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Solving a Complicated Transaction Puzzle

Kleinbard has represented the City of Philadelphia in various matters, including in connection with its role in the development of the Family Court Building. The transaction was complicated by the involvement of numerous parties, governmental entities, and quasi-governmental bodies, each with its own regulatory framework. Recognizing the complications, the City of Philadelphia turned to Bernie Kolodner, Practice Leader of the Firm’s Real Estate Group, to represent its interests in this very substantial and high-profile project.

The land was owned by the Philadelphia Parking Authority, who wanted to own and operate an underground garage. To accommodate that, the transaction was structured between the state and the Parking Authority to create an air rights parcel above the ground. The air rights parcel would be owned by the state, and the Courthouse would be built on that location. This results in two owners in what had been a single parcel of land. Elevators traverse both portions; equipment and utility service for each owner is, to an extent, located in the portion of the other owner; the structure is for the benefit of both owners; and visitors (and judges and Court staff) have to move between the garage and the Courthouse. To govern all of this, ground rules, in the form of an easement agreement, had to be created for the multi-faceted shared usage. Since the easement governed conduct by the state, the city, the Court, and the Parking Authority, all four had to negotiate the easement agreement, including issues such as who would pay for which repairs and maintenance, how entry to the other’s space was to be granted or limited, who controlled signage, and who would shovel the snow at ground level but leading to the underground garage.

Involvement of other parties resulted from state legislation requiring that the Courthouse be built for the city, not directly for the Court, and City Charter provisions requiring the involvement of an entity (specifically, an authority) if there were contracts (in this case, the lease) for more than four years. The most direct structure to get the state’s building to the Courts would have been a lease from the state to the city, and a sublease from the city to the Court. However, due to the City Charter provision, the state had to lease to an authority that would then lease to the city. A lease from the city to the Court also needed to involve an intermediate authority, so the city leased to the Parking Authority, who then leased the Courthouse to the Court. The successful end result was four leases/subleases, which, to further complicate matters, could not be identical, in accordance with additional requirements.