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City Files Suit Against Forest City For Times Square Ground Lease

Madame Tussaud's, one of the tenants at 234 West 42nd St.

The City of New York has filed suit against developer Forest City Ratner over the terms of a ground lease, calling into question how to value buildings in the city.

Forest City Ratner has leased 234 West 42nd St. from the city since 1996 for $1.17M a year, but with the second term of the lease set to begin in 2018, the terms are being renegotiated. But the two sides disagree considerably over terms for the next phase, with the city asking for as much as 10 times the rent Forest City is seeking to pay, The Real Deal reports. Through a spokesperson, Forest City said it was "surprised and disappointed" by the city's legal action.

Forest City contends the lease should be calculated using subleases by tenants on the property (in this case, an AMC movie theater and wax museum Madame Tussaud's), while the city argues that current market value should determine the ground lease.

Other suits have been filed between landlords and tenants across the city over lease renegotiations, with the most common sticking point being whether to use the present or the future when determining value.