Real Estate 101
Students and parents at a small, innovative public high school in Brooklyn's Williamsburg learned a painful lesson about real property in Brooklyn's Supreme Court this month.
It was this: property trumps children.
The lesson was taught in the courtroom of Supreme Court Justice Joseph Dowd, who was asked by school directors to force the owners of a long-derelict factory building to live up to the terms of a five-year-old deal to sell the building so that it could be turned into a new facility for the school.
He couldn't do that, the judge said. There was nothing "malicious" about the owner's decision to seek a higher price; he was merely "seeking to maximize his financial position" and within his right to do so. "The action is dismissed," wrote Justice Dowd. "The Clerk shall enter judgment accordingly."
The decision was upsetting to many Williamsburg parents. "It would have meant so much to the community," said Cecilia Iglesias, an immigrant from the Dominican Republic whose daughter Sherlley graduated with honors from the school, El Puente Academy for Peace and Justice, and went on to college. "It would be something we could own, that would help so many families."
Gino Maldonado, director of operations for El Puente, said the school currently turns away scores of students for lack of space. The school was founded in 1993 by a local community activist, Frances Lucerna, with the goal of using innovative curricula and small classes to teach local youngsters, most of whom come from poor families and many of whom speak mainly Spanish.
By the city's own achievement criteria it has done well. Ninety-seven percent of last year's graduating class passed the mathematics exam; 88 percent passed the English test. Every student was accepted into college, including such prestigious schools as Cornell, Mount Holyoke, Sarah Lawrence, and Smith.
In a city tortured by its inability to make schools work, the little academy in Brooklyn is considered something of a guiding light by education experts looking for new ways to reach the city's student population. But it is a very small place now, just 150 students. Lucerna's dream, along with her husband and partner at El Puente, Luis Garden Acosta, has been to move it into a larger building, one capable of serving about 500 students.
Five years ago they thought they had found just such a place, a vacant seven-story factory down the street from the old church on South 4th Street that currently houses the school and a community development center. Empty of tenants for more than 20 years, the building is a tattered eyesore, its 75,000 square feet home only to pigeons and rodents. But in a 1997 decision, the Board of Education said that if El Puente could acquire title to the property, it would use its capital funds to renovate the building. Then it would sign a long-term lease with the community organizationthe first one ever with a not-for-profit landlordthat would pay enough to operate the building. Plans also called for a new library, an art gallery, and a human rights museum. The resolution to do so passed unanimously at the board's February 26, 1997 meeting.
The board was especially eager to make the deal because it had come under fire from the Daily News, which ran a series of articles called "The Lease Fleece." These stories disclosed embarrassing tales of how the board was paying top-dollar rents to private landlords for old warehouses and borderline industrial properties. One lease went to a landlord who had once pleaded guilty in an arson-for-profit scheme. Another was for a building so loaded with toxins it couldn't be used.
The board had originally intended to lease the South 4th Street building from David Krinsky, a politically connected Brooklyn real estate entrepreneur who held an option on the property. Krinsky already held two other high-priced, long-term leases with the board. But after the News disclosed Krinsky's contracts and his failure to pay $800,000 in back taxes, the board backed off. Immediately, Garden Acosta and Lucerna stepped forward, offering to raise private funds to buy the building themselves, renovate it, and lease it to the board.
After the board vote, then-schools chancellor Rudy Crew hailed the El Puente deal as "a major, historical first," one that would be widely replicated. "We will be the first community organization in New York state to own our own school," Garden Acosta stated proudly. "We declare ourselves the first liberated zone for learning."
That upbeat story also ran in the News. It had a disquieting effect on one elderly reader, however: William Muschel, a wealthy owner of commercial and industrial properties, who held title to 104 South 4th Street and had signed a contract to sell it to Krinsky for $1.5 million. There had been little market for such properties at the time. But then Muschel opened the Daily News and guessed that Krinsky had probably made a very good deal for himself. He was right. The terms of the arrangement were that Krinsky would sell the property to El Puente for $1.95 millionrealizing a $450,000 gross profit simply for flipping the building.
After the article appeared, negotiations came to a sudden halt. Krinsky said Muschel stopped speaking to him. He filed suit to enforce his contract. Muschel sued back.
Meanwhile, Lucerna and Garden Acosta waited. In June 1997, Garden Acosta was able to get a sit-down with Muschel. Part of his concern was that Muschel, a Hasidic Jew, had decided not to sell the property to El Puente because of the long-term tensions over turf between Hispanics and Hasidim in Williamsburg. "I attempted to lay out who we were, what our plans were," recalled Garden Acosta. "But he was very agitated. He said, 'I have seen all the publicity and I know who you are. I know Krinsky will make a lot of money. He will never get the building and you will not get it.' "
Muschel, however, did suggest a figure, Garden Acosta said. It was $3 million, double the amount of his original contract with Krinsky. "He was clearly saying under no circumstances would he comply with the contract," said Garden Acosta.
Nor did he. Muschel died in January, 2001, leaving the property, and its attendant litigation, to his three sons. In March, just days before the matter was to come to trial, the Muschels paid Krinsky $500,000 to drop his claimsa tidy profit for a man who had never even owned the building. It also had the effect of leaving El Puente high and dry. Using a team of pro bono attorneys from a prominent Manhattan real estate firm, KMZ and Rosenman, El Puente brought its pleas before Judge Dowd.
Garden Acosta took the stand to testify about his dealings with the late owner but said he was blocked from doing so when Judge Dowd upheld objections by the Muschels' attorney. "They wouldn't allow me to testify about anything," said Garden Acosta. "I couldn't say that we had a meeting with the owner before he died; that he told us we would never get the building."
One of Garden Acosta's attorneys, Gerald Rosenberg, said Dowd's ruling will be appealed. "The court was extremely limiting in its evidentiary rulings," he said.
But a lawyer for the Muschels, Andrew Miltenberg, said his client's actions were reasonable and legal. "We considered the original contract dead," he said. There was no problem with El Puente itself, Miltenberg said, just their price. "[The Muschels] believe it may be worth $4 million to $5 million now," he said. "Were El Puente to come now and make a commercially reasonable offer to lease and buy the building I am sure [the owners] would be receptive."
There ends the lesson.
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