The ground lease under 100 West 57th Street was signed on 16 December 1959. On 18 July 2025 a three-arbitrator panel fixed the fair market value of that land at $301,250,000, which under the lease’s formula raised the annual rent from $4,360,587 to $24,602,184. The building on top is a 324-unit cooperative. On 3 September 2026 the Appellate Division, First Department, vacated the award and sent the dispute to a new panel.[1] It did not say the land was worth less than $301 million. No court has said anything about the land’s value, and none will.
In a ground lease, two separate provisions decide the rent. The valuation standard fixes what gets appraised, and courts will enforce it word for word even when the result is ruinous. The arbitration clause fixes who decides and who can be removed, and if it is silent on removal the challenge goes to the arbitrator being challenged.
The formula is a percentage of a number the lease defines. Carnegie House’s lease ran through 2004 with three optional 21-year extensions, and rent resets at the start of each one. The operative rent is 8.1667% of the fair market value of the demised land, “considered as if vacant, unimproved, and free of the Lease.” The tenants exercised the second extension on 1 March 2024 for a term beginning 15 March 2025, negotiated, deadlocked, and went to arbitration.[2] The phrase “free of the Lease” is not original. The 1959 lease and first amendment set renewal rent at 5% of appraised value “considered as unimproved and exclusive of any buildings or improvements thereon.” The “free of the Lease” language first shows up in the Second Amendment of Lease dated 15 March 1974.[2]
Those four words are why the cooperative’s own appraisal never got heard. New York has been separating these standards for seventy years. In Ruth v S.Z.B. Corp. the lease said the land be valued “free of lease,” and the court held the drafters could not have meant the arbitrator “might give heed to the very lease which so declared” otherwise, so the lease restrictions came out of the appraisal entirely. In Plaza Hotel Assocs. v Wellington Assocs. the lease pointed the other way, and the appraisers’ valuation at highest and best use was rejected because the lease required them to account for the restriction that the land be used for a hotel, a less profitable use.[3] Same instrument, same kind of clause, opposite answers, decided by which words are in it. Before the Carnegie House hearing the landlord moved to strike the tenants’ appraisal premised on cooperative use and to preclude them from arguing their reading of the valuation clause. The panel granted it over the dissent of the tenants’ own appointed arbitrator.[1]
The Court of Appeals has already refused to fix one of these bargains. In New York Overnight Partners, L.P. v Gordon the land under the Ritz-Carlton at 112 Central Park South was leased in 1963 at $78,000 a year, renewable for four 15-year terms at 6.5% of “the appraised value of the land.” The fee owners, one of whom was Donald Trump, argued the appraiser should credit the benefit the 152,000-square-foot hotel imparts to the land, and that current zoning should be ignored because the nonconforming use could lawfully continue. In 1996 the Court of Appeals rejected both arguments and affirmed: value it as vacant, unimproved, subject to current zoning and the lease. Judge Ciparick wrote that unambiguous terms striking the successors “as a poor bargain 33 years after execution of the lease does not constitute a basis for recasting the agreement under the guise of judicial interpretation."[4] The lessors would get the hotel when the last renewal ran out. Until then, they had the deal they had.
The arbitration clause in a 1959 lease names a statute that no longer exists. Paragraph Nineteenth of the Carnegie House lease provides that arbitration proceed under Article 84 of the Civil Practice Act, the predecessor to CPLR Article 75. The panel is tripartite: each side appoints one, and the two appointees pick a neutral umpire. They could not agree, so they asked the American Arbitration Association to appoint one, which it did on 28 February 2025. That was the whole of the AAA’s job. When the cooperative asked the AAA on 23 May 2025 to remove the umpire, the AAA answered four days later: “As this matter is closed with the AAA, we do not have the authority to rule on the objection of Mr. Mattioli.” The arbitration was self-administered. There was no administrator to hear the challenge, so the cooperative had to ask the umpire to recuse himself, and he declined.[5] Tenants’ counsel told the court that earlier the same year this same umpire had been removed from a different panel on a party’s objection, because that arbitration was AAA-administered.[5]
What he was being challenged over was a job offer from the landlord’s lawyer. The landlord’s counsel, representing a different landlord in an unrelated appraisal proceeding, contacted the umpire directly and offered him a paid position as neutral umpire in it. The umpire’s own disclosure email to both sides omitted that the contact had been direct, and affirmatively said, “I have not had, nor will I have or be permitted to have, any ex parte communications with counsel in the appraisal proceeding.” The procedural order the panel had issued in March barred ex parte communications outright. The landlord’s counsel, not the umpire, supplied the missing fact three days later. Asked to recuse, the umpire offered to decline the other engagement if the cooperative withdrew its recusal application. It refused. He then denied recusal in an email reading, “I am denying the request for the reasons stated in [Landlord’s] letter of today,” and declined the other engagement, both of which the landlord’s counsel had asked him in writing to do.[5]
The trial court called all of that compromising and confirmed the award anyway. Justice Nicholas Moyne found the conduct “clearly compromised the integrity of the arbitral process and mandates strict scrutiny,” then held the cooperative had not carried the heavy burden of clear and convincing proof of prejudice under CPLR 7511, leaning partly on the fact that the tenants’ own arbitrator had signed the unanimous award.[5] The First Department reversed on both counts. The trial court had relied on U.S. Elecs., Inc. v Sirius Satellite Radio, Inc., a Federal Arbitration Act case that does not set the CPLR 7511 standard. Under CPLR 7511(b)(1)(ii), partiality can be shown by “actual bias” or “the appearance of bias from which a conflict of interest may be inferred,” and it is “only necessary to demonstrate the potential for bias to find misconduct.” The unanimous signature did not save the award either, because the tenants’ arbitrator had preserved his dissent on the order striking their case and later explained he signed to prevent an even higher valuation.[1] Quoting Goldfinger v Lisker through Kern: “precisely because arbitration awards are subject to . . . judicial deference, it is imperative that the integrity of the process, as opposed to the correctness of the individual decision, be zealously safeguarded."[1]
The same clause can flatten the fee owner instead. Ben Ashkenazy and Michael Alpert bought the land under 625 Madison Avenue in 2013 for $400 million. SL Green held the leasehold and was paying $4.6 million a year, with a reset due in 2022. Alpert told Crain’s in 2016 that the site was worth at least $1.4 billion as a residential development and the rent should land around $80 million, adding that “the ground lease has a very clear valuation clause.” In 2023 the arbitrator set it at $20.25 million. That was enough to render SL Green’s roughly $230 million leasehold investment worthless, and not nearly enough for the fee owner’s basis. SL Green and its partners had bought into the $195 million mezzanine loan secured by Ashkenazy’s fee position, and in August 2023 they took the parcel at a UCC foreclosure auction.[6] A reset clause tuned for maximum upside produced a number that killed the leasehold and left the fee owner unable to service the debt he had used to buy the bet.
The trigger is the extension option, which is why a reset clause and a renewal notice deadline have to be read together rather than in separate memos two decades apart. Exercising an option at Carnegie House meant accepting a valuation process the co-op had no way to steer. A percentage of fair market value is also the least predictable escalation anyone still signs. It is the opposite of the operating expense ratchet, which grinds upward in small documented steps; this one sits flat for twenty-one years and then moves by a factor of five in a single hearing week. Safehold’s current form leases run a 92-year weighted average term, and 83% of that portfolio by cash rent carries a CPI lookback capped between 3.0% and 3.5% a year compounded.[7] Caps are the whole difference. Nobody drafting a reset in 2026 has an excuse for leaving one out.
About a hundred ground-lease cooperatives exist in New York City, housing roughly 25,000 shareholders. A bill from Senator Liz Krueger and Assemblymember Linda Rosenthal would give them tenant status on lease expiration, borrowing rights for repairs, and a right of first refusal if the land sells. It died in committee for the fourth straight year, referred to Senate Judiciary on 7 January 2026.[8] Schron and Werner paid $261 million for the Carnegie House land in 2014.[9] The panel valued it at $301,250,000 eleven years later. The purchase price was itself a bet on the reset clause, made a decade before it fired.
Reading the reset before it resets#
Acrebase pulls the rent reset provisions out of every ground lease in a portfolio and lines up what actually determines the number: the percentage, the valuation standard and its exact wording, whether the appraisal is as-if-vacant, whether it is free of the lease or subject to it, whether current zoning and use restrictions come in, whether there is a floor, a cap, or a collar, and how many years of notice you get before the valuation date. It does the same for the dispute machinery, which is the part nobody reads until it matters: tripartite or single, administered or ad hoc, which rules govern, who appoints, and whether there is any removal mechanism at all. For an owner or a lender holding leasehold positions across a dozen assets, that is the difference between knowing which resets are dangerous and finding out from an award. When a new ground lease is being negotiated, the clause library and negotiation playbook hold the reset language your counsel approved along with the fallback positions, so the cap you won in one deal does not vanish from the next one.
If you are a leasehold owner or its lender, find the valuation standard now and read it against what your building actually is. “Free of the Lease” means your appraiser does not get to mention the tenants. Model the reset at a land value you do not believe, because the panel might, and check whether your loan covenants survive that number. Fix the arbitration clause while nobody is angry: name a current set of rules, name an administrator with power to hear a disqualification challenge, require continuing disclosure in writing, and set a baseball or high-low format if you cannot get a cap. If you are a fee owner, the upside case depends on words drafted by somebody who died before the building’s current use existed, and a reset large enough to break the leasehold breaks your rent roll with it. Ask what your tenant can actually pay before you price the fee. Ashkenazy’s $400 million did not.
Footnotes
[1] Matter of 57th & 6th Ground LLC v Carnegie House Tenants Corp., 2026 NY Slip Op 05230 (1st Dept, decided and entered 3 September 2026), Index No. 654326/25, Appeal No. 6961, Case No. 2026-00087, before Webber, J.P., Kapnick, Pitt-Burke and Chan, JJ. Judgment of Supreme Court, New York County (Nicholas W. Moyne, J.) entered 7 January 2026 confirming the award under CPLR 7510 unanimously reversed, petition denied, cross-motion to vacate granted, and the matter remanded to a new arbitration panel. Award dated 18 July 2025 fixed the fair market value of the land at $301,250,000, increasing annual rent from $4,360,587 to $24,602,184; 324-unit cooperative, with Georgetown 57, LLC owning and operating the retail space. Landlord’s prehearing motion filed 20 June 2025 to strike two tenant expert reports and parts of a third and to preclude argument on the valuation clause, permitted over objection on 23 June notwithstanding a procedural order calling prehearing briefs “unnecessary,” opposed on two days’ notice, granted 26 June with the written order the following day over the dissent of the tenants’ appointed arbitrator; hearing compressed from eight days to one week after the cooperative said it would seek the umpire’s removal in court. Quoting Matter of Kern (303 E. 57th St. Corp.-Excelsior 57th St.), 204 AD2d 152, 153 (1st Dept 1994), quoting Matter of Goldfinger v Lisker, 68 NY2d 225, 230 (1986); New York Rests. Exch. v Chase Manhattan Bank, 226 AD2d 312, 315 (1st Dept 1996); Matter of Catalyst Waste-to-Energy Corp. (City of Long Beach), 164 AD2d 817, 820 (1st Dept 1990). https://www.courtlistener.com/opinion/10965970/matter-of-57th-6th-ground-llc-v-carnegie-house-tenants-corp/
[2] 57th & 6th Ground LLC v Carnegie House Tenants Corp., 2026 NY Slip Op 26003 (Sup Ct, NY County, 5 January 2026, Moyne, J.), Index No. 654326/2025 — Agreement of Lease dated 16 December 1959 as amended; annual net rent calculated as 8.1667% of the fair market value of the demised land “considered as if vacant, unimproved, and free of the Lease”; mandatory arbitration of any reset dispute under Paragraph Nineteenth. Footnote 1 of the decision records that the original lease and First Amendment set renewal rent at “5% of the then appraised value of the land which is subject to the renewal lease at the commencement of the term thereof, considered as unimproved and exclusive of any buildings or improvements thereon,” and that the “considered as if vacant, unimproved, and free of the Lease” language first appeared in the Second Amendment of Lease dated 15 March 1974 and was carried into the later amendments. Extension exercised 1 March 2024 for a renewed term commencing 15 March 2025 (1st Dept decision, note 1 above). https://www.courtlistener.com/opinion/10773968/57th-6th-ground-llc-v-carnegie-house-tenants-corp/
[3] Ruth v S.Z.B. Corp., 2 Misc 2d 631, 636-637, affd 2 AD2d 970 (lease providing that the land be valued “free of lease”; the drafters cannot have intended that the arbitrator “might give heed to the very lease which so declared” otherwise, so the land is valued without the lease restrictions); Plaza Hotel Assocs. v Wellington Assocs., 55 Misc 2d 483, 486-487, affd 28 AD2d 1209, affd on opn at Special Term 22 NY2d 846 (appraisers’ valuation at highest and best use free of the lease restrictions rejected as contrary to express lease language requiring the appraisal to account for the restriction that the land be used for a hotel, a less profitable use); see also United Equities v Mardordic Realty Co., 8 AD2d 398, 400, affd 7 NY2d 911; 185 Lexington Holding Corp. v Holman, 19 Misc 2d 521, affd 10 AD2d 569, affd 8 NY2d 965. All as collected and applied in New York Overnight Partners, L.P. v Gordon, 88 NY2d 716, 721-722 (1996). https://www.courtlistener.com/opinion/5692134/new-york-overnight-partners-lp-v-gordon/
[4] New York Overnight Partners, L.P. v Gordon, 88 NY2d 716 (1996), Ciparick, J., Chief Judge Kaye and Judges Simons, Titone, Bellacosa, Smith and Levine concurring, affirming 217 AD2d 20 (1st Dept 1995, Tom, J.) — ground lease executed on or about 30 December 1963 between Massachusetts Mutual Life Insurance Company as lessor and Louis Berry and F.B.M. Manufacturing Company as lessees for 112 Central Park South, then the Navarro Hotel and now the Ritz-Carlton; initial 30-year term at $78,000 annually, with four successive 15-year extensions at 6.5% of “the appraised value of the land but to be not less than Seventy Eight Thousand ($78,000) Dollars annually”; successors to the lessor included Joan Gordon, Alice S. Kandell and Donald Trump. Held that the appraiser must value the land as though vacant, without improvements, and subject to current zoning restrictions, contractual limitations and the lease itself, and that the parties did not intend appraisal at highest and best use; the lessors’ contention that the 152,000-square-foot legally nonconforming hotel’s benefit should be credited rejected. https://www.courtlistener.com/opinion/5692134/new-york-overnight-partners-lp-v-gordon/
[5] 57th & 6th Ground LLC v Carnegie House Tenants Corp., 2026 NY Slip Op 26003 (Sup Ct, NY County, 5 January 2026, Moyne, J.) — tripartite panel of Howard Raber (tenant-appointed), Sharon Y. Locatell (landlord-appointed) and neutral umpire Eli R. Mattioli, appointed by the AAA on 28 February 2025 under an AAA Notice of Appointment imposing a continuing obligation to disclose “any past or present relationship with the parties, their counsel, or potential witnesses, direct or indirect”; landlord’s counsel Thomas Mealiffe solicited the umpire directly for a paid neutral umpire position in the unrelated Durst appraisal proceeding; the umpire’s disclosure email (dated 16 May 2025 per the Supreme Court decision, 19 May 2025 per the First Department) omitted the direct contact and stated “I have not had, nor will I have or be permitted to have, any ex parte communications with counsel in the appraisal proceeding”; AAA response of 27 May 2025 that “As this matter is closed with the AAA, we do not have the authority to rule on the objection of Mr. Mattioli” because the arbitration was self-administered, the AAA’s mandate having been limited to appointment; umpire’s 29 May 2025 denial of recusal stating “I am denying the request for the reasons stated in [Landlord’s] letter of today,” following Stephen B. Meister’s letter asking him to deny the request and to “resolve the matter by declining to serve in the new matter”; Howard Raber’s later affirmation that he signed the Final Award solely to mitigate an even higher valuation proposed by the majority; footnote 4 recording that the same umpire had been removed from another panel earlier that year on a party’s objection to the AAA because that arbitration was AAA-administered. The court found the conduct created an appearance of impropriety that “clearly compromised the integrity of the arbitral process and mandates strict scrutiny” but held the heavy burden under CPLR 7511 unmet. https://www.courtlistener.com/opinion/10773968/57th-6th-ground-llc-v-carnegie-house-tenants-corp/
[6] The Real Deal, “The Taking of Madison 625: How SL Green grabbed Ashkenazy’s trophy” (18 August 2023) — SL Green bought the 625 Madison Avenue leasehold in 2004; Ben Ashkenazy and Michael Alpert bought the fee for $400 million in 2013, when SL Green was paying $4.6 million in annual ground rent with a reset due in 2022, financing the purchase with a $195 million mezzanine loan from the Children’s Investment Fund; Alpert told Crain’s in 2016 that the site was worth at least $1.4 billion as a residential development, implying about $80 million of rent, and that “the ground lease has a very clear valuation clause”; an arbitrator set the 2023 rent at $20.25 million, rendering SL Green’s roughly $230 million investment worthless; SL Green and partners, having bought into the mezzanine debt, took control at a UCC foreclosure auction in August 2023. https://therealdeal.com/new-york/2023/08/18/how-sl-green-wrested-625-madison-avenue-from-ben-ashkenazy/
[7] Safehold Inc., Q1 2026 earnings supplement filed with the SEC (Exhibit 99.2, 30 April 2026) — 92-year weighted average lease term including extensions; 83% of the portfolio as determined by cash rent carries some form of CPI lookback, generally capped between 3.0% and 3.5% per annum compounded; total portfolio ground book value $7.1 billion and estimated unrealized capital appreciation $9.5 billion; portfolio ground lease to value 51%, rent coverage 3.4x, economic yield 7.4%; three new ground leases originated in the quarter for $54 million. https://www.sec.gov/Archives/edgar/data/1095651/000109565126000014/safe-20260430xex99d2.htm
[8] NY Senate Bill S2433A (2025-2026 session), sponsored by Senator Liz Krueger, same-as Assembly Bill A2619 sponsored by Assemblymember Linda Rosenthal — would amend the real property law, the Emergency Tenant Protection Act of 1974 and the New York City Administrative Code to grant residents of ground lease residential cooperative buildings tenant status on lease expiration, permit the cooperative to borrow for repairs and improvements with landowner consent limited to reasonable cause, and create a right of first refusal if the underlying land is sold; last action 7 January 2026, referred to Senate Judiciary after dying in the Assembly, the fourth consecutive session in which it failed. Roughly 100 ground-lease cooperative buildings and about 25,000 shareholders in New York City, per Habitat Magazine’s reporting on the bill’s failure in June 2026. https://www.nysenate.gov/legislation/bills/2025/S2433/amendment/A
[9] The Real Deal, “Carnegie House co-op wins new shot in ground lease fight” (4 September 2026, updated 8 September 2026) — Rubin Schron of Cammeby’s International Group and David Werner Real Estate bought the land under the 324-unit cooperative for $261 million in 2014; MSD Partners lent them $100 million in 2023; counsel for the cooperative were Brett Dockwell of Haynes and Boone and Gayle Pollack and Hon. David Saxe of Morrison Cohen; a spokesperson for 57th & 6th Ground LLC said after the reversal that “the numbers are the numbers and we are confident that the next arbitrator will come to the same conclusion.” https://therealdeal.com/new-york/2026/09/04/carnegie-house-co-op-wins-second-shot-in-ground-lease-fight/
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