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Aar Allen Services Inc. v. Feil 747 Zeckendorf Blvd LLC

United States District Court, S.D. New York

May 6, 2014

AAR ALLEN SERVICES INC., Plaintiff,
v.
FEIL 747 ZECKENDORF BLVD LLC, Defendant.

OPINION AND ORDER

JESSE M. FURMAN, District Judge.

AAR Allen Services Inc. (along with its parent company, "AAR") sues Feil 747 Zeckendorf Blvd LLC ("Feil") to enforce the terms of a lease providing AAR with an option to purchase the property covered by the lease, located at 747 Zeckendorf Boulevard, Garden City, New York (the "Garden City Property"). The material facts are undisputed; the parties' dispute centers instead on whether, under the terms of the lease, AAR's right of first refusal to the purchase the Garden City Property was triggered. For the reasons discussed below, the Court agrees with Feil that it was not. Accordingly, although only AAR moves for summary judgment under Rule 56 of the Federal Rules of Civil Procedure, Feil is entitled to judgment as a matter of law. Thus, summary judgment is granted in Feil's favor, and the Complaint is dismissed.

BACKGROUND

The following facts, which are taken from the parties' Local Rule 56.1 Statements of Material Facts and the evidence they submitted in connection with this motion, are uncontested except where noted.

A. Factual Background

In 1979, AAR purchased the Garden City Property, a nine-acre lot containing a 150, 000 square-foot office and testing facility. (Def. Feil 747 Zeckendorf Blvd LLC's Resp. Pl. AAR Allen Services Inc.'s Local Rule 56.1 Statement Material Facts (Docket No. 35) ("Def.'s 56.1 Resp.") 1). AAR uses the facility to maintain and repair aircraft components, which is its primary line of business. ( Id. ¶¶ 2-3). In 2003, AAR sold the Garden City Property to non-party iStar Garden City LLC for $14, 800, 000. ( Id. ¶ 6). Pursuant to a contemporaneous contract (the "lease agreement"), AAR simultaneously leased back the Garden City Property for a twenty-year term on a "triple-net" basis (that is, where the lessee is legally responsible for paying all expenses associated with the property, including interest, property taxes, insurance, and maintenance costs, see Black's Law Dictionary 972, 1646 (9th ed. 2009)). ( Id. ¶ 7). In 2008, iStar Garden City LLC assigned its interest in the lease agreement to Defendant Feil. ( Id. ¶ 13).

B. The Lease Agreement

Under the terms of the lease agreement, AAR secured the right, if certain conditions were met, to repurchase the Garden City Property after ten years of the twenty-year lease period expired. That right was established by Paragraph 30 of the lease agreement, which reads, in relevant part, as follows:

(a) From August 1, 2012 through October 31, 2012 ("ROFR Period") and so long as no Event of Default then exists..., Tenant shall have a right of first refusal to purchase the Premises upon the terms and conditions set forth in this paragraph 30. During the ROFR Period Landlord shall not sell or agree to sell the Premises without first complying with this paragraph 30.
(b) During the ROFR Period, if Landlord receives an offer to sell the Premises to a Person that is not a Landlord Affiliate or an Affiliate of Tenant or Guarantor which Landlord desires to accept, Landlord shall notify ("ROFR Notice") Tenant in writing of such event. Landlord agrees that if Landlord receives such an offer to sell the Premises during the ROFR period for a purchase price of $16, 280, 000.00 or greater on an all-cash basis, Landlord shall agree to accept such offer solely for purposes of this paragraph 30 and complying with the provisions of this paragraph 30. The date such notice is given is herein called the "ROFR Notice Date". The ROFR Notice shall state that Landlord intends to sell the Premises to a Person that is not a Landlord Affiliate or an Affiliate of Tenant or Guarantor, for the specified price in such offer ("ROFR Notice Price") on an all-cash basis. Tenant shall have the right, at its option, to make an offer ("Tenant's ROFR Offer") to purchase the Premises in accordance with paragraph 29 on November 1, 2013 (notwithstanding any other proposed closing date in any offer referenced in the ROFR Notice) for the ROFR Notice Price, which offer shall be an all cash offer.

(Pl.'s Local Rule 56.1 Statement Material Facts (Docket No. 28) ("Pl.'s 56.1 Statement"), Ex. 2 ("Lease Agreement") ¶ 30 (emphasis added and emphasis omitted); see also Def.'s 56.1 Resp. ¶ 10). In simple terms, the provision created a "right of first refusal" that arose approximately halfway through the duration of the twenty-year lease, but only for three months. Specifically, if Feil received an offer during that window to purchase the property for more than $16, 180, 000, and if that offer did not come - to the extent relevant here - from an "affiliate" of AAR, then AAR had the option to purchase the property on an all-cash basis for the amount of the offer.

As defined in the lease agreement, "[a]ffiliates' means Persons (other than individuals), controlled by, controlling, or under common control" with the tenant. (Lease Agreement ¶ 1; Def.'s 56.1 Resp. ¶ 17). "Control, " in turn, is defined as "the possession directly or indirectly of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contracts or otherwise." (Lease Agreement ¶ 1 (emphasis added); Def.'s 56.1 Resp. ¶ 19).

C. The Alleged Purchase Offer

On January 27, 2012, AAR entered into an agreement with Jones Lang LaSalle - "a financial and professional services firm specializing in commercial real estate services and investment management" - "to provide advisory services" related to AAR's real estate holdings. (Def.'s 56.1 Resp. ¶¶ 14, 21). As part of those advisory services, AAR asked Jones Lang LaSalle to assist it in reacquiring the Garden City Property, and Jones Lang LaSalle agreed to do so. ( Id. ¶¶ 22, 24). In order to ensure that AAR paid the lowest possible price, AAR and Jones Lang LaSalle agreed to have the latter firm offer to purchase the Garden City Property for exactly $16, 280, 000, the amount specified in Paragraph 30(b) of the lease agreement. ( Id. ¶ 25). AAR agreed to pay Jones Lang LaSalle a $365, 000 "advisory fee upon closing" if AAR successfully purchased the property. ( Id. ¶ 26; see also Pl.'s 56.1 Statement, Ex. 4, at 3). On August 15, 2012, after obtaining AAR's approval to do so, Jones Lang LaSalle submitted a letter to Feil that purported to be a "Purchase Offer" setting out the "basic terms and conditions under which Jones Lang LaSalle or its assignees... would agree to purchase" the Garden City Property for $16, 280, 000 payable in cash. (Pl.'s 56.1 Statement, ...


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