[*1]
Granfeld II, LLC v Kohl's Dept. Stores, Inc.
2015 NY Slip Op 51024(U)
Decided on July 13, 2015
Supreme Court, Suffolk County
Emerson, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and will not be published in the printed Official Reports.


Decided on July 13, 2015
Supreme Court, Suffolk County


Granfeld II, LLC, Plaintiff,

against

Kohl's Department Stores, Inc. and KOHL'S ILLINOIS, INC., Defendants.




22962-09



SOMER, HELLER & CORWIN, LLP
Attorneys for Plaintiff
2171 Jericho Turnpike, Suite 350
Commack, New York 11725

PILLSBURY WINTHROP SHAW PITTMAN LLP
Attorneys for Defendants
1540 Broadway
New York, New York 10036-4039

STEVEN F. GOLDSTEIN, L.L.P.
Attorneys for Defendants
One Old Country Road, Suite 318
Carle Place, New York 11514

Elizabeth H. Emerson, J.

DECISION ON DAMAGES


The court's prior decision on the issue of liability set forth in detail the factual and procedural history of this case. To summarize, the plaintiff leased to the defendants a 9.81-acre parcel of vacant land in the Town of Brookhaven, Suffolk County, upon which the defendants were to construct a Kohl's department store. The lease was contingent upon the plaintiff obtaining zoning approval within 24 months and the defendants obtaining all other governmental approvals within six months after the zoning approval. The plaintiff obtained zoning approval from the Town of Brookhaven on May 23, 2008, and the parties agree that the defendants were obliged to obtain the governmental approvals on or before December 23, 2008. In order to obtain a building permit, the Town of Brookhaven required, inter alia, a road-opening permit from the New York State Department of Transportation (the "DOT") for a curb cut on the service road of the Long Island Expressway. When it appeared to the defendants that the road-opening permit was not likely to be obtained before construction was to begin, they obtained a letter from the DOT advising the Town that the DOT was in conceptual agreement with the request for a curb cut, that it did not object to the issuance of a building permit at that time, and that it would issue the road-opening permit when the Town was ready to issue the certificate of occupancy. The Town of Brookhaven issued the building permit on October 24, 2008, but the defendants did not begin construction. By a letter dated January 21, 2009, the defendants advised the plaintiff that they were terminating the lease because they had not obtained all of the governmental approvals, including the applicable permit and approval from the DOT. By a letter dated February 12, 2009, the plaintiff advised the defendants that it deemed them to be in default of the lease. This action ensued.

The matter was tried before the court without a jury. In a decision dated February 4, 2013, the court determined that the defendants had breached the lease. The court found that the failure to obtain the DOT permit was merely a pretext for the defendants' termination of the lease and that the real reason for the termination was the defendants' decision to scale back its plans to construct new Kohl's department stores. In reaching that conclusion, the court relied on, inter alia, an internal Kohl's email dated January 21, 2009, indicating that the defendants planned to terminate the project that is the subject of this action and 22 other projects around the country because they had a "negative net present value." Thus, the court found in favor of the plaintiff on the issue of liability and, with the parties' consent, reserved decision on the issue of damages.

The court subsequently conferenced the matter in an attempt to reach a negotiate resolution of the damage issue. However, after several conferences, it became apparent that a negotiated resolution was not possible, and the parties were directed to submit post-trial memoranda on the issue of damages. The parties' memoranda in-chief were submitted in November 2014 and their reply memoranda in December 2014. The court has considered the parties' memoranda as well as the evidence of damages adduced at trial, including the testimony and reports of the parties' experts, in reaching its determination. The court has not considered the supplemental affidavits and documents submitted by the defendants, i.e., the affidavit of the defendants' expert, Andrew Albro, dated October 29, 2014; the affidavit of the defendants' attorney, Steven Goldstein, dated October 30, 2014; and the exhibits annexed thereto. They [*2]bring to the court's attention events that took place after the trial and that are not part of the record. They are, therefore, dehors the record.

The parties agree that the calculation of damages is governed by section 19.2 (a) of the lease, which provides as follows:

"If Tenant is in default under this Lease..., then Landlord may pursue any or all of the following remedies in addition to all other rights and remedies provided at law or in equity:

"(a)Landlord may terminate this Lease and forthwith repossess the Premises and remove all persons or property therefrom, and be entitled to recover forthwith as damages a sum of money equal to the total of (i) the reasonable cost of recovering the Premises, including reasonable attorney's fees; (ii) the accrued and unpaid rentals owed at the time of termination, plus interest thereon from due date at the lesser of the Prime Rate...plus (2%) per annum, or the maximum rate permitted by law; (iii) the discounted net present value of the balance of the annual fixed rent for the remainder of the Term minus the then fair market rental value of the Premises for the remainder of the Term; and (iv) any other sum of money and damages owed by Tenant to Landlord[.]"

The term of the lease is 20 years with an annual fixed rent of $850,000 a year for the first ten years and $900,000 a year for the second ten years.[FN1] The operative date for valuation purposes is January 21, 2009, the date of the lease's termination.

The plaintiff's expert, Richard DiGeronimo, calculated damages under section 19.2 (a) (iii) of the lease using the sales-comparison method to value the subject parcel because he was unable to find comparable ground leases. He valued the parcel at $5.2 million by using the sales of four large parcels of vacant land in Suffolk County near the subject parcel between 2007 and 2010, which he adjusted for size, shape, and location, among other things. He then used the income-capitalization method to determine the market rent for the parcel. Using national indices, he found that the parcel would generate a 7% rate of return or an annual fair market ground rent of $364,000. The difference between the annual contract rent of $850,000 for the first ten years of the lease and the fair market rent of $364,000 was $486,000 per annum.[FN2] To calculate the difference between the annual contract rent of $900,000 for the second ten years of [*3]the lease and the fair market rent, DiGeronimo increased the fair market rent by 10%.[FN3] To determine the present value of the difference between the contract rent and the fair market rent, DiGeronimo applied a discount rate of 5.25%, which was the prime rate in 2009 plus 2%. DiGeronimo chose the prime-plus-2% rate because it is found in section 19.2 (a) (ii) of the parties' lease. DiGeronimo calculated the damages from August 24, 2009, through January 31, 2030, a period of 20 years and five months. He used August 24, 2009, as the starting date because it was 10 months after the issuance of the building permit and because the first full lease year began on February 1st of the following year.[FN4] Using the 5.25% discount rate, DiGeronimo determined that the net present value of the rent differential over the 20 years and five months was $5,864,000. At the conclusion of the testimony of the defendants' expert, DiGeronimo recalculated the damages using a 7% discount rate, which resulted in an $829,000 reduction in the net present value of the rent differential to $5,035,000.

DiGeronimo also calculated damages under section 19.2 (a) (iv) of the lease as the residual value of the building and other improvements that the defendants were supposed to construct. Using the cost method, DiGeronimo calculated that the cost of building a Kohl's department store with site improvements on the subject parcel in January 2009 was $13,937,985.[FN5] However, DiGeronimo did not simply depreciate that cost over the 20-year term of the lease. Rather, he calculated the projected cost of building a new store with site improvements in January 2030 at the end of the lease term. He estimated that construction costs would increase 3% a year between 2009 and 2030. Applying a 3% annual increase to $13,937,985, he determined that the total cost of building a new store in 2030 would be $25,949,225. He then depreciated $25,949,225 by one-third to reflect that the building and site improvements would have no residual value at the end of 60 years (i.e., the 20-year term of the lease plus eight five-year extensions). DiGeronimo's depreciated residual value at the end of 20 years was $18,048,843, to which he applied the same 5.25% present-value discount rate that he applied to his calculation of damages under section 19.2 (a) (iii). His final determination of the residual value of the land and other improvements was $6,154,000.

While DiGeronimo opined that the plaintiff had suffered damages in the total [*4]amount of $12,018,000 ($5,864,000 plus $6,154,000), the defendants' expert, Andrew Albro, opined that the plaintiff had not suffered any damages. Albro calculated damages under section 19.2 (a) (iii) of the lease only. To determine the fair market rental value of the subject parcel, he used long-term ground leases for six large parcels of improved and vacant land in Nassau and Suffolk Counties that were entered into between 2005 and 2010. Adjusting for differences in size and location, among other things, he determined that the market rent for ground leases as of January 21, 2009, was $2.25 per square foot, which declined to $2.00 per square foot between January 21, 2009, and January 21, 2012. Albro then estimated that ground rents would remain stable in 2013 and increase by .5%, 1%, and 1.5% in 2014, 2015, and 2016, respectively. After 2016, he estimated that ground rents would increase by 2% a year through January 2029.[FN6] Albro determined that the contract rent for the first 10 years of the lease was $1.99 per square foot and $2.10 per square foot for the second 10 years. Albro then compared the contract rent to the market rent for the 20-year period from January 2009 through January 2029 and determined that the market rent exceeded the contract rent each and every year. He, therefore, concluded that the plaintiff had not suffered any damages. His analysis, however, did not end there. He went on to discount to present value the difference between the market rent and the contract rent for each year of the aforementioned 20-year period using a 9.25% discount rate, which he derived from national publications. That calculation produced a negative number, - $522,820 to be exact.

The Lease Term

In a breach of contract action, damages are ordinarily ascertained as of the date of the breach (Brushton-Moira Cent. School Dist. v Thomas Assocs., 91 NY2d 257, 261), which in this case was January 21, 2009, the date on which the defendants terminated the lease. Thus, the defendants have calculated damages from the end of January 2009 through the end of January 2029, a period of 20 years. The plaintiff, on the other hand, has calculated damages from August 24, 2009, through January 31, 2030, a period of 20 years and five months.

The term of the lease, excluding the eight optional five-year extensions, is 20 years beginning on the Commencement Date and ending on the last day of the 20th full Lease Year after the Rent Commencement Date. The "Commencement Date" is defined as the date on which the plaintiff obtained zoning approval, and the "Rent Commencement Date" is defined as the date 10 months after the defendants obtained all governmental approvals necessary to construct and operate the building. The "Lease Year" is defined as a 12-month period ending on the last day of January. The lease provides that the period from the Rent Commencement Date to the following January 31 is considered a partial Lease Year and that the first full Lease Year begins on the day following the last day of that partial Lease Year.

The court finds that the lease commenced on May 23, 2008, when the plaintiff obtained zoning approval, but that the obligation to pay rent did not arise until 10 months after [*5]the defendants obtained the building permit on October 24, 2008.[FN7] Thus, the Rent Commencement Date was August 24, 2009, and the term of the lease ran from that date until the last day of the 20th full Lease Year or January 31, 2030. Accordingly, the plaintiff is correct that it is entitled to recover damages for the partial Lease Year from August 24, 2009, to January 31, 2010, and for a full 20 years thereafter, a period of 20 years and five months.

Damages under Section 19.2 (a) (iii)

Contrary to the defendants' contentions, the comparable-sales method in which market value is determined with evidence of recent sales of comparable properties is an appropriate method of valuing property (see, Matter of FMC Corp. v Unmack, 92 NY2d 179, 189). A comparable sale need not be identical to the subject property. It need only be sufficiently similar to serve as a guide to the market value of the subject property, notwithstanding differences between the comparable and the subject property (Id.). Moreover, sound theory and objective data may be used to adjust evidence of sales of comparable properties in order to more accurately reflect the market value of the subject property (Id.).

The court finds that the four comparable sales used by the plaintiff's expert more accurately reflect the market value of the subject parcel than the six ground leases used by the defendants' expert. As previously noted, the subject parcel is a 9.81-acre parcel of vacant land in the Town of Brookhaven, Suffolk County, on the service road to the Long Island Expressway. Three of the four parcels used by the plaintiff's expert are located in the Town of Brookhaven and one is even located in the same community as the subject parcel, i.e., Medford. The fourth is located in the nearby community of Hauppauge. Both the Hauppauge and Medford parcels are located on the service road to the Long Island Expressway and are similar in size and shape to the subject parcel. All four parcels are vacant. Two are zoned J-2 Business, the current zoning for the subject parcel, and the other two are zoned L-1 Industrial, the previous zoning for the subject parcel.[FN8] All four sales occurred within a year or two of the parties' valuation date, i.e., January 21, 2009. The six parcels used by the defendants' expert, on the other hand, are located in both Nassau and Suffolk counties, as far east as Hampton Bays and as far west as Oceanside. Only one is in Brookhaven, and only three are vacant. Two are zoned DRC (Destination Retail Center), and two are either improved or will be improved with a supermarket, which is a "wet" [*6]use for which the subject parcel is not suited. All are irregularly shaped, unlike the subject parcel, which is near-rectangular. Moreover, half of the leases were entered into in 2005 and 2006, approximately three years before the valuation date and before the recession that began in 2007. Although the defendants' expert made some adjustments to compensate for the differences, he adjusted for fewer factors than the plaintiff's expert. On cross examination, he admitted that two of the leases were not "strong comparables that well support the conclusion." Accordingly, the court credits the opinion of the plaintiff's expert that the subject parcel was valued at $5.2 million on January 21, 2009.

Having determined the value of the subject parcel, the plaintiff's expert then used the income-capitalization method to determine the fair market rent therefor. The income-capitalization method is widely recognized as a valid method of determining the market value of income-producing property (Matter of Mill Riv. Club v Board of Assessors, 48 AD3d 169, 171). Value is arrived at by dividing the net income (i.e., rent) by a capitalization rate derived from a study of the sales of comparable, income-producing properties using market data including, where available, investor surveys (Id. at 171-172; see also Latham Land I LLC v TGI Friday's Inc., 124 AD3d 957). The plaintiff's expert used the income-capitalization method to arrive at a fair market rent for the subject parcel by multiplying the value of the parcel, which he determined to be $5.2 million, by a 7% capitalization rate. In selecting the 7% rate, the plaintiff's expert relied on three indices, i.e., the PwC Real Estate Investor Survey, the Boulder Funds, and the Realty Rates Investor Survey. The last two had specific indices for ground leases that reflected capitalization rates of 7% in the New York market in the second quarter of 2010 and 7.88% in the national market in the first quarter of 2009, respectively. The court credits the opinion of the plaintiff's expert that the fair market rent for the subject parcel was $364,000 (7% of $5.2 million) during the first ten years of the lease, which increased 10% during the second ten years.[FN9]

The court does not credit the opinion of the plaintiff's expert, however, that the appropriate discount rate is 5.25%. The plaintiff's expert used 5.25% as the discount rate because it is found in section 19.2 (a) (ii) of the lease, which provides that the plaintiff may recover as damages any accrued and unpaid rent owed at the time of termination of the lease plus interest at the lesser of the prime rate plus 2% per annum or the maximum rate permitted by law. Since the prime rate was 3.25% in 2009, the plaintiff's expert used 5.25% as the discount rate. However, the record does not reflect that the parties intended the prime-plus-2% rate to apply to the calculation of damages under section 19.2 (a) (iii) or to any provision of the lease other than section 19.2 (a) (ii).[FN10] The defendants' expert, on the other hand, determined the discount rate to be 9.25% in the first quarter of 2009 based on surveys by Price Waterhouse Coopers ("PwC") [*7]and the Real Estate Research Corp. ("RERC"). At the conclusion of the testimony of the defendants' expert, the plaintiff's expert revised his discount rate upward to 7%. Although the 7% rate is found in the PwC survey upon which the defendants' expert relied, it is in the lowest range. In the first quarter of 2009, the discount rates ranged from 7% to 15%, and the averages ranged from 8.59% to 10.30%. Accordingly, the court finds the discount rates proffered by the plaintiff's expert to be too low and credits the 9.25% discount rate proffered by the defendants' expert.

In view of the foregoing, the court has calculated the plaintiff's damages under section 19.2 (a) (iii) of the lease from August 24, 2009, through January 31, 2030, using the difference in rent as determined by the plaintiff's expert and using the 9.25% discount rate as determined by the defendants' expert:

Lease Year EndingRent Difference [FN11] Present Value Factor [FN12] Damages


Jan. 31, 2010 $207,578.91533 $190,002


Jan. 31, 2011 $476,280.83783 $399,042


Jan. 31, 2012 $476,280.76689 $365,254


Jan. 31, 2013 $476,280.70196 $334,330

Jan. 31, 2014

$476,280

.64253

$306,024

Jan. 31, 2015

$476,280

.58813

$280,115

Jan. 31, 2016

$476,280

.53833

$256,396

Jan. 31, 2017

$476,280

.49275

$234,687

Jan. 31, 2018

$476,280

.45103

$214,817

Jan. 31, 2019

$476,280

.41284

$196,627

Jan. 31, 2020

$476,280

.37789

$179,981

Jan. 31, 2021

$489,612

.34589

$169,352

Jan. 31, 2022

$489,612

.31661

$155,016

Jan. 31, 2023

$489,612

.28980

$141,890

Jan. 31, 2024

$489,612

.26526

$129,874

[*8]Jan. 31, 2025

$489,612

.24280

$118,878

Jan. 31, 2026

$489,612

.22225

$108,816

Jan. 31, 2027

$489,612

.20343

$ 99,602

Jan. 31, 2028

$489,612

.18621

$ 91,171

Jan. 31, 2029

$489,612

.17044

$ 83,449

Jan. 31, 2030

$489,612

$ 76,384 [FN13]

___________________



Total damages under section 19.2 (a) (iii):$4,131,707


Damages under Section 19.2 (a) (iv)



The plaintiff contends that it is entitled to recover the value of the building and other improvements that the defendants were to construct on the subject parcel. In support thereof, the plaintiff relies on section 19.2 (a) (iv) of the lease, which provides that the plaintiff may recover "any other sum of money and damages owed by Tenant to Landlord."



A lease, like any other contract, is to be enforced in accordance with the expressed intention of the contracting parties (Goldman v Orange County Chapter, New York State Assoc. for Retarded Children, Inc., 121 AD2d 683, 684). When, as here, the parties set down their agreement in a clear, complete document, their writing should be enforced according to its terms (Vermont Teddy Bear Co. v 538 Madison Realty Co., 1 NY3d 470, 475). This basic rule is particularly applicable in the context of real property transactions, where commercial certainty is a paramount concern and the instrument was negotiated at arms length between sophisticated, counseled business people (Id.; see also, 101123 LLC v Solis Realty LLC, 23 AD3d 107, 113). In such circumstances, courts should be extremely reluctant to interpret an agreement as impliedly stating something that the parties have neglected to specifically include (Vermont Teddy Bear Co., supra). Hence, courts may not by construction add or excise terms, nor distort the meaning of those used, and thereby make a new contract for the parties under the guise of interpreting the writing (Id.).



The parties to a civil dispute are free to chart their own course. Unless public policy is affronted, they may fashion the way a controversy is to be resolved or how damages are [*9]to be computed without interference by the courts (Town of Orangetown v Magee, 88 NY2d 41, 54). Thus, the parties to a contract may agree to restrict the liability resulting from a breach (Adamses v Awad, 47 AD3d 737). When a contract contains a clause specifically setting forth the remedies available to the non-breaching party, fundamental rules of contract construction and enforcement require the court to enforce the contract as written, including the applicable remedies. The court may not look beyond the agreed-upon remedies to award the non-breaching party remedies other than those that the parties agreed would be available (Id.; 101123 LLC v Solis Realty LLC, supra; see also, J. D'Addario & Co., Inc. v Embassy Industries, Inc., 20 NY3d 113).



Applying these principles, the court finds that the phrase "any other sum of money and damages owed by Tenant to Landlord" does not include the cost of the building and other improvements that the defendants were to construct on the subject parcel. The lease was negotiated at arms length by sophisticated, counseled business people and contains a clause specifically setting forth the remedies available to the plaintiff upon the defendants' default. Those remedies are limited to repossession of the premises and (i) the reasonable cost of recovering the premises, (ii) the accrued and unpaid rentals owed at the time of termination, (iii) the discounted net present value of the balance of the annual fixed rent for the remainder of the term minus the then fair market rental value of the premises for the remainder of the term, and (iv) any other sum of money and damages owed by the defendants to the plaintiff. The court finds that subsection (iv) of section 19.2 (a), upon which the plaintiff relies, does not refer to the cost of construction of the building and other improvements. Had the parties intended to allow the plaintiff to recover those costs, which are substantial, it would have been a simple matter to include them in section 19.2 (a). That section 19.2 (a) makes no explicit provision for their recovery leads the court to conclude that the parties did not intend for them to be included in the damage calculation, and the court declines to interpret the lease to include something that the parties have neglected to specifically include.[FN14] The court finds that the phrase "money and other damages owed by Tenant to Landlord" refers to payments other than rent for which the defendants were responsible. For example, the defendants were responsible for the cost of maintaining and repairing the common areas and signs on the premises. They were also responsible for paying the real-estate taxes, utilities, and insurance premiums during the term of the lease and for obtaining the governmental approvals, including the DOT permit.



The plaintiff seeks to recover the real estate taxes over the entire 20-year term of the lease, a total of $331,026.59, and $10,000 that it spent after the defendants defaulted to finish the work needed to obtain the DOT permit. At trial, the plaintiff produced evidence that it paid an engineer $10,000 to obtain the DOT permit and that it paid the following real-estate taxes on [*10]the parcel: $9,513.63 for the tax year from December 1, 2008, through November 30, 2009; $9,985.62 for the tax year from December 1, 2009, through November 30, 2010; $10,246.58 for the tax year from December 1, 2010, through November 30, 2011; and $10,599.67 for the tax year from December 1, 2011, through November 30, 2012. The court finds the plaintiff's projection of the real-estate taxes for the parcel after November 30, 2012, to be speculative and unsupported by the record since the plaintiff did not produce any evidence at trial of what those taxes would be. Accordingly, the court awards the plaintiff damages under section 19.2 (a) (iv) of the lease in the total amount of $50,345.50: $40,345.50 for the real estate taxes from December 1, 2008, through November 30, 2012, and $10,000 for the DOT permit.



Interest



The defendants contend that the plaintiff is not entitled to prejudgment interest at the statutory rate and that the court should apply the prime-plus-2% (or 5.25%) rate found in the lease. The prime-plus-2% rate is found in section 19.2 (a) (ii) of the lease, which applies to any accrued and unpaid rentals owed at the time of termination. As previously discussed, the record does not reflect that the parties intended the prime-plus-2% rate to apply to any provision of the lease other than section 19.2 (a) (ii). Accordingly, the court finds that the plaintiff is entitled to prejudgment interest at the statutory rate.



CPLR 5001, 5002, and 5003 set forth the interest requirements for three distinct periods: interest prior to verdict (CPLR 5001), interest from verdict to judgment (CPLR 5002), and interest from judgment to payment (CPLR 5003) (Matter of Tabitha LL., 87 NY2d 1009, 1013). A party may recover interest under CPLR 5001 upon a sum awarded because of a breach of performance of a contract (CPLR 5001 [a]). When damages were incurred at various times, interest under CPLR 5001 is computed on each item from the date it was incurred or on all of the damages from a single, reasonable intermediate date specified by the court (CPLR 5001 [b]). Interest charged against the present value of future damages is computed under CPLR 5002 from the date of the determination of liability (Matter of Tabitha LL., supra at 1013-1014).



Applying these principles, the court finds that the plaintiff is entitled to prejudgment interest under CPLR 5001 for damages incurred prior to the court's determination of liability on February 4, 2013, and under CPLR 5002 for damages incurred thereafter. Interest on the rental damages incurred prior to February 4, 2013, shall be computed from the end of each lease year. Thus, the plaintiff is entitled to interest on $190,002 from January 31, 2010; on $399,042 from January 31, 2011; on $365,254 from January 31, 2012; and on $334,330 from January 31, 2013. Interest on the remaining rental damages shall be computed from February 4, 2013. Thus, the plaintiff is entitled to interest on $2,843,079 from February 4, 2013. Interest on the real-estate taxes shall be computed from the end of each tax year. Thus, the plaintiff is entitled to interest on $9,513.63 from November 30, 2009; on $9,985.62 from November 30, 2010; on $10,246.58 from November 30, 2011; and on $10,599.67 from November 30, 2012. Interest on the remaining $10,000 shall be computed from June 11, 2009, the date on which this action was commenced, because it cannot be determined from the trial record when the DOT [*11]permit was obtained.



Mitigation



The court finds that, contrary to the defendants' contentions, the plaintiff made sufficient efforts to mitigate its damages.



Attorney's Fees



The parties are directed to contact the court to set a schedule to resolve the remaining issue of attorney's fees, and the plaintiff is directed to serve a copy of this order on its former attorney, the law firm of Rosenberg, Fortuna & Laitman, LLP.



Dated: July 13, 2015

J.S.C.

Footnotes


Footnote 1:Although the lease gave the defendants options to extend the term for eight successive periods of five years each, the parties have not included any option periods in their damage calculations.

Footnote 2:In his final calculations, DiGeronimo reduced the contract rent, as well as the market rent, by 2% to account for operating expenses.

Footnote 3:While the increase from $850,000 to $900,000 is 5.9%, DiGeronimo used 10% for the fair market rent, which benefits the defendants.

Footnote 4:The lease provides that it expires on the last day of the 20th full Lease Year after the Rent Commencement Date. "Lease Year" is defined as a 12-month period ending on January 31, and "Rent Commencement Date" is defined as 10 months after all governmental approvals necessary to construct and operate the building are obtained. Since the building permit was obtained on October 24, 2008, the Rent Commencement Date was August 24, 2009, 10 months later. The period from August 24, 2009, to January 31, 2010, was a partial Lease Year, and the first full Lease Year began on February 1, 2010.

Footnote 5:That figure also includes the cost of fill material.

Footnote 6:Albro's report is dated January 27, 2012. Therefore, the rents after 2012 are all estimates.

Footnote 7:When the building permit was issued, all of the governmental approvals necessary to construct and operate the building were in place. As the court found in its prior decision on the issue of liability, obtaining the DOT permit was a relatively minor issue that would be resolved when it was actually needed, i.e., when the building was substantially complete. As the no-objection letter from the DOT reveals, the DOT was in conceptual agreement with the request for a curb cut. The record does not reflect that the DOT permit could not be obtained or that it would not be issued.

Footnote 8:The zoning was changed on November 8, 2007, in order to accommodate the defendants' use of the premises as a Kohl's department store.

Footnote 9:As previously noted, the 10% increase, while greater than the 5.9% increase in the contract rent, benefits the defendant.

Footnote 10:There were no damages under section 19.2 (a) (ii) of the lease because the obligation to pay rent did not accrue until after the lease was terminated.

Footnote 11:The difference between the fair market rent and the contract rent was obtained from the report of the plaintiff's expert.

Footnote 12:The present value factors were obtained from the report of the defendants' expert.

Footnote 13:Because the defendants' expert did not include the partial lease year in his calculations, his report does not contain a present value factor for the lease year ending on January 31, 2030. The court has calculated the present value of the damages for that year using an on-line present value calculator.

Footnote 14:In addition, the court finds the depreciated residual value of the building and other improvements proffered by the plaintiff's expert to be inflated. Rather than depreciate the cost of a Kohl's department store and site improvements built in January 2009 over the 20-year term of the lease, the plaintiff's expert depreciated the projected cost of a new store and site improvements built in 2030 at the end of the lease's term.