FILED: NEW YORK COUNTY CLERK 02/10/2011 INDEX NO /2010 NYSCEF DOC. NO. 42 RECEIVED NYSCEF: 02/10/2011

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1 FILED NEW YORK COUNTY CLERK 02/10/2011 INDEX NO /2010 NYSCEF DOC. NO. 42 RECEIVED NYSCEF 02/10/2011 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK x BUILDING SERVICE LOCAL 32B-J PENSION FUND; BUILDING SERVICE LOCAL 32B-J HEALTH FUND; BUILDING SERVICE LOCAL 32B-J LEGAL SERVICES FUND; LOCAL 32B- 32J SERVICE EMPLOYEES INTERNATIONAL UNION Plaintiffs, vs. 101 LIMITED PARTNERSHIP Defendant x Index No /10 REPLY AFFIDAVIT OF BART MCDADE IN SUPPORT OF PLAINTIFFS MOTION FOR A TEMPORARY RESTRAINING ORDER AND A YELLOWSTONE INJUNCTION, OR ALTERNATIVELY, FOR A PRELIMINARY INJUNCTION STATE OF NEW YORK ) ) ss. COUNTY OF NEW YORK ) BART MCDADE, having been duly sworn, deposes and says 1. I am a Vice-President and Director of Operations at Grubb & Ellis Management Services, Inc. ( G&E ) and currently manage a portfolio of properties that includes the building at 101 Avenue of the Americas, New York (the Building ). I have personal knowledge of the facts set forth herein. I submit this reply affidavit in response to Defendant 101 Limited Partnership s submissions in opposition to Plaintiffs application for a Yellowstone or preliminary injunction. 2. Defendant submits the Affidavit of Carlos R. Olivieri ( Olivieri Aff. ), which claims that the Building s hot water heaters, HVAC Blazer units, building management system ( BMS ), and fire alarm system require immediate and complete replacement, and that Defendant can dismantle, remove, and/or demolish, renovate, and replace each of these entire

2 systems in the next few months (in anticipation of new tenants moving in) without disrupting Plaintiffs occupancy and operations. These claims are without merit. The Building s Systems Are in Good Repair 3. At 11, Mr. Olivieri says that based on his inspections and review of [my purportedly] conclusory reports, he has concluded that approximately 2/3 of the existing water heaters date back to the initial construction of the Building 19 years ago and therefore require immediate replacement. Paragraph 7 of my moving Affidavit, however, explained clearly that all hot water heaters in the Building have been replaced since the Leases incepted with the last such replacement occurring in August of The Olivieri Aff. apparently challenges the veracity of that statement. 4. If, however, Mr. Olivieri had simply inspected the hot water heaters as he asserts he did, he would have seen that all hot water heaters are of recent vintage because (as I explained in my moving affidavit) each heater was replaced since the Lease began. Moreover, the serial numbers on every single hot water heater make clear that they were manufactured between 1994 and 2008 which is after the Lease began in January (See G&E Report attached hereto as Exhibit 1.) It is impossible for any hot water heater to be original to the Building as Mr. Olivieri claims, let alone 2/3 of them. 5. Further, although Mr. Olivieri is correct that my tenure as manager of the portfolio of properties that include the Building post-dates the Lease s inception (id. at 12), he is incorrect in drawing the conclusion that I therefore lack information about when hot water heaters were replaced. The Building s prior property management company, Ronan Associates, managed the Building from the Lease s inception to the date G&E took over, and when G&E assumed management duties for the Building, it reviewed all of Ronan Associates existing 2

3 repair and replacement logs maintained in the ordinary course. Because of time constraints in preparing my initial affidavit, information taken from the logs was not included. This information may now be found in the report (see Exhibit 1) detailing the manufacturing and/or installation dates of each hot water heater, regardless of whether the work was done by Ronan Associates, G&E, or an outside vendor. 6. Mr. Olivieri s challenge to the repair log records at Exhibit 2 to my moving affidavit is misinformed Those records included only hot water heaters that G&E itself replaced from January 7, As I expect someone with Mr. Olivieri s experience knows, G&E replaces certain hot water heaters itself, and engages outside contractors to replace the balance. Over the years G&E s outside contractors have replaced the majority of hot water heaters including the six-gallon hot water heater on the eighteenth floor replaced on August 13, (See invoice for replacement of 6 gallon hot water heater dated 9/23/10 attached hereto as Exhibit 2.) It is a mere six months old while the average age of the Building s hot water heaters is about 4 years. (See Exhibit 1.) Mr. Olivieri s speculations are based on incorrect facts and erroneous assumptions. 7. Mr. Olivieri next asserts that the individual HVAC Blazer units located on each floor of the Building should have all been replaced beginning around 5 years ago. (Id. 15.) Mr. Olivieri claims that G&E s continued maintenance of the units is somehow inappropriate because the manufacturer went out of business in approximately 2007, and replacement parts are no longer being manufactured for Blazer units. (Id. emphasis in original.) Mr. Olivieri s statements appear to reflect a misunderstanding of HVAC maintenance and operation. 8. First, Blazer s cessation of business has had no impact on G&E s (or for that matter, Defendant s or any future tenant s) ability to service the units and procure any needed 3

4 replacement parts. G&E has continuously maintained the Blazer units without issue since 2007 (when Blazer ceased operating) because the components therein were manufactured by other companies. For example, Bristol Compressors International manufactures the units compressors, which are stock items, still manufactured, and easily replaced as and when appropriate. Similarly, Belimo Aircontrols manufactures the units internal controls (i.e. velocity sensors, mechanical cooling valves, and other actuators). Each of these items are still manufactured and each can be replaced with a phone call. To the extent that Blazer specific parts are needed (and they generally are not) vendors such as Brothers Supply Company, GDT Supply Company, Jaco Mechanical (all in New York), and others carry a surplus of Blazer parts and can ship them to the Building promptly. I attach hereto as Exhibit 3 several invoices demonstrating the ease in which replacement parts for the Blazer units have been and are obtained. 9. Mr. Olivieri s unsupported claim ( 15) that Plaintiffs are scrounging for parts and have cannibalized the components of the unit servicing the 23 rd floor of the Building (thus impliedly leaving it non-functional for that floor) are untrue. In fact, it was never utilized or placed into service at all because a different unit was installed there, which services that floor. To avoid pointlessly purchasing new replacement parts for other Blazer units located in the Building, we used components from the never-active 23 rd floor unit. This had nothing to do, however, as Mr. Olivieri implies, with any alleged difficulty in procuring replacement parts, nor did it relate in any way to the heating and cooling of the 23d floor. I am surprised that Mr. Olivieri has implied otherwise, because I believe he knows these facts. 10. Second, Mr. Olivieri s claims about the alleged need to replace the Blazer units because they have reached the end of their useful life do not address anywhere the rigorous 4

5 maintenance schedule that G&E performs. G&E conducts annual infrared testing on each Blazer unit to identify hot spots and replaces individual components before they fail. G&E conducts regular vibration tests on the Blazer units to identify loose bearings and blower wheels and replaces them before they fail. Because of the rigorousness of this program, the units are in near perfect condition and, if continuously maintained in such fashion, should function for many more years without issue, just as a well-maintained automobile can and will function for decades beyond its suggested useful life. Indeed, GHC Consultants (hired by Defendant) admitted that the useful life of such units varies from location to location. And the Blazers are in excellent repair at this one. 11. On this point, I respectfully reject Mr. Olivieri s claim that a prudent owner (or net lessee) would not operate a first class building with HVAC units that are (i) beyond their projected useful lives; and (ii) for which replacement parts are not being manufactured. (Id. at 16.) As just noted, replacement parts are still being manufactured and will be manufactured continuously in the foreseeable future. Moreover, I have managed HVAC and other systems in many other first class buildings throughout New York and I can state that nearly all prudent operators do operate the units beyond their projected useful lives (by replacing and rebuilding the units internal components as necessary) and do not generally replace entire units so long as they are properly maintained. This is so because complete unit replacement is extremely expensive and causes massive disruption to building occupants. It is, for example, my experience that continuous preventative maintenance, when combined with internal replacement and reconstruction, results in substantial cost-savings in comparison to running units until their life expectancy expires and then summarily cutting up, removing, and replacing them with brand new units. 5

6 12. Mr. Olivieri next claims that the Building s sidewalks and Plaza require installation of a large-scale drainage system because, he hypothesizes, some unspecified trapped water will freeze, and the expanded ice will cause heaving and cracking of the surface. (Id. at 27.) Notably, Mr. Olivieri nowhere identifies a single slab or Plaza structure that is suffering from the ill effects of this imagined trapped water and ice. The reason for this is that the sidewalks and Plaza are in excellent condition with Plaintiffs having spent approximately $300,000 in repair and replacement costs (including replacement of all steps to the Plaza) in (See McDade Moving Aff. Ex. 1 at 2.) Moreover, Plaintiffs immediately replace cracked slabs in the sidewalk or Plaza when such cracks develop which in any event is a rare occurrence because of Plaintiffs improvements and because (as Defendant correctly observes) Plaintiffs applied water sealant to protect the sidewalks and Plaza. 13. I note that Defendant could have easily photographed damage to the Plaza or sidewalk and appended such photographs as an exhibit to its opposition papers if immediate installation of this drainage system was in fact required. Instead of doing that, Defendant tries to justify its demand for this upgrade by asserting that Plaintiffs failed to provide Defendant with their shop drawings, and work plans, showing just what work it has commissioned in respect of the Plaza. To avoid further wasted time on this point, I annex as Exhibit 4 a letter from Plaintiffs engineering company (Braxton Engineering) confirming that the work specified in Blade Contracting, Inc. s bid acceptance form included as Exhibit 5 was fully completed in In addition, the photographs annexed hereto as Exhibit 6 confirm that the Plaza and sidewalk are nowhere buckling, heaving, or cracking such that a massive drainage installation is now needed, as Defendant demands. In short, Defendant s claims that the sidewalk and Plaza require this massive upgrade to comply with the Lease are untrue. 6

7 14. The BMS and fire alarm system also are well maintained and in good condition. As noted in 5 of my moving affidavit, Plaintiffs have hired an outside vendor to maintain the BMS system at a cost of $40,680 per year. (McDade Moving Aff. at 5.) This preventative maintenance program has kept the BMS system in good repair. Likewise, an outside vendor maintains the Building s fire alarm system at a cost of $18,837 per year. The fire alarm system was just tested on January 11, 2011 and found to be functioning perfectly. (Id. at 6.) 15. After making repeated and unsubstantiated claims that these systems are original and therefore have exceeded their useful life expectancies and require replacement, (Olivieri Aff. at 19-20, 23), Defendant fails to offer any evidence to support its demand that these systems be replaced now save for a single reference to a purported conversation with the BMS system s manufacturer allegedly indicating that the system is obsolete and that the manufacturer proposes to replace it. (Id. at 19.) Putting aside the fact that the BMS manufacturer has an obvious interest in recommending the opportunity for it to sell a replacement unit, Defendant fails to explain why these systems require immediate replacement merely because they are aging. Contrary to Mr. Olivieri s contentions, age alone is not an accurate indicator of needed replacement or obsolescence. The reason is simple. Prudent owners and/or net lessees of buildings generally invest monies to maintain such systems in top-flight condition with the expectation that they will recover their investments over time by extending the life-expectancy of these systems and therefore avoiding the exorbitant costs and associated difficulties that occur with system-wide replacements. That is what Plaintiffs have done here and Defendant should not be permitted to penalize Plaintiffs for their prudent conduct by now ordering that these perfectly capable systems be demolished and stripped from the Building. 7

8 Impact of Defendant s Threats 16. Mr. Olivieri devotes a significant portion of his affidavit claiming that massive, system-wide, top-to-bottom, state-of-the art replacements of the Building s five major systems can be accomplished now and without disrupting Plaintiffs occupancy. Respectfully, this is absurd, for the reasons explained in my opening affidavit and for the additional reasons explained herein. 17. Initially, I note that Mr. Olivieri s suggestion that I lack specialized expertise in understanding projects of this type ignores my forty-plus years of property management experience during which I have supervised many replacement projects when they are appropriate. Indeed, by way of relevant example here, I recently supervised the replacement of an entire fire-alarm system for a 500,000 square foot building located in Manhattan and the installation of package AC units on ten floors of that building that previously had no cooling. 18. That fire alarm system replacement involved maintenance of the old system while the new system was wired into place and tested over a one year period. During this one year period, the building s occupants had to contend with the disruptions caused by many days of testing by the Fire Department, contractors, and others. This was problematic for the tenants because the new system cut operation to the fans for the HVAC systems, recalled the building s elevators to the first floor, blared when triggered, and emitted repeated flashes of light when tested. Similarly, mere installation of the AC units (that were smaller in size than the Blazer HVAC units at issue here) resulted in tremendous disruption during the four-month period it took to complete that portion of the project. Importantly, replacement of the fire alarm system and installation of the AC units in that building occurred serially, with the AC units installed prior to the fire alarm system so as to minimize disruption to the building s tenants. Here, Defendant 8

9 seeks to replace all the Building s major systems essentially at once which will maximize tenant disruption. 19. For example, the Blazer units in the Building are of significant size; each is housed in a room approximately 20 feet by 20 feet. Thus, as described in 10 of my moving affidavit, contractors will need to demolish the wall housing each unit and physically disassemble the unit onsite. I recently supervised removal of the unused Blazer unit servicing the 23 rd floor at the Landlord s request and this process alone took two weeks. Notably omitted from Mr. Olivieri s affidavit is any explanation about how he intends to move physically the replacement units to their housing locations on each of the Building s floor. Mr. Olivieri conclusorily claims only that the new units could be delivered to its location before Monday morning and then installed and tested for the next seven days. (Olivieri Aff. at 17.) 20. Replacement HVAC units (assuming they are comparable to the existing Blazer units) must be disassembled upon delivery to the Building, carried in pieces to their new locations, then reassembled in place. Based upon my decades of experience (including my years of experience at the Building), I know that a team of contractors would need a minimum of four to six weeks per floor to (1) tear apart the old unit and its accompanying housing wall; (2) disassemble and reassemble the new unit; and (3) install and test the new unit. Even worse, the tenants on each floor undergoing conversion would lack all heat and air conditioning for the entirety of this four to six week process. Mr. Olivieri s lack of acknowledgement of the attendant disruption is regrettable, as is his suggestion that the tenants of any impacted floor could relocate to some unknown and unspecified location (which does not even exist in the Building) while the Blazer units on their floor were replaced. 9

10 21. Equally unfortunate is Mr. Olivieri s failure to address the negative effects that replacement of the BMS and hot water heaters will have on Plaintiffs which include intermittent outages of air conditioning, heating, and hot water that will be in addition to the other disruptions that will attach should Defendant seek to replace the fire alarm and Blazer units. 22. As to Mr. Olivieri s suggestion that Defendant s proposed renovations to the sidewalks and Plaza can be done in stages and so that there always remains adequate accessway for the Building s occupants, he never specifies where such an accessway exists. (Olivieri Aff. at 28.) I can only surmise from this omission that he accepts my conclusion that Defendant s proposed improvements to the sidewalk and Plaza would result in a shut-down of the main entrance to the Building and the creation and use of a temporary entrance in another area of the Building with confusion and hardship to Plaintiffs employees, visitors, vendors, and others. 23. The bottom line is that Defendant s proposed massive, system-wide, top-tobottom, state-of-the art replacements are unneeded and unnecessary as all the Building s systems are performing in good condition and are very well-maintained. What is more, Defendant s attempt to complete these system upgrades immediately, collectively, simultaneously (as threatened), and without justification would result in such a level of disruption to Plaintiffs (depending on how the renovations were conducted) that continued occupancy of the Building would not be feasible during the renovation period. 24. One way to visualize the disruptive nature of Defendant s proposed renovations is to envision a typical employee of Plaintiffs who might arrive at the Building while these renovations are underway. That worker could arrive at the Building s main entrance, to the sound of jack hammers, and find the entrance closed. The worker would make his or her way to a new temporary entrance whereupon, if the fire-alarms were being tested, the elevators to his or 10

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