Friday, August 11, 2006

Landlord says Ratner has "unclean hands" in lease dispute

Are Bruce Ratner, Brooklyn’s leading developer, and Shaya Boymelgreen, another bigfoot, collaborating to deceive Henry Weinstein, a smaller player who leased Boymelgreen some key properties within the proposed Atlantic Yards footprint? That’s what Weinstein charges in court papers, citing a curiously misaddressed letter, even as Boymelgreen claims that Weinstein is at fault.

It’s unclear how much difference the dispute might make in the long run, since the state could still use eminent domain to take the properties whether or not Ratner controlled the lease. But the transfer of the lease has been used to portray publicly that Forest City Ratner “controls” Weinstein’s property, Lots 5, 6 & 13 on the map; the asterixes hint at the dispute. (And should Forest City Ratner control the lease, that would mean one less commercial lease to be canceled in an eminent domain proceeding.)

Boymelgreen, in his legal complaint, argues that Weinstein is using the legal fight to shore up his negotiating position with Ratner, while Weinstein responds that the collusion would diminish the value of his property in anticipation of a buyout or condemnations.

Weinstein believes that FCR’s behavior disqualifies the developer from the project. “When people don’t agree, he’s just running them over,” he said on August 3 at the Community Board 8 hearing on Atlantic Yards. “A private developer with unclean hands should not be allowed to benefit” from the use of eminent domain.

Weinstein's legal complaint charges that FCR's Jim Stuckey last year "made a verbal offer to buy defendants' properties--which FCRC refused to confirm in writing--coupled with the threat that, if defendants did not reach an agreement with FCRC, then the ESDC would take defendants' proeprties by eminent domain."

The properties at stake

Companies controlled by Weinstein own a six-story yellow former manufacturing building at 752-766 Pacific Street, as well as two adjacent lots, used as a parking lot. The building, formerly a typewriter ribbon and carbon paper manufacturer, looks sound, and it is, though Weinstein and his tenant Boymelgreen have made several repairs to the building.

Boymelgreen wants the state Supreme Court to compel Weinstein to consent to the assignment of the lease of those properties to Forest City Ratner. FCR has for now leased back the properties for Boymelgreen's use, and Boymelgreen operates offices in the top two floors.

The leases between Weinstein and Boymelgreen, for just under 49 years, were signed in October 1999, long before the Atlantic Yards plan was contemplated, and about six months after Boymelgreen bought the nearby former Daily News printing plant, which was subsequently converted to the Newswalk building of luxury condos.

Who’s reasonable?

The leases provide that the tenants may assign their leases with the consents of the landlord, which “shall not be unreasonably withheld or delayed.” At issue is whether Weinstein has unreasonably withheld the lease. (At right, outdated photo of grass-filled parking lot from the ESDC's blight study.)

Around 3/31/05, Boymelgreen and Ratner agreed on a one-year option for Ratner to acquire Boymelgreen’s lease. (That was about the same time that Boymelgreen agreed to sell two nearby properties to Ratner for $44 million.) On 2/16/06, they asked Weinstein by letter to consent to the agreement, according to Boymelgreen’s complaint. Weinstein didn’t reply, so on 3/2/06, two weeks later, they closed the transaction.

But Weinstein says Boymelgreen’s sequence is fishy. In his legal filing, Weinstein says that, back in 2000, he had given Boymelgreen an address on Long Island, rather than Brooklyn, for all business mail, and Boymelgreen had been sending rent to the correct address. However, the lease request was mailed to Weinstein's outdated Brooklyn address. (While the Secretary of State’s Corporations Division does list a Brooklyn address for Weinstein, the official address for mail is on Long Island.)

The dispute builds

According to Boymelgreen’s complaint, Weinstein’s lawyer questioned the assignments in a letter dated 3/21/06, and Ratner’s lawyer responded with a letter dated 5/1/06. That letter, according to Boymelgreen’s document, provided requested financial information about Ratner’s company. (At right, photo of parking lot taken yesterday.)

In court papers served on 5/9/06, Weinstein, according to Boymelgreen, for the first time disclosed that the 2/16/06 letter had been sent to the wrong address. On 6/9/06, Weinstein sent a letter saying he wouldn’t consent to the lease transfer.

It’s about the money

The only reason for Weinstein to withhold consent, Boymelgreen charges, is to increase the value of his interest in negotiation with FCR or in contemplation of use of eminent domain by the ESDC.

But Weinstein responds that his posture is reasonable, for a number of reasons, including "a means concocted by plaintiffs and Ratner to diminish defendants' property value in anticipation of a buyout or condemnation, which had already been secretly consummated almost a year before defendants' consent was sought." In the legal filing, he points out that the February letter did not disclose that Ratner agreed to lease back the properties to Boymelgreen for 36 months.

Boymelgreen contends that Weinstein is not acting in good faith, because in October 2005 he stated at the ESDC’s scoping hearing that he was aware of Ratner’s option. (Weinstein identified a “wholly false statement” that Ratner controlled three properties he owned.)

But Weinstein says no details were provided for months after that, and alleges more chicanery. In the answer filed in response to Boymelgreen's complaint, Weinstein charges that, in February 2006, Boymelgreen had misrepresented the fact that he had signed a deal with Ratner a year earlier, since “proposed” assignment agreements were unsigned with a 2006 date, suggesting that they had not yet been consummated, and that they did not disclose that Ratner had already agreed to lease back the properties to Boymelgreen.

Weinstein, having filed the most recent legal documents, has the last word for now, but Boymelgreen will respond, in court at least, in a few weeks.

Lawyers for Boymelgreen and Ratner wouldn't comment, according to the Brooklyn Papers (whose article misidentified the building as the former Ward Bakery down the block). And Weinstein has offered his property up for anti-Ratner protest art, by the Prospect Heights Action Coalition. [Update 8/12/06: A new version of the mural is below.]

Btw, it's blighted

The Empire State Development Corporation lists the building at issue as blighted (see Figure 1, p. 5 of the PDF) because it has one or more blight characteristics--but they likely could be attributed to the tenant, Boymelgreen, rather than the owner, Weinstein. The ESDC acknowledges that there are no unsanitary or unsafe conditions, the building structure does not seem substantially compromised, and the lot is fully utilized. However, the study states:
Building Code Violations
Lot 13 has 23 open building code violations, 10 of which were filed between 2000 and 2005. All of the violations issued after 2000 are for elevator-related issues. Four of these violations are for working on the elevator without a permit.
Vacancy Status
The building on lot 13 was previously vacant and undergoing some renovation when [Forest City Ratner's] AYDC began negotiations with the principals of [Boymelgreen's] 752 Pacific. Under an agreement between AYDC and 752 Pacific, AYDC has agreed to permit 752 Pacific to occupy a portion of the building (and use the parking area on lots 5 and 6) for up to two years after the closing under that agreement. In accordance with this agreement, a portion of the building is now occupied by 752 Pacific.


However, most of the building code violations, according to Weinstein's legal answer, are attributable to the tenant, Boymelgreen. And though it unclear that the building was actually vacant during the time frame referenced--when did negotiations begin?--the building had already been leased to Boymelgreen.

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