FILED: QUEENS COUNTY CLERK 11/28/2016 03:37 PM
NYSCEF DOC. NO. 8
INDEX NO. 712807/2016
RECEIVED NYSCEF: 11/28/2016
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF QUEENS
KCM REALTY COMPANY, L.P.,
Index No. 712807/2016
Plaintiff,
AMENDED COMPLAINT
NEW RAM REALTY, LLC,
Defendant.
Plaintiff KCM Realty Company, L.P. ("KCM" or "Plaintiff), by its attorneys, Holland &
Knight LLP, as and for its Complaint against New Ram Realty, LLC ("New Ram" or
"Defendant"), alleges as follows:
NATURE OF ACTION
1.
This action for declaratory and injunctive relief arises out of a lease dispute between
Plaintiff KCM (as Owner) and Defendant New Ram (as Tenant). Under the terms of the lease,
New Ram is permitted to use the subject premises only for "the erection, operation and
maintenance of a hotel," for "retail stores located on the ground floor of the hotel," and for "the
parking of vehicles related to the business of the hotel and such stores." However, in late August
2016, New Ram approached KCM with a plan to sublease the existing hotel to a third party, who
would convert the hotel to an adult homeless shelter pursuant to an Agreement with the New York
City Department of Homeless Services ("DHS"). By an August 25,2016 letter, KCM immediately
advised New Ram that the proposed conversion of the hotel to an adult homeless shelter violated
the use restrictions in the Lease, that the proposed conversion would constitute an event of default
under the lease, and that KCM would not consent to the proposed sublease.
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2.
New Ram's plan to sublease the hotel to a third party to convert it to an adult
homeless shelter was extremely lucrative for New Ram. This plan was immediately widely
criticized by the surrounding community. In light of KCM's refusal to approve the unauthorized
use of the premises and the significant community backlash, New Ram indicated that it was
abandoning the plan to convert the hotel to a homeless shelter. However, the potential profit to
New Ram must have been too great to turn down because in blatant disregard of the terms of its
lease and in contradiction to its representations to the community, New Ram has begun the
conversion of the hotel to a homeless shelter, surreptitiously renting over a quarter of the hotel's
rooms to the DHS to house homeless adults.
PARTIES
3.
KCM is a New York limited partnership with its principal office at 362 Kingsland
Avenue, Brooklyn, New York, 11222.
4.
On information and belief, New Ram is a New York limited liability company with
its principal office at 59-40 55th Road, Maspeth, New York, 11378.
JURISDICTION AND VENUE
5.
This Court has personal jurisdiction over New Ram because New Ram has its
principal place of business in the State of New York and KCM's causes of action arise out of real
property located in New York.
6.
Venue is proper in this Court because the judgment demanded will affect the use of
real property situated in Queens County.
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FACTS PERTINENT TO ALL COUNTS
A. The Parties Enter Into A Lease Which Contains Explicit Use Restrictions.
I.
KCM owns certain real property located in Maspeth, New York designated as
Block 2687, Lot 21, in Maspeth, New York on the tax map of the County of Queens (the
"Premises").
8.
On or about March 5, 2004, KCM and New Ram entered into the Agreement of
Lease, dated as of March 5, 2004, for the Premises (the "Lease").
9.
Pursuant to Article 2 of the Lease, the term of the Lease is for forty-five (45) years.
10.
Section 8.1 of the Lease provides that "Tenant [New Ram], at its sole cost and
expense, in consideration of the granting of this Lease, shall construct on the Land a first class
modem, fire-proof, fully sprinklered hotel of up to five (5) stories which shall be a complete, selfsufficient and independent building with self-contained utilities and erected wholly within the
boundary lines of the Land..."
II.
Under the terms of the Lease, New Ram is permitted to utilize the Premises only
for certain specified purposes.
12.
Specifically, Article 5 of the Lease provides, in relevant part, that "Tenant [New
Ram] shall use the Premises for: (i,) the erection, operation and maintenance of a hotel which shall
not exceed five (5) stories in height, (ii) retail stores, and (iii) for the parking of vehicles related to
the business of the hotel and such stores . . . and/or no other user (Emphasis added).
13.
Section 35.8 of the Lease further defines this use restriction:
Limitation on Use. Tenant shall not use the Premises for any use
other than to accommodate transient hotel guests, and for retail
stores located on the ground floor of the hotel. The Improvements
shall not be converted to apartments. . . . Tenant shall not permit
the Premises to be used as a multiple dwelling orfor residential uses
or apartments. (Emphasis added).
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14.
Under Section 12.1(a) of the Lease, New Ram also is prohibited from subleasing
the Premises, or any part thereof, without KCM's written consent, which consent shall not be
unreasonably withheld. Section 12.1(b) of the Lease provides that "Tenant [New Ram] and its
successors and assigns shall not, directly or indirectly, seek to circumvent the requirements of this
article [Article 12] which require Tenant [New Ram] and its successors and assigns to obtain the
consent of Owner [KCM]."
15.
Section 35.1 of the Lease provides that it is governed by New York law.
16.
Section 35.2 of the Lease provides that "[t]his Agreement may not be changed,
cancelled or discharged orally, but only by an agreement in writing and signed by the party against
whom enforcement of any waiver, change modification or discharge is sought" and that "[a]ll
understandings and agreements between Owner and Tenant are merged in this Lease which
represents the entire agreement between the parties and which fully and completely sets forth the
terms and conditions of the transactions embodied in this Lease."
B. New Ram Approaches KCM With A Plan To Convert The Hotel To A Homeless Shelter And
KCM, In Writins, Rejects The Plan As A Violation Of The Lease's Use Restriction.
17.
On August 25, 2016, New Ram approached KCM with a plan to convert the
existing Holiday Inn Hotel on the Premises (the "Hotel") to a homeless shelter.
dated
18.
On information and belief, the Hotel has 115 rooms.
19.
Specifically, on August 25, 2016, New Ram e-mailed to KCM a draft Agreement,
, 2016, between New Ram and The Promesa Housing Fund Development
Corporation ("Promesa")(the "Proposed Agreement"). (A copy of New Ram's e-mail is annexed
hereto as Exhibit 1).
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20.
Under the terms of the Proposed Agreementwhich was designated as a "Room
Rental Agreement" but was, in actuality, a subleaseNew Ram would lease 110 of the Hotel's
115 rooms to Promesa, for an initial term of five years, to operate the premises as a homeless
shelter pursuant to an agreement between Promesa and the DHS. (A copy of the Proposed
Agreement is annexed hereto as Exhibit 2).
21.
The Proposed Agreement provided that Promesa would pay New Ram "rent" of at
least $2,400,000 per year.
22.
By a letter, dated August 25, 2016, KCM rejected New Ram's proposed sublease
and New Ram's proposal to convert the Hotel to a homeless shelter. KCM's August 25, 2016
letter, in pertinent part, stated:
Representatives of New Ram Realty, LLC have made us aware, in
addition to the recent news coverage and public protests, that there
have been discussions with the City regarding the proposed
conversion of the Holiday Inn Express (the "Hotel") located at 5940 55th Road, Maspeth, New York (the "Premises") to an adult
"homeless shelter " (the "Proposed Conversion ").
Please be advised that, pursuant to Article 5 and Section 35.8 of that
certain Agreement of Lease by and between the undersigned, as
Owner, and New Ram Realty, LLC, as tenant ("Tenant"), dated as
of March 5, 2004 (the "Lease "), the Premises may only be used for
purposes of(i) the erection and operation of a hotel, (ii) retail store
and (iii) related parking for the same (which is compliant with the
certificate of occupancy). The Lease further provides that "Tenant
shall not permit the Premises to be used as a multiple dwelling or
for residential uses or apartments". ...
For the foregoing reasons, among others, please be advised that the
Proposed Conversion would be an Event of Default under the Lease
entitling the undersigned to pursue its rights and remedies under the
Lease. (Emphasis added).
(A copy of KCM's August 25, 2016 letter is annexed hereto as Exhibit 3).
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C The Plan To Convert The Hotel To A Homeless Shelter Faces Significant
Community Opposition And New Ram Purportedly Abandons The Plan.
23.
By the time New Ram e-mailed the Proposed Agreement to KCM, the plan to
convert the Hotel to a homeless shelter had already been made public.
24.
Almost immediately, the plan faced significant public opposition, sparking intense
protests and an outcry from residents of the surrounding community.
25.
The plan also drew opposition from community leaders and elected officials, even
prompting a lawsuit to stop the shelter from going forward, filed against the City by a Queens City
Council Member, a New York State Senator, and a New York State Assembly Member.
26.
As noted, KCM immediately made clear to New Ram that it would be withholding
its consent to the Proposed Agreement, as the planned conversion of the Premises to a homeless
shelter would constitute a violation of the Lease's use restriction. (See Exhibit 3).
27.
On August 29, 2016 New Ram requested a meeting with KCM.
28.
On September 7, 2016, a meeting was held between KCM and New Ram, at which
time KCM repeated its position that the conversion of the Premises from a hotel to a homeless
shelter would constitute a violation of the use restriction in the Lease.
29.
Following KCM's refusal to approve the unauthorized use of the Premises and the
substantial public backlash, New Ram made numerous public and private representations that it
had abandoned the plan to convert the Hotel to a homeless shelter.
30.
An article entitled "Co-owner of Queens hotel planned to become homeless shelter
backs out after neighborhood protests," that appeared in the New York Daily News on September
9, 2016 reported as follows:
"The co-owner of a Queens Holiday Inn that had been slated to
become a homeless shelter said he wants out of the deal because the
community opposition is too much... He [Harshad Patel] confirmed
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he no longer supported the shelter to the Daily News on Thursday and said he already told Acacia Network, the non-profit that had
contracted with the city to run the shelter, he was done with the
plan."
(A copy of the September 9, 2016 New York Daily News article is annexed hereto as Exhibit 4).
31.
The September 9, 2016 article also reported that with respect to the planned
conversion, Harshad Patel, the principal of New Ram, told the press: "The community doesn't
like it, so we decided not to move forward."
32.
On information and belief, Harshad Patel told community leaders in a private
meeting that he, on New Ram's behalf, would be willing to sign an amendment to the Lease which
would explicitly state that the Premises could not be used as a homeless shelter.
D. New Ram Surreptitiously Begins To Convert The Hotel Into A Homeless Shelter.
33.
However, within weeks of representing that it had abandoned plans to convert the
Hotel into a homeless shelter, New Ram secretly struck a deal with the City to rent a substantial
part of the Hotel to DHS or another agency of New York City to house homeless persons.
34.
On information and belief, New Ram has structured the arrangement with DHS or
another agency of New York City so as to circumvent the use restrictions of the Lease.
35.
On information and belief, New Ram has structured the arrangement with DHS or
another agency of New York City so as to circumvent Section 12.1 of the Lease, which requires
KCM's consent before New Ram can sublease any part of the Premises.
36.
On or about October 10, 2016, without prior notice to KCM, approximately 30
homeless persons were moved into the Hotel pursuant to an arrangement between New Ram and
DHS or another agency of New York City.
37.
On information and belief, metal detectors have been installed in the lobby of the
Hotel.
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38.
On information and belief, the DHS or another agency of New York City is
providing on-site services and security to the homeless persons at the Premises.
39.
On information and belief, DHS or another agency of New York City and New
Ram plans to house homeless persons at the Hotel for months at a time.
40.
On information and belief, New Ram plans to rent additional rooms to DHS or other
agencies of New York City to shelter homeless persons, such that homeless persons will eventually
occupy well over half (or more) of the Hotel's rooms.
FIRST CAUSE OF ACTION FOR A DECLARATORY JUDGMENT
41.
KCM repeats and realleges each and every allegation contained in paragraphs 1
through 40, inclusive, as if fully set forth at length herein.
42.
The Lease is a valid contract between KCM and New Ram.
43.
KCM, as the Owner of the Premises, had the right by express provisions in the
Lease, to limit and restrict the use of the Premises to specific purposes.
44.
KCM has performed and continues to perform all of its obligations under the Lease.
45.
KCM has advised New Ram in writing and orally that New Ram's use of the
Premises as a homeless shelter constitutes a breach of Article 5 and Section 35.8 of the Lease that
restrict the use of the Premises to "(i) the erection, operation and maintenance of a hotel which
shall not exceed five (5) stories in height, (ii) retail stores, and (iii) for the parking of vehicles
related to the business of the hotel and such stores . . . and for no other use.'" (Emphasis added).
46.
New Ram's renting of 30 rooms - more than 25% of the rooms of the Premises -
to DHS or another agency of New York City to house homeless persons constitutes a material
departure from the use provision in the Lease and a violation of the express terms of the Lease.
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47.
New Ram's renting of 30 rooms to DHS or another agency of New York City is
an attempt to do indirectly that which it cannot do directly under the Lease.
48.
New Ram's renting of 30 rooms to DHS or another agency of New York City is an
attempt to do an end-run around the use provision in the Lease.
49.
An actual justiciable and substantial controversy exists between KCM and New
Ram concerning whether New Ram is in breach of the use provisions in the Lease.
50.
An actual justiciable and substantial controversy exists between KCM and New
Ram concerning whether New Ram is in breach of the non-circumvention provision of the Lease.
51.
A declaratory judgment will serve the useful purpose of clarifying and settling the
legal relations and rights of the parties under the Lease.
52.
The substantial controversy between the parties having adverse interests is of
sufficient immediacy and reality to warrant the issuance of a declaratory judgment.
53.
KCM has no adequate remedy at law.
54.
By reason of the foregoing, KCM is entitled to a judgment declaring: (1) that New
Ram's renting of 30 rooms at the Premises to DHS or another agency of New York City to house
homeless persons constitutes a material departure from the use provisions (Article 5 and Section
35.8) of the Lease and a breach of such use provisions and that, as a result thereof, KCM is entitled
to exercise its remedies under the Lease; and (2) that New Ram has breached the noncircumvention provision of Section 12.2(c) of the Lease and that, as a result thereof, KCM is
entitled to exercise its remedies under the Lease.
SECOND CAUSE OF ACTION FOR INJUNCTIVE RELIEF
55.
KCM repeats and realleges each and every allegation contained in paragraphs 1
through 54, inclusive, as if fully set forth at length herein.
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56.
By leasing 30 rooms - more than 25% of the rooms in the Premises - to DHS or
another agency of New York City to house homeless persons, New Ram has breached and is
continuing to breach the Lease's use provisions.
57.
New Ram's renting of 30 rooms - more than 25% of the rooms of the Premises -
to DHS or another agency of New York City to house homeless persons constitutes a material
departure from the use provision in the Lease and a violation of the express terms of the Lease.
58.
Section 14.2(g) of the Lease provides that "[i]n the event of any breach by Tenant
[New Ram] of any of the covenants, agreements, terms or conditions hereof, Owner [KCM], in
addition to any and all other rights, shall be entitled to enjoin such breach and shall have the right
to invoke any right and remedy allowed at law or in equity . . . . "
59.
KCM will suffer irreparable harm if New Ram is not enjoined from breaching the
Lease's use provisions.
60.
KCM has no adequate remedy at law.
61.
This Court may by injunction prevent New Ram from using the Premises for a
purpose which violates the use provisions of the Lease.
62.
Injunctive relief is required to ensure that New Ram will not lease any more rooms
to DHS or another agency of New York City to house homeless persons.
63.
Injunctive relief is required to maintain the status quo with respect to New Ram's
leasing of rooms to DHS or another agency of New York City to house homeless persons.
64.
By reason of the foregoing, KCM is entitled to a preliminary injunction, enjoining
New Ram from violating the Lease's use provisions, including enjoining New Ram from renting
any additional rooms to DHS or another agency of New York City to house homeless persons.
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65.
By reason of the foregoing, KCM is entitled to a permanent injunction, enjoining
New Ram from violating the Lease's use provisions.
THIRD CAUSE OF ACTION FOR ATTORNEY'S,
FEES, COSTS AND EXPENSES INCURRED IN
ENFORCING THE USE PROVISION IN THE LEASE
66.
KCM repeats and realleges each and every allegation contained in paragraphs 1
through 65, inclusive, as if fully set forth at length herein.
67.
Section 14.7 of the Lease provides, in relevant part, that "Tenant [New Ram] shall
also pay to Owner [KCM] all costs and expenses, including reasonable attorneys' fees, paid or
incurred by Owner [KCM] in enforcing any of the covenants and provisions of this Lease and paid
or incurred in any action brought by Owner [KCM] against Tenant [New Ram] on account of the
provisions hereof, and all such costs, expenses, and attorneys' fees may be included in and form a
part of any judgment entered in any proceeding brought by Owner [KCM] against Tenant [New
Ram] on or under this Lease."
68.
As a result of KCM's efforts to enforce the Lease's use provisions, KCM has and
will continue to incur attorneys' fees, costs and expenses.
69.
By reason of the foregoing, New Ram is liable to KCM for attorneys' fees, costs
and expenses incurred in enforcing the Lease's use provision in an amount to be determined at
trial or upon summary judgment.
WHEREFORE, KCM Realty Company, L.P. respectfully requests judgment as follows:
(a)
On the First Cause of Action, a judgment declaring (1) that New Ram's renting of
30 rooms at the Premises to DHS or another agency of New York City to house homeless persons
constitutes a material departure from the use provisions (Article 5 and Section 35.8) of the Lease
and a breach of such use provisions and that, as a result thereof, KCM is entitled to exercise its
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remedies under the Lease; and (2) that New Ram has breached the non-circumvention provision
of Section 12.2(c) of the Lease and that, as a result thereof, KCM is entitled to exercise its remedies
under the Lease.
(b)
On the Second Cause of Action, judgment enjoining New Ram from violating the
Lease's use provisions, including a preliminary injunction enjoining New Ram from renting any
additional rooms to DHS or another agency of New York City to house homeless person, and a
permanent injunction, enjoining New Ram from violating the Lease's use provisions;
(c)
On the Third Cause of Action, a judgment awarding KCM costs, expenses, and
reasonable attorneys' fees incurred in enforcing the use provisions of the Lease in an amount to be
determined at trial or on summary judgment; and
(d)
Such other relief as this Court deems just and proper.
Dated: November 28, 2016
New York, New York
HOLLAND & KNIGHT LLP
By:
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Mitchell J. Gell
Mitchell J. Geller
Stosh M. Silivos
31 West 52nd Street
New York, New York 10019
(212)513-3200
Attorneys for Plaintiff
KCM Realty Company, L.P.
#48799829 vl
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