Steve Roth has such an iron grip on New York Metropolis actual property that no dealer would dare to cross him for concern of shedding a bit of Vornado Realty Belief’s profitable enterprise.
That’s the declare made by an explosive lawsuit introduced by the Korein household over a lease dispute at Penn 1, which name-checks prime brokers like Darcy Stacom, Bob Knakal and dealmakers at Cushman & Wakefield, Newmark, Avison Younger and Colliers.
The Koreins, who personal the land underneath Penn 1, say it’s nearly unimaginable to search out an neutral dealer to appraise the honest market worth of the property as a result of everyone seems to be petrified of arriving at a valuation that will offend Vornado.
“For Manhattan actual property brokers, Vornado is a extremely related and sought-after shopper,” wrote legal professionals for the Koreins, who stated they — in contrast — are a smaller firm with much less affect.
“For Manhattan actual property brokers, Vornado is a huge out there,” the lawsuit reads. “As a result of landlords like Vornado pay the commissions for each the owner’s and the tenant’s brokers, remaining in Vornado’s good graces might be very important to a dealer’s livelihood.”
On the coronary heart of the matter is a disagreement over the lease at Penn 1, the two.5 million-square-foot workplace tower that Vornado controls via a floor lease with the Korein household.
Vornado has managed the bottom lease since 1998. When the lease got here up for renewal in June 2023, the $2.5 million annual floor lease was supposed to extend primarily based on the land’s honest market worth. Just a few years earlier, Vornado started undertaking a large renovation of the property, redubbing the once-named One Penn Plaza to Penn 1. Estimates of the brand new lease swung wildly main as much as the renewal — from Roth’s suggestion in 2022 that it may leap to $26 million, to later projections of a far decrease determine because of market situations.
The 2 events have been locked in an appraisal stalemate since earlier than the lease expired. The Koreins’ lawsuit asks the choose to just accept their appraisal valuing the property at $1.9 billion.
Is there a dealer in the home?
Underneath the phrases of the bottom lease, if the 2 sides couldn’t agree on the land’s worth, a panel of three appraisers was alleged to set it, one chosen by every celebration and a 3rd chosen by the Actual Property Board of New York or the court docket.
However the Koreins declare many brokers refused to characterize them within the negotiations, fearing retaliation from Vornado, whose offers can generate thousands and thousands in commissions for his or her companies.
They approached Stacom to characterize them, however stated she declined as a result of “she didn’t wish to jeopardize her enterprise prospects with Vornado.” Certainly, Stacom ended up representing the opposite facet.
The Koreins identified that when Stacom left CBRE final yr to start out her personal agency, Roth was quoted within the press saying she “will probably be getting many essential and complicated assignments from us,” realizing full effectively that Stacom on the time was representing Vornado as appraiser within the lease dispute.
In 2021, the Koreins employed a well known dealer to characterize them, who resigned earlier than the method started after which inside a yr represented Vornado in a $70 million Queens property sale.
That dealer turned out to be Bob Knakal, in line with an affidavit filed by his former associate, Paul Massey.
The Koreins’ legal professionals included the affidavit of their swimsuit, by which Massey lays out Vornado’s gross sales and leasing exercise and its “vastly influential presence within the brokerage neighborhood.” He cited Knakal’s Queens deal for instance.
“My former associate, Bob Knakal, brokered the sale for Vornado,” he wrote. “At customary market charges, the commissions paid by Vornado on this transaction would have been roughly $700,000.”
Appraisal meltdown
The Koreins in the end chosen David Pearson of Pearson Realty Companies; Vornado selected Stacom, then of CBRE. Either side finally agreed to nominate mortgage dealer Jonathan Estreich to be the third appraiser and chair of the panel, however the course of shortly fell aside, per the lawsuit. Pearson valued the land at $1.9 billion, which might imply $114 million in annual lease for Vornado.
Stacom, in contrast, stated the land was price principally nothing — partially — as a result of it was encumbered by a sublease, preserving lease unchanged. The Koreins argued that the sublease was lengthy expired, and stated its inclusion was an try and drive down the appraised worth to zero.
“[A]n absurd notion,” they declare.
In March 2025, the panel of appraisers put aside 22.5 hours over six days to hash out the worth.
However the Koreins stated that on the primary day, Stacom grew to become hostile and began threatening Pearson and Estreich that Vornado would sue them.
“Stacom threw her supplies and stormed out of the room,” in line with the lawsuit. “Stacom’s menace had its supposed impact on [Estreich]. The Chair grew to become noticeably leery of upsetting Stacom or Vornado and repeatedly appeased Stacom by providing concessions to Respondent at Petitioner’s expense.”
Stacom stormed out of a gathering after a fellow appraiser urged the next valuation, warning that Vornado would sue the others in the event that they adopted it. The court docket later vacated the appraisal — which valued the property at $250 million (if encumbered by the sublease) or $337 million (if unencumbered by the sublease) — citing “an egregious look of impropriety.” However the court docket stopped in need of overturning the appraisal course of, ruling this month that the Koreins’ problem to find an neutral appraiser was not sufficient grounds to overturn the method.
Vornado has argued that the bottom lease is ruled by “a binding appraisal continuing” and that the courts ought to keep out of it.
“This matter was already requested and answered, with a call three weeks in the past in Vornado’s favor,” stated Vornado legal professional Janice Mac Avoy of Fried, Frank, Harris, Shriver & Jacobson. “We intend to combat this new submitting vigorously, and we intend to win as we have now up to now.”
A lawyer for the Koreins didn’t instantly reply to a request for remark.
Practically three years after the lease reset date, the land’s worth — and tens of thousands and thousands in annual lease — stay unresolved.
Learn extra
How appraisers and property owners find a price that’s right for their project
Vornado sells Queens dev site for $70M — 15% off initial price
Darcy Stacom, Wendy Silverstein launch real estate advisory firm
