Restaurant Economic Damages Litigation

Issue:
Civil litigation was initiated in a property dispute between the owners of a restaurant and the owners of a neighboring piece of real estate. Arxis Financial was hired to quantify the financial impact of a parking injunction on the value of a restaurant. The injunction would prevent the restaurant from using a driveway that provided access to a parking lot at the rear of the restaurant. There was no other access to the parking lot and loss of that access would require the restaurant to initiate a parking valet service. This service would require additional cost to patrons and would necessarily limit the restaurant hours to dinner only since surrounding parking lots were fully utilized during daytime business hours. Breakfast and lunch business represented 40% of the profits of the business and would be impossible.

Arxis work:
Two business valuations were prepared: A business valuation was prepared as-if the injunction did not happen and a second appraisal was prepared reflecting the permanent diminution in value had the injunction been made permanent. Because of the type of litigation, Arxis Financial was required to consider alternative uses of the building that might mitigate the loss of revenue. Cash flow and economic analysis was prepared for conversion to a smaller sized structure to make room for a driveway and the conversion of the existing space to either a smaller restaurant, walk-up retail, or a combination of both. When comparing the two valuations Arxis Financial was required to establish the “permanent” loss in value as opposed to temporary reduction in income. All of this was done in less than a week since the temporary injunction was filed and it was effectively choking the life from the business. There was an urgency to getting the valuations and declarations done so relief could be sought in court.

Result:
The case settled with terms that preserved a landmark restaurant.   A key aspect of the settlement was the valuation work, which demonstrated that the loss of business income was so significant that the driveway access issue had to be resolved.  This caused the two parties to mutually resolve the matter in a way that was satisfactory to both, avoiding additional litigation.