Court Opinion

ID: 9929189
Source: CourtListenerOpinion
Date Created: 2024-02-01 21:08:24.941827+00
Date Added: 2024-06-11T10:05:33.332751
License: Public Domain

Macklowe v BP 510 Madison Ave. LLC
               2024 NY Slip Op 30335(U)
                     January 25, 2024
           Supreme Court, New York County
        Docket Number: Index No. 655921/2020
                  Judge: Andrew Borrok
Cases posted with a "30000" identifier, i.e., 2013 NY Slip
 Op 30001(U), are republished from various New York
 State and local government sources, including the New
  York State Unified Court System's eCourts Service.
 This opinion is uncorrected and not selected for official
                       publication.
                                                                                                                         INDEX NO. 655921/2020
  NYSCEF DOC. NO. 126                                                                                              RECEIVED NYSCEF: 01/25/2024

                                   SUPREME COURT OF THE STATE OF NEW YORK
                                             NEW YORK COUNTY
            PRESENT:             HON. ANDREW BORROK                                                  PART                              53
                                                                                      Justice
            ----------------------------------------------------------------- ----------------X
                                                                                                     INDEX NO.          655921/2020
             HARRY MACKLOWE
                                                                                                                        04/28/2023,
                                                         Plaintiff,                                  MOTION DATE        04/28/2023

                                                                                                     MOTION SEQ. NO. - -001 002
                                                 - V -                                                                   ----

             BP 510 MADISON AVE LLC,
                                                                                                       INTERIM DECISION AND
                                                         Defendant.                                      ORDER ON MOTION

            ------------------------------------------------------------------- --------------X

            The following e-filed documents, listed by NYSCEF document number (Motion 001) 28, 29, 30, 31, 32,
            33,34,35,36,37,38,39,40,41,42,43,44, 101,102,103,104,105,106,107,108,109,110,111,112,
            113, 114, 115, 117, 118, 119, 120, 121
            were read on this motion to/for                                              PARTIAL SUMMARY JUDGMENT

            The following e-filed documents, listed by NYSCEF document number (Motion 002) 45, 46, 47, 48, 49,
            50,51,52,53,54,55,56,57,58,59, 60, 61,62,63, 64, 65,66, 67, 68, 69, 70, 71, 72, 73, 74, 75, 76, 77,
            78, 79, 80, 81, 82, 83, 84, 85, 86, 87, 88, 89, 90, 91, 92, 93, 94, 95, 96, 97, 98, 99,100,116,122,123,
            124
            were read on this motion to/for                                                       JUDGMENT - SUMMARY

            Harry Macklowe's motion (Mtn. Seq. No. 1) is granted solely to the extent that Mr. Macklowe is

            entitled to summary judgment to the extent that BP 510 Madison Ave LLC (BP 510) owes him

            the Fixed Fee as such term is defined in the Consulting Agreement, dated September 24, 2010

            (the Agreement; NYSCEF Doc. No. 3). BP 510's motion (Mtn. Seq. No. 2) is granted solely to

            the extent that the second cause of action for specific performance is dismissed.

            On the record before the Court, it appears that Mr. Macklowe is also entitled to summary

           judgment as to both the Additional Fee and the Final Fee as such terms are defined in the

            Agreement because it appears that BP 510 is netting out its Adjusted Equity Contribution (i.e.,

            and not just its preferred return on its Adjusted Equity Contribution) prior to the payment of Mr.

             655921/2020 HARRY MACKLOWE vs. BP 510 MADISON AVE LLC                                                       Page 1 of 9
             Motion No. 001 002

[* 1]                                                                       1 of 9
                                                                                                 INDEX NO. 655921/2020
  NYSCEF DOC. NO. 126                                                                    RECEIVED NYSCEF: 01/25/2024

            Macklowe's Additional Fee and Final Fee contemplated by Section 4 of the Agreement. This is

            not what the Agreement calls for.

            Briefly, by way of background, Mr. Macklowe is a real estate developer and former owner of

            510 Madison Avenue, New York, New York (the Building). Mr. Macklowe sold the Building to

            BP 510 on September 24, 2010. Pursuant to the terms of the Agreement, which had a IO-year

            term, Mr. Macklowe and BP 510 agreed that if the Building met certain performance metrics,

            Mr. Macklowe would be entitled to additional compensation. According to Mr. Macklowe, the

            milestones set forth in the Agreement were met and he was not paid. Accordingly, he brought

            this action seeking to recover damages for breach of the Agreement based on BP 510's alleged

            failure to pay the Fixed Fee, Additional Fee, and Final Fee.

            Both parties have moved for summary judgment. Both parties agree that the terms of the

            Agreement are not ambiguous (see NYSCEF Doc. No. 44 at 2-3, 14-15; NYSCEF Doc. No. 113

            at 14-17, 19; NYSCEF Doc. No. 76 at 1, 13-14; NYSCEF Doc. No. 100 at 13). In fact, the

            Agreement is not ambiguous.

               I.       Mr. Macklowe is entitled to the Fixed Fee

            Pursuant to Paragraph 4.B (1) of the Agreement, the parties agreed that Mr. Macklowe would

            receive a "Fixed Fee" of $1 million "payable within thirty (30) days after Stabilization Date if

            the Stabilization Date occurs prior to the Expiration Date."

             655921/2020 HARRY MACKLOWE vs. BP 510 MADISON AVE LLC                               Page 2 of 9
             Motion No. 001 002

[* 2]                                                     2 of 9
                                                                                                                INDEX NO. 655921/2020
  NYSCEF DOC. NO. 126                                                                                  RECEIVED NYSCEF: 01/25/2024

            Paragraph 4.B (2) provides that plaintiff would receive an additional $1 million "payable within

            thirty (30) days after the Stabilization Date if, on the Stabilization Date (provided the

            Stabilization Date occurs during the Term), the Average Rent (hereinafter defined) for all

            Eligible Leases then in effect is $90 per rentable square foot or greater."

            The "Stabilization Date" is defined as "[t]he first day of the calendar month immediately

            following the calendar month in which Eligible Leases demising at least ninety percent (90%) of

            the total rentable square footage of the Building (excluding the health club) are in full force and

            effect."

            In support of this motion, Mr. Macklowe met his initial burden of making a "prima facie

            showing of entitlement to judgment as a matter of law" (Alvarez v Prospect Hosp., 68 NY2d

            320, 324 [1986]) that he is owed the $2 million Fixed Fee under the Agreement by

            demonstrating that the Stabilization Date occurred on July 1, 2014 (i.e., prior to the expiration

            date of the Agreement), and that on that date, the Average Rent for all Eligible Leases then in

            effect was $90 per rentable square foot or greater. In their opposition papers, BP 510 fails to

            raise an issue offact. 1 In fact, BP 510's counsel conceded on the record (1.25.24) that Mr.

            Macklowe is entitled to the Fixed Fee, arguing only that BP 510 is entitled to an offset of

            approximately $400,000. This does not however preclude the entry of summary judgment for

            Mr. Macklowe at this time (see Parlux Fragrances, LLC v S. Carter Enters., LLC, 204 AD3d 72,

            89 [1st Dept 2022]). Thus, this branch of Mr. Macklowe's motion is granted.

            1 For completeness the Court notes that BP 510 initially opposed this branch of Mr. Macklowe's motion on the

            ground that the claim is barred by the statute oflimitations and cross-moved to dismiss the claim on the same
            grounds. However, BP 510 later withdrew the cross-motion and indicated that it is no longer relying on the statute
            oflimitations argument reflected in Point I of its memorandum oflaw (Ltr [6-27-23], NYSCEF Doc. No. 118).
             655921/2020 HARRY MACKLOWE vs. BP 510 MADISON AVE LLC                                              Page 3 of 9
             Motion No. 001 002

[* 3]                                                            3 of 9
                                                                                                 INDEX NO. 655921/2020
  NYSCEF DOC. NO. 126                                                                    RECEIVED NYSCEF: 01/25/2024

            Mr. Macklowe is not however entitled to exclude BP 510's expert's opinion based on the

            argument that she seeks to provide expert opinion as to the legal obligations under the

            Agreement. Although this would be impermissible (see Good Hill Master Fund L.P. v Deutsche

            Bank AG, 146 AD3d 632, 637 [1st Dept 2017]; Northeast Restoration Corp. v TA. Ahern

            Contrs. Corp., 132 AD3d 552, 553 [1st Dept 2015]), experts routinely make assumptions in their

            analysis and base their calculations on those assumptions. The opposing party may of course

            challenge those assumptions. This is not however a basis for exclusion. BP 51 O's expert made

            an assumption and opined as to whether the Additional Fee and the Final Fee are owed to Mr.

            Macklowe. Thus, this branch of Mr. Macklowe' s motion is denied. What the Agreement means

            however is an issue soundly left to the province of the Court, and it appears as though BP 510's

            expert has not applied the formula set forth in the Agreement correctly.

               II.      Paragraph 4.C of the Agreement provides for the order of payment

            Pursuant to the terms of the Agreement, the parties agreed that Mr. Macklowe would receive an

            Additional Fee and a Final Fee if BP 510 earned its Cumulative Preferred Return and received a

            distribution of all of its then Accrued and Unpaid Cumulative Preferred Return as of the end of

            the immediately preceding Fiscal Year. This is what Section 4.C of the Agreement says and

            means. It does not say that BP 510 is entitled to reduce its Adjusted Equity Contribution prior to

            the payment of Mr. Macklowe's Additional Fee or Final Fee.

             655921/2020 HARRY MACKLOWE vs. BP 510 MADISON AVE LLC                               Page 4 of 9
             Motion No. 001 002

[* 4]                                                    4 of 9
                                                                                                      INDEX NO. 655921/2020
  NYSCEF DOC. NO. 126                                                                       RECEIVED NYSCEF: 01/25/2024

            To wit, pursuant to Paragraph 4.C, the parties agreed that Mr. Macklowe would be paid if two

            conditions were satisfied:

                     "If, in any Fiscal Year, [BP 51 O] (i) has achieved its Cumulative Preferred
                     Return for such Fiscal Year and (ii) has received a distribution of all of its
                     then Accrued and Unpaid Cumulative Preferred Return as of the end of the
                     immediately preceding Fiscal Year, then Macklowe shall receive an amount
                     (the 'Additional Fee') equal to twelve percent (12%) multiplied by the
                     amount by which Net Operating Income exceeds the Cumulative Preferred
                     Return with respect to such Fiscal Year"

            (NYSCEF Doc. No. 3 at 6).

            "Cumulative Preferred Return" is defined in the Agreement as:

                     "An amount equal to the product derived by multiplying Adjusted Equity Contributions
                     as may be outstanding from time to time by ten percent ( 10%) per annum simple interest
                     after giving effect to all prior distributions" (emphasis added)

            (id. at 2).

            "Adjusted Equity Contributions" means:

                     "Equity Contributions as of such time as actually made, contributed from time to time, (i)
                     less (x) any distributions in return of Equity Contributions other than any amounts
                     contributed or deposited to fund any cash collateral account pursuant to an Accommodator
                     Loan and (y) Deemed Debt, (ii) plus any Accrued and Unpaid Cumulative Preferred
                     Return" (emphasis in original)

            (id.).

            "Equity Contributions" means:

                     "The total amount of money contributed by [BP 51 O] from time to time, to fund costs and
                     expenses of the Project, including, without limitation and without duplication, all funds
                     contributed in connection with the purchase of the Building and the Project, all closing
                     expenses and costs to acquire any mortgage or mezzanine loan secured by the Building or
                     any ownership interest in [BP 510' s] predecessor-in-interest, all funds contributed for real
                     estate taxes, insurance premiums, operating expenses, tenant improvements, leasing
                     commissions, landlord work letter obligations, capital expenditures and all other costs and
                     expenses relating to operating and leasing the Project, but excluding all funds contributed
                     to or deposited with a lender under an Accommodator Loan to fund any cash collateral
                     accounts"

            (id. at 3).

             655921/2020 HARRY MACKLOWE vs. BP 510 MADISON AVE LLC                                    Page 5 of 9
             Motion No. 001 002

[* 5]                                                      5 of 9
                                                                                                      INDEX NO. 655921/2020
  NYSCEF DOC. NO. 126                                                                         RECEIVED NYSCEF: 01/25/2024

            "Accommodator Loan" means:

                     "Any loan made to [BP 510] that is secured by the Project and a cash collateral account in
                     the principal amount of the loan"

            (id. at 1).

            "Deemed Debt" is defined as follows:

                     "An amount of indebtedness, determined as of the Stabilization Date, meeting
                     the following criteria as of such date: (a) a non-recourse first mortgage in the principal
                     amount equal to seventy (70%) percent of the fair market value of the Project based upon
                     a commercially reasonable determination of fair market value by an institutional lender,
                     (b) a ten year term, (c) a market fixed interest rate and, to the extent then generally required
                     by institutional lenders on 10-year, fixed rate, 70% loan to value loans, monthly scheduled
                     amortization payments and (d) otherwise on commercially reasonable terms for a loan of
                     this type at the time in question, as would be available from an institutional lender. Any
                     such terms received by [BP 51 O] in writing from any one of Bank of America, Citigroup,
                     JPMorgan Chase or Wells Fargo shall be conclusive and binding on [BP 510] and
                     Macklowe for purposes of calculating Deemed Debt"

            (id. at 3).

            The Agreement provides that "Accrued and Unpaid Cumulative Preferred Return" is "Interest,

            calculated at ten percent (10%) per annum simple interest, on any Adjusted Equity Contributions

            that are accrued and unpaid at any time" (id. at 2).

            In other words, the deal set forth in the Agreement is that as long as BP 510 receives its preferred

            return on its equity contribution of 10% taking into account "deemed debt," and had received any

            accrued unpaid preferred return as of the prior fiscal year, Mr. Macklowe was to be paid an

            Additional Fee.

             655921/2020 HARRY MACKLOWE vs. BP 510 MADISON AVE LLC                                    Page 6 of 9
             Motion No. 001 002

[* 6]                                                        6 of 9
                                                                                                    INDEX NO. 655921/2020
  NYSCEF DOC. NO. 126                                                                       RECEIVED NYSCEF: 01/25/2024

            BP 51 O's expert indicates that these two conditions were never satisfied. In support of her position,

            she points to Exhibit 3 of the Interrogatories (Ager Report, NYSCEF Doc. No. 68, at 1,9;

            Interrogatories, NYSCEF Doc No. 61 at 17-26). As Mr. Macklowe points out, the spreadsheet

            does not appear to apply the formula correctly. It appears to deduct BP 510' s actual Adjusted

            Cumulative Equity Contributions (i.e., and not just preferred return on their Adjusted Equity

            Contributions) prior to calculating Mr. Macklowe' s Additional Fee. Assuming that this is the case,

            this is improper.

            Counsel for BP 510 indicated (1.25.24) that she thought this is not what BP 510' s expert, Meridith

            Agers, did in her analysis. As an accommodation, for clarity, a hearing is scheduled where the

            parties can each produce their expert witness to discuss the issue. The hearing will be scheduled

            for one of the following dates and times:

                      1/29/2024 at 2:00 - 3:00 pm.
                      1/31/2024 at 11 :30 am - 12:30 pm.
                      2/2/2024 at 11 :30 am - 12:30 pm.
                      2/8/2024 at 11 :30 am - 1:00 pm.

            The parties will meet and confer and inform the court by January 26, 2024, at 3:00 pm, via email

            to Part 53 (sfc-part53@nycourts.gov), of which date and time they can appear in person with their

            expert witness.

               III.      Mr. Macklowe is not entitled to Specific Performance

            BP 510 is entitled to summary judgment and dismissal of Mr. Macklowe' s second cause of action

            for specific performance requiring BP 510 to produce "all Projects Books and Records pertaining

            to the Property." Dismissal of this cause of action is warranted because BP 510 has offered to

             655921/2020 HARRY MACKLOWE vs. BP 510 MADISON AVE LLC                                  Page 7 of 9
             Motion No. 001 002

[* 7]                                                      7 of 9
                                                                                                  INDEX NO. 655921/2020
  NYSCEF DOC. NO. 126                                                                       RECEIVED NYSCEF: 01/25/2024

            make such books and records available to Mr. Macklowe and BP 510 maintains that it has

            effectively provided Mr. Macklowe with everything he has requested (Walsh Affidavit at ,i,i 31-

            32, NYSCEF Doc. No. 55; Ltr, NYSCEF Doc. No. 64). Mr. Macklowe does not refute this

            assertion. Nor does he raise any argument as to why dismissal of the second cause of action is

            unwarranted. Thus, the second cause of action is dismissed in its entirety.

                      Accordingly, it is

                      ORDERED that Mr. Macklowe' s motion for partial summary judgment is granted to the

            extent that plaintiff is awarded summary judgment that BP 510 owes him the Fixed Fee; and it is

            further

                      ORDERED that Mr. Macklowe' s motion for partial summary judgment is granted to the

            extent that Paragraph 4C provides for the order of payment; and it is further

                      ORDERED that branch of Mr. Macklowe's motion which seeks to strike BP 510's

            expert report is denied; and it is further

                      ORDERED that the branch of BP 51 O's motion for partial summary judgment seeking

            dismissal of the second cause of action for specific performance is granted; and it is further

                      ORDERED that the balance of the motions are held in abeyance pending the hearing

            which is scheduled for the reasons set forth above; and it is further

                      ORDERED that the parties shall appear for a remote status conference on January 26,

            2024, at 3:00 pm, via Teams, to set the hearing date.

                      This constitutes the Interim Decision and Order of this Court.

             655921/2020 HARRY MACKLOWE vs. BP 510 MADISON AVE LLC                                Page 8 of 9
             Motion No. 001 002

[* 8]                                                       8 of 9
                                                                                                    INDEX NO. 655921/2020
  NYSCEF DOC. NO. 126                                                                         RECEIVED NYSCEF: 01/25/2024

                    1/25/2024
                      DATE

                                     ~                                ~
             CHECK ONE:                  CASE DISPOSED                    NON-FINAL DISPOSITION

                                                         □ DENIED
                                                                                                   □
                                         GRANTED                          GRANTED IN PART              OTHER

             APPLICATION:                SETTLE ORDER                     SUBMIT ORDER

                                                                                                   □
             CHECK IF APPROPRIATE:       INCLUDES TRANSFER/REASSIGN       FIDUCIARY APPOINTMENT        REFERENCE

             655921/2020 HARRY MACKLOWE vs. BP 510 MADISON AVE LLC                                  Page 9 of 9
             Motion No. 001 002

[* 9]                                                      9 of 9