Koreins Dispute Vornado’s Penn 1 Ground Lease

14 minutes read

Steve Roth has such an iron grip on New York City real estate that no broker would dare to cross him for fear of losing a piece of Vornado Realty Trust’s lucrative business.

That’s the claim made by an explosive lawsuit brought by the Korein family over a rent dispute at Penn 1, which name-checks top brokers like Darcy Stacom, Bob Knakal and dealmakers at Cushman & Wakefield, Newmark, Avison Young and Colliers.

The Koreins, who own the land under Penn 1, say it’s virtually impossible to find an impartial broker to appraise the fair market value of the property because everyone is fearful of arriving at a valuation that would offend Vornado.

“For Manhattan real estate brokers, Vornado is a highly relevant and sought-after client,” wrote lawyers for the Koreins, who said they — by contrast — are a smaller company with less influence.

“For Manhattan real estate brokers, Vornado is a giant in the market,” the lawsuit reads. “Because landlords like Vornado pay the commissions for both the landlord’s and the tenant’s brokers, remaining in Vornado’s good graces can be vital to a broker’s livelihood.”

At the heart of the matter is a disagreement over the rent at Penn 1, the 2.5 million-square-foot office tower that Vornado controls through a ground lease with the Korein family.

Vornado has controlled the ground lease since 1998. When the lease came up for renewal in June 2023, the $2.5 million annual ground rent was supposed to increase based on the land’s fair market value. A few years earlier, Vornado began undertaking a massive renovation of the property, redubbing the once-named One Penn Plaza to Penn 1. Estimates of the new rent swung wildly leading up to the renewal — from Roth’s suggestion in 2022 that it could jump to $26 million, to later projections of a far lower figure due to market conditions.

The two parties have been locked in an appraisal stalemate since before the lease expired. The Koreins’ lawsuit asks the judge to accept their appraisal valuing the property at $1.9 billion.

Is there a broker in the house?

Under the terms of the ground lease, if the two sides could not agree on the land’s value, a panel of three appraisers was supposed to set it, one chosen by each party and a third chosen by the Real Estate Board of New York or the court.

But the Koreins claim many brokers refused to represent them in the negotiations, fearing retaliation from Vornado, whose deals can generate millions in commissions for their firms.

They approached Stacom to represent them, but said she declined because “she did not want to jeopardize her business prospects with Vornado.” Indeed, Stacom ended up representing the other side.

The Koreins pointed out that when Stacom left CBRE last year to start her own firm, Roth was quoted in the press saying she “will be getting many important and complex assignments from us,” knowing full well that Stacom at the time was representing Vornado as appraiser in the rent dispute.

In 2021, the Koreins hired a well-known broker to represent them, who resigned before the process began and then within a year represented Vornado in a $70 million Queens property sale.

That broker turned out to be Bob Knakal, according to an affidavit filed by his former partner, Paul Massey.

The Koreins’ lawyers included the affidavit in their suit, in which Massey lays out Vornado’s sales and leasing activity and its “hugely influential presence in the brokerage community.” He cited Knakal’s Queens deal as an example.

“My former partner, Bob Knakal, brokered the sale for Vornado,” he wrote. “At standard market rates, the commissions paid by Vornado on this transaction would have been approximately $700,000.”

Appraisal meltdown

The Koreins ultimately selected David Pearson of Pearson Realty Services; Vornado chose Stacom, then of CBRE. Both sides eventually agreed to appoint mortgage broker Jonathan Estreich to be the third appraiser and chair of the panel, but the process quickly fell apart, per the lawsuit. Pearson valued the land at $1.9 billion, which would mean $114 million in annual rent for Vornado.

Stacom, by contrast, said the land was worth basically nothing — in part — because it was encumbered by a sublease, keeping rent unchanged. The Koreins argued that the sublease was long expired, and said its inclusion was an attempt to drive down the appraised value to zero.

“[A]n absurd notion,” they claim.

In March 2025, the panel of appraisers set aside 22.5 hours over six days to hash out the value.

But the Koreins said that on the first day, Stacom became hostile and started threatening Pearson and Estreich that Vornado would sue them.

“Stacom threw her materials and stormed out of the room,” according to the lawsuit. “Stacom’s threat had its intended effect on [Estreich]. The Chair became noticeably leery of upsetting Stacom or Vornado and repeatedly appeased Stacom by offering concessions to Respondent at Petitioner’s expense.”

Stacom stormed out of a meeting after a fellow appraiser suggested a higher valuation, warning that Vornado would sue the others if they adopted it. The court later vacated the appraisal — which valued the property at $250 million (if encumbered by the sublease) or $337 million (if unencumbered by the sublease) — citing “an egregious appearance of impropriety.” But the court stopped short of overturning the appraisal process, ruling this month that the Koreins’ difficulty in finding an impartial appraiser was not enough grounds to overturn the process.

Vornado has argued that the ground lease is governed by “a binding appraisal proceeding” and that the courts should stay out of it.

“This matter was already asked and answered, with a decision three weeks ago in Vornado’s favor,” said Vornado attorney Janice Mac Avoy of Fried, Frank, Harris, Shriver & Jacobson. “We intend to fight this new filing vigorously, and we intend to win as we have in the past.”

A lawyer for the Koreins did not immediately respond to a request for comment.

Nearly three years after the rent reset date, the land’s value — and tens of millions in annual rent — remain unresolved.