Confidential
Published: Nov. 16, 2003 | Result Date: Sep. 10, 2003 |Case number: DUM0002696 Arbitration – $46,815
Facts
The subject suit involved the determination of the fair rental value for a Santa Monica restaurant during a five-year option period. The claimant landlord submitted an appraisal showing a fair rental value of $66,750 per month and the respondent tenant submitted its appraisal showing a fair rental value of $39,925 per month. The arbitrator found a fair rental value of $46,815 per month. The primary dispute between the appraisers involved whether the property should be appraised, under highest and best use, at its existing use of a single-tenant restaurant, or whether it could be valued based upon a subdivision into several properties, including restaurant and non-restaurant use. The tenant's appraisal reflected the value as a single restaurant property, while the landlord's appraisal arrived at a significantly higher rate based upon valuing the property for multi-tenant use. Under the terms of the lease, because the appraisers were unable to agree on a fair rental value of the property and were further unable to agree on a third appraiser to break the stalemate, the matter was submitted to a determination by the American Arbitration Association.
Other Information
The matter was presented to retired Judge Eli I. Chernow through the American Arbitration Association. The arbitrator concluded that under applicable law, in particular, the "moratorium" imposed by the City of Santa Monica on converting restaurant space to retail use along the 3rd Street Promenade, the property had to be valued as a restaurant. The arbitrator further determined that the evidence provided by the landlord was insufficient to show a fair rental value based upon subdivided smaller units, and therefore the space had to be valued according to its existing use - a single-tenant restaurant. Based upon the comparable lease rates provided at the arbitration, the arbitrator determined that the fair rental value was $46,815 per month.
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