Volume 17 • Issue 9 / July 23 - 29, 2004

Lots of litigation, little action at market building

By Erica Stein

Downtown Express photo by Elisabeth Robert

Henry Rainge Megill in 130-140 Essex St.

When Henry Rainge Megill constructed his business plan for 130-140 Essex St. — Building B of the Essex St. Market — in 1998, he planned for his “International House of Good Eats” to be open for business by Aug. 13, 1999, and to have a net profit of $82,625 for July of 2004.

Six years later, while the three southern buildings of the Essex St. Market are home to 24 vendors, a restaurant and an art gallery, Building B stands empty and Megill, who incorporated as 130-40 Essex Street Development Corp., has filed for Chapter 11. The city’s Economic Development Corporation, which owns all of the Essex St. Market buildings, has been in litigation with Megill since 1999 over non-payment of rent and, in its ongoing attempt to evict Megill, has argued that he has failed to improve the property.

“That’s crazy,” Megill, 66, said last week. “This project is 90 percent finished.”

In February 1998, Megill, a Lower East Side resident, entered into a 20-year lease with the city for Building B.

“My three goals in this project, as promised in my business plan, were to make money, improve the community and employ local people. I didn’t want to run out of money,” said Megill, who had $700,000 available for the project at the time of its approval.

His architect developed a plan that cost $500,000 but which did not, according to Megill, take into account the significant structural work that would have to be done on the building itself. “See this crack here,” said Megill, pointing to a jagged line running through the brick on the outside wall of the Essex St. side of the building. “This is a concrete slab building. The La Guardia administration put it up in ’33 to house the pushcart vendors. It’s set down on what’s called footing; there’s no foundation. When the building shifted, it caused wall separation. When I took the building over there wasn’t even any glass in the windows. It was a shell.”

Megill said that in late 1998, he had about $600,000 left, with the large expenses of the foundation and ceiling repairs still to be paid. Realizing that he could not support the extra costs of structural renovation, Megill fired his original architect, hired Fritz Johnson and brought in G.D.M Development as a partner. Megill said that the original terms of his 20-year lease from E.D.C. allowed him not only the option to purchase the property — which he said he planned to exercise after the first year but as of yet has not — but allowed him to sell up to 49 percent of the shares of the corporation to which E.D.C. had issued the lease: 130-40 Essex Street Development Corp.

“I made a deal with G.D.M that they could purchase 49 percent of the shares if they put $160,000 upfront,” said Megill. “They were to pay for everything but not to spend more than $450,000.” Anything more than that, said Megill, was to be considered a loan from the Essex Street Development Corp. and would be repaid by Megill.

He said that by 1999, with the exception of the bathrooms, which have since been completed, the building was in its current state: the ceiling and foundation had been repaired and he had installed gas lines, electricity, sinks, drains and internal walls. For six months Megill operated a barbecue shed in one of the kiosks. Megill closed the location despite a favorable review in the New York Times in July of 2000 because, he said, it caused construction to slow while he was otherwise occupied and E.D.C. told him they didn’t consider it to be “upscale” enough.

In October of 1999, he arrived to find a notice from E.D.C. on the door, notifying him of his eviction in 10 days due to his failure to pay $37,381 of his $56,035 yearly rent. The court gave E.D.C. permission to evict unless Megill repaid the money, with the first payment to be made in December.

The city and Megill have been in litigation ever since. Megill said that in February of 2000, he attempted to pay the entire sum after missing the first payment, only to be rebuffed. An eviction was scheduled for March 13. Megill appealed the ruling to a three-judge panel, which overturned the original decision of the Civil Court in May 2001 and returned possession of the building to Megill.

The final construction performed on the building, said Megill, was the completion of the bathrooms in 2002. Since then, the building has remained with its interior walls and entryways constructed but not completed. Flooring and chairs have been purchased but not installed. Construction material remains piled in the planned banquet hall space and kitchenware is stacked haphazardly over the deli counter. The last wood from the barbecue takeout venture still sits in its pit. The single refrigerator sits empty while the kitchen floor is dotted with eggshells.

“The city says we didn’t improve the building at all, and it may look that way if you don’t know what it was like when we started. But I took it to a place of being able to have an affair here in 2002 for 1,151 people. Ticketron sold the tickets. The city found out and gave me a cease and desist letter and ordered Ticketron to refund all the money,” said Megill. “Why should I do anything so the city can confiscate it? I have creditors. I must owe somewhere near $600,000.”

In March, Judge Prudence Carter Beatty of U.S. Bankruptcy Court ordered the city to submit a motion proposing to complete the eviction, according to one of Megill’s two attorneys, Michael Schreiber, who explains that the debtor was given 20 days to respond to the city’s petition. Two weeks ago, Beatty informed both sides that she was granting a modification to the automatic stay, which would allow the eviction to proceed unless Megill filed an action in State court by July 26.

“It appears,” said Schreiber, “that under the law there’s no limit to how many times you can appeal. That’s why it’s so hard to evict anyone. These things can stretch out forever. But depending on what happens, this could be done in six months or a year.”

One possible outcome if the city does win the suit is that it will call for the submission of new business plans. One plan, by the Federation of East Village Artists, is to turn the space into a Lower East Side Performing Arts Center.

FEVA executive director Phil Hartman said if he were awarded a lease, the plan would include food and drink facilities and he would talk with Megill about operating them. “Yeah. I’m willing to talk to anyone about anything,” Hartman said. “I used to eat there all the time when the barbecue was open.”

Megill, who says he still intends to open, added: “This is my whole life. I have nowhere else to go. When I started I was in perfect health, I didn’t have arthritis in my shoulder or glaucoma. If I lose, I’m going to leave the city.”

An E.D.C. spokesperson said the agency does not comment on matters under litigation.

Downtown Express is published by
Community Media LLC.

Downtown Express
487 Greenwich St.,
Suite 6A | New York, NY 10013

All rights reserved.
Downtown Express and downtownexpress.com
are registered trademarks of Community Media, LLC
John W. Sutter, president


Phone: 212.229.1890 | Fax: 212.229.2790
Email: josh@downtownexpress.com


Downtown Express is published by
Community Media LLC.

Downtown Express | 487 Greenwich St., Suite 6A | New York, NY 10013

Phone: 212.242.6162 | Fax: 212.229.2970
Email: news@downtownexpress.com

Written permission of the publisher must be obtainedbefore any of the contents of this newspaper, in whole or in part, can be reproduced or redistributed.