyn, including 174 Clinton Avenue, 657 Carlton Avenue and 114 Henry Street, against development goliath Forest City Enterprises.
Today, The NY Sun details the legal ruling in an editorial.
As the opinion by Judges Harold Ackerman, Damon Keith, and Jeffrey Sutton recounts, "In the early 1930s, as part of a series of measures designed to implement the Roosevelt Administration's overhaul of American monetary policy, Congress withdrew gold from circulation and banned nearly all private ownership of it. ... And in 1933, Congress passed a Joint Resolution that declared gold clauses to be 'against public policy,' barred their inclusion in any future contract and suspended the operation of existing gold clauses by allowing all contract obligations to be paid in paper currency instead."
However, the opinion goes on, "Four decades later, Congress changed course. It repealed the ban on private ownership of gold in 1975. And in 1977, it amended the 1933 Joint Resolution, providing that the resolution 'shall not apply to obligations issued on or after' the amendment's date of enactment. ... In an effort to clarify the matter, Congress passed a law in 1996 saying that owners could enforce pre-1977 gold clauses only if the parties to a new obligation issued after 1977 'specifically agree[d] to include a gold clause' in their new agreement."
The case at hand, which was covered in these pages in June under the headline "Count Those Square Feet in Gold" and which Brownstoner.com has linked to an article on the Web site of the Cleveland Plain Dealer, involves two companies with New York City ties. The landlord, Stuart Venner, is a New York-based real estate investor. The renter is an arm of Forest City Enterprises, which is behind the big effort to develop Atlantic Yards in Brooklyn and bring the Nets to play basketball there. If the gold clause is to be enforceable, Forest City's rent would escalate to about $1.4 million a year from $35,000 a year. The judges, in an opinion issued last week, found that the clause was indeed enforceable.
Images, CB Richard Ellis (cbre.com).
Posted by lumi at September 3, 2008 5:37 AM