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The state of New York has lost a bid to undo a $126 million award granted to a Long Island real estate company in an eminent domain dispute over land to expand a state university.

The Appellate Division, Second Department, on Wednesday affirmed a lower court ruling that rejected the state's $26 million valuation of the 246-acre parcel on Long Island's North Shore. The state launched a condemnation action in 2005 in order to construct a research center at SUNY Stony Brook to focus on wireless technology and homeland security.

Property owner Gyrodyne Co., a former defense manufacturer, had planned to develop the site, known as Flowerfield, as a golf course and residential community and said the property was worth about $126 million.

The state had asserted that the highest and best use of the parcel, the legal standard used to establish a condemnation award, was as light industrial, which meant it was worth only about $26 million. Gyrodyne argued that it was worth much more as residential property.

The appeals court agreed with Gyrodyne. "The trial court properly rejected the appraisal submitted by the State of New York, since the evidence demonstrated that the highest and best use of the property was as a residential development."

Gyrodyne President and CEO Stephen Maroney said in a news release that the company was "extremely gratified" by the decision.

Arguing the case for the State of New York was the Office of the New York State Attorney General. Calls seeking comment from that office were not immediately returned on Friday.

The case is Gyrodyne Company of America v. State of New York, No. 12279, Appellate Division, Second Department.

For Gyrodyne: Joseph Clasen, Robinson & Cole, New York. For the State of New York, Attorney General Eric Schneiderman, New York.

(Reporting by Leigh Jones)

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