Skip to main content

“Unclean hands”? Judge raps Boymelgreen, Ratner in AY lease dispute

A state judge has backed charges that developer Forest City Ratner has “unclean hands” in a dispute over property in the planned Atlantic Yards footprint.

For months, Henry Weinstein—who owns some key properties in the proposed Atlantic Yards footprint—has protested in state court that his tenant, developer Shaya Boymelgreen, improperly assigned leases to a Pacific Street building and adjacent parking lot to an affiliate of Forest City Ratner. And that assignment, he argued, allowed the Empire State Development Corporation (ESDC) to deceptively portray—since October 2005—that Forest City Ratner “controlled” the land, thus suggesting a lesser need for eminent domain.

Weinstein called it “unclean hands,” and though State Supreme Court Justice Ira B. Harkavy didn’t use those words, he has agreed with Weinstein’s case, ruling that Boymelgreen’s lease assignment to Ratner violated the terms of the original leases with Weinstein, which required the landlord’s “written consent,” and declaring the latter leases “terminated.” (The decision.)

Now Weinstein, who’s also a plaintiff in the federal eminent domain case organized by Develop Don't Destroy Brooklyn (DDDB) challenging the project, will move to evict Boymelgreen and other tenants in the six-story building on Pacific Street just east of Carlton Avenue. They had leased back the space from AY 535 Carlton, a Forest City Ratner affiliate.

[Updated] Boymelgreen will appeal, according to a statement from a Forest City Ratner attorney, posted on the New York Observer's blog, The Real Estate.

More costly condemnation?

The ruling can't stop the state from using eminent domain to take the properties. But it might make it more costly. Boymelgreen had argued that Weinstein is using the legal fight to shore up his negotiating position with Ratner, while Weinstein responded that Boymelgreen’s deal with Ratner would diminish the value of his property.

Weinstein claimed that Forest City Ratner executive Jim Stuckey made a verbal offer to buy his property but wouldn’t put in in writing, and threatened that if no agreement was reached, the state would use eminent domain. FCR denied making any threats or raising the issue of condemnation, according to Harkavy’s decision.

DDDB, in a statement, observed that Forest City misled not only the ESDC but also the Public Authorities Control Board by claiming control of Weinstein's properties. DDDB charged, "By acquiring Mr. Weinstein's leases - which run until 2048 - FCRC likely hoped to claim that the properties had little value beyond the leases themselves. With full control restored to Mr. Weinstein, however, the cost of acquisition has likely increased ten-fold." There's no citation for those numbers, however.

The state’s willingness to portray the properties as “controlled” by Forest City Ratner may be used in the federal eminent domain case to argue that the developer has benefited from favoritism. (According to the ESDC, the asterixes indicate: FCRC has closed on an option to take by assignment the lessee's interests under the ground leases for these properties. However, the property owner has objected to such assignments.)

The properties at stake

Companies controlled by Weinstein own the six-story yellow former manufacturing building at 752-766 Pacific Street, as well as two adjacent lots, used as a parking lot. They make up about one acre of the proposed 22-acre site.

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. (Boymelgreen also sold the Ward Bakery, seen as a potential hotel, to Forest City.)

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 was whether Weinstein unreasonably withheld the lease.

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, believing there was no reasonable basis to any objection.

The wrong address

But Weinstein said 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. (Boymelgreen and Forest City called it an excusable error.)

Weinstein’s lawyer questioned the assignments, asking for financial information about AY Carlton, the Forest City affiliate. While AY Carlton initially declined to provide that, in legal papers, the developer asserted that AY Carlton is financially responsible, as it’s affiliated with Forest City Ratner and the parent Forest City Enterprises.

In oral argument 11/15/06, Weinstein’s lawyer, David Brody, called the affiliate a shell and claimed, “The people spent considerable time negotiating the amount of the litigation fund that Forest City Ratner would provide for the Boymelgreen organization.”

Defense lawyer John Sheridan said that “this case is all about greed,” arguing that Weinstein in 1999 “was thrilled to get a tenant, any tenant,” but now sees the value of his property rising given the Atlantic Yards project. (Weinstein has said he had plans to develop the property himself.)

Sheridan also argued that the absence of a financial guarantee from the Ratner affiliate wasn’t important, since the previous guarantee from Boymelgreen had already expired.

Clear decision

In his decision, dated 3/1/07 but released on Tuesday, Harkavy wrote:
The leases in question here clearly and unambiguously required tenants to “first” obtain the written consent of the landlords before any assignment of the leases. Notwithstanding that provision, the tenants chose to execute the assignments to AY Carlton, even though they had not received the written consent of the landlords. Indeed, the tenants chose to execute the assignments less than two weeks after sending their letter requests, before they received any response from the landlords, without trying to contact the landlords. The tenants’ assignment was clearly not permitted by the leases.

As for whether Weinstein’s withholding consent was unreasonable, Harkavy wrote:
However, according to the clear terms of the leases, plaintiffs were required to obtain consent prior to assigning the leases, regardless of the reasonableness of withholding consent. Additionally, it is not clear that the landlords’ withholding was unreasonable as a matter of law.

Moreover, even after plaintiffs responded, they refused, among other things, to provide specific financial information about AY Carlton itself, instead simply asserting that AY Carlton is “affiliated” with larger companies. Similarly, the proposed use of the premises—namely, demolition—would constitute a material change in use.

Had the tenants believed Weinstein was unreasonably withholding consent, Harkavy wrote, the leases provided for them to go to court to seek such consent. However, he wrote:
The tenants chose not to utilize that option and so they cannot now try to cure their default in another matter.

[Updated] Still, as with the pattern of legal disputes regarding Atlantic Yards, the case will get another hearing in appellate court.

Comments

Popular posts from this blog

Barclays Center/Levy Restaurants hit with suit charging discrimination on disability, race; supervisors said to use vicious slurs, pursue retaliation

The Daily News has an article today, Barclays Center hit with $5M suit claiming discrimination against disabled, while the New York Post headlined its article Barclays Center sued over taunting disabled employees.

While that's part of the lawsuit, more prominent are claims of racial discrimination and retaliation, with black employees claiming repeated abuse by white supervisors, preferential treatment toward Hispanic colleagues, and retaliation in response to complaints.

Two individual supervisors, for example, are charged with  referring to black employees as “black motherfucker,” “dumb black bitch,” “black monkey,” “piece of shit” and “nigger.”

Two have referred to an employee blind in one eye as “cyclops,” and “the one-eyed guy,” and an employee with a nose disorder as “the nose guy.”

There's been no official response yet though arena spokesman Barry Baum told the Daily News they, but take “allegations of this kind very seriously” and have "a zero tolerance policy for…

Behind the "empty railyards": 40 years of ATURA, Baruch's plan, and the city's diffidence

To supporters of Forest City Ratner's Atlantic Yards project, it's a long-awaited plan for long-overlooked land. "The Atlantic Yards area has been available for any developer in America for over 100 years,” declared Borough President Marty Markowitz at a 5/26/05 City Council hearing.

Charles Gargano, chairman of the Empire State Development Corporation, mused on 11/15/05 to WNYC's Brian Lehrer, “Isn’t it interesting that these railyards have sat for decades and decades and decades, and no one has done a thing about them.” Forest City Ratner spokesman Joe DePlasco, in a 12/19/04 New York Times article ("In a War of Words, One Has the Power to Wound") described the railyards as "an empty scar dividing the community."

But why exactly has the Metropolitan Transportation Authority’s Vanderbilt Yard never been developed? Do public officials have some responsibility?

At a hearing yesterday of the Brooklyn Borough Board Atlantic Yards Committee, Kate Suisma…

Barclays Center event June 11 to protest plans to expand Israeli draft; questions about logistics

At right is a photo of a poster spotted in Hasidic Williamsburg right. Clearly there's an event scheduled at the Barclays Center aimed at the Haredi Jewish community (strict Orthodox Jews who reject secular culture), but the lack of English text makes it cryptic.

The website Matzav.com explains, Protest Against Israeli Draft of Bnei Yeshiva Rescheduled for Barclays Center:
A large asifa to protest the drafting of bnei yeshiva in Eretz Yisroel into the Israeli army that had been set to take place this month will instead be held on Sunday, 17 Sivan/June 11, at the Barclays Center in Downtown Brooklyn, NY. So attendees at a big gathering will protest an apparent change of policy that will make it much more difficult for traditional Orthodox Jewish students--both Hasidic (who follow a rebbe) and non-Hasidic (who don't)--to get deferments from the draft. Comments on the Yeshiva World website explain some of the debate.

The logistical questions

What's unclear is how large the ev…

Atlanta's Atlantic Yards moves ahead

First mentioned in April, the Atlantic Yards project in Atlanta is moving ahead--and has the potential to nudge Atlantic Yards in Brooklyn further down in Google searches.

According to a 5/30/17 press release, Hines and Invesco Real Estate Announce T3 West Midtown and Atlantic Yards:
Hines, the international real estate firm, and Invesco Real Estate, a global real estate investment manager, today announced a joint venture on behalf of one of Invesco Real Estate’s institutional clients to develop two progressive office projects in Atlanta totalling 700,000 square feet. T3 West Midtown will be a 200,000-square-foot heavy timber office development and Atlantic Yards will consist of 500,000 square feet of progressive office space in two buildings. Both projects are located on sites within Atlantic Station in the flourishing Midtown submarket.
Hines will work with Hartshorne Plunkard Architecture (HPA) as the design architect for both T3 West Midtown and Atlantic Yards. DLR Group will be t…

Forest City acknowledges unspecified delays in Pacific Park, cites $300 million "impairment" in project value; what about affordable housing pledge?

Updated Monday Nov. 7 am: Note follow-up coverage of stock price drop and investor conference call and pending questions.

Pacific Park Brooklyn is seriously delayed, Forest City Realty Trust said yesterday in a news release, which further acknowledged that the project has caused a $300 million impairment, or write-down of the asset, as the expected revenues no longer exceed the carrying cost.

The Cleveland-based developer, parent of Brooklyn-based Forest City Ratner, which is a 30% investor in Pacific Park along with 70% partner/overseer Greenland USA, blamed the "significant impairment" on an oversupply of market-rate apartments, the uncertain fate of the 421-a tax break, and a continued increase in construction costs.

While the delay essentially confirms the obvious, given that two major buildings have not launched despite plans to do so, it raises significant questions about the future of the project, including:
if market-rate construction is delayed, will the affordable h…

Revising official figures, new report reveals Nets averaged just 11,622 home fans last season, Islanders drew 11,200 (and have option to leave in 2018)

The Brooklyn Nets drew an average of only 11,622 fans per home game in their most recent (and lousy) season, more than 23% below the announced official attendance figure, and little more than 65% of the Barclays Center's capacity.

The New York Islanders also drew some 19.4% below announced attendance, or 11,200 fans per home game.

The surprising numbers were disclosed in a consultant's report attached to the Preliminary Official Statement for the refinancing of some $462 million in tax-exempt bonds for the Barclays Center (plus another $20 million in taxable bonds). The refinancing should lower costs to Mikhail Prokhorov, owner of the arena operating company, by and average of $3.4 million a year through 2044 in paying off arena construction.

According to official figures, the Brooklyn Nets attendance averaged 17,187 in the debut season, 2012-13, 17,251 in 2013-14, 17,037 in 2014-15, and 15,125 in the most recent season, 2015-16. For hoops, the arena holds 17,732.

But official…

At 550 Vanderbilt, big chunk of apartments pitched to Chinese buyers as "international units"

One key to sales at the 550 Vanderbilt condo is the connection to China, thanks to Shanghai-based developer Greenland Holdings.

It's the parent of Greenland USA, which as part of Greenland Forest City Partners owns 70% of Pacific Park (except 461 Dean and the arena).

And sales in China may help explain how the developer was able to claim early momentum.
"Since 550 Vanderbilt launched pre-sales in June [2015], more than 80 residences have gone into contract, representing over 30% of the building’s 278 total residences," the developer said in a 9/25/15 press release announcing the opening of a sales gallery in Brooklyn. "The strong response from the marketplace indicates the high level of demand for well-designed new luxury homes in Brooklyn..."

Maybe. Or maybe it just meant a decent initial pipeline to Chinese buyers.

As lawyer Jay Neveloff, who represents Forest City, told the Real Deal in 2015, a project involving a Chinese firm "creates a huge market for…