Wednesday, February 20, 2008

Documents clarify FCR's obligation to state, but not city, if AY abandoned

Last month the New York Post reported that developer Forest City Ratner can pull out of the $4 billion Atlantic Yards project without penalty, because the developer has not yet signed binding contracts or drawn on direct subsidies. Develop Don't Destroy Brooklyn picked up the news.

What exactly does that mean? After all, the developer has already spent a chunk of its own funds, and would have to pay for the completion of the Carlton Avenue Bridge, for example. The General Project Plan (GPP) does address a reimbursement obligation to the state, but not to the city.

The GPP is a state document, so it's not surprising that city officials didn't sign it. Does that mean that the city has side contracts, as with the bridge, that require reimbursement if the project does not go forward? Or was there a gap in the documentation? It's unclear to me.

The official language

According to p. 27 of the General Project Plan (emphasis added):
Except as hereinafter set forth, in the event that prior to the completion of the Initial Development the Project is discontinued, abandoned, terminated or permanently enjoined beyond all right to appeal, for any reason whatsoever, including, without limitation, FCRC's voluntary decision to abandon the project, FCRC's and ESDC's inability to negotiate mutually acceptable terms for definitive Project documentation, or requirement to modify the terms of this General Project Plan which are not approved by ESDC and are not acceptable to the City, FCRC shall be obligated to reimburse (the "Reimbursement Obligation") the ESDC in an amount equal to the sum of all funds advanced by the ESDC under the Funding Agreements (excluding amounts advanced on behalf of the City) plus interest thereon calculated at the borrowing rate of ESDC. The Reimbursement Obligation shall also apply, and FCRC shall be obligated to make such repayment to ESDC, in the event the Arena construction is not commenced within one year after ESDC delivers vacant possession of the Project Site to FCRC (subject to up to four years of delays resulting from force majeure events or material adverse changes affecting the financing of the Arena) as required to construct the Arena including staging and necessary infrastructure. In the event the Arena construction is timely commenced by is not completed within six (6) years after ESDC's delivery of vacant possession of the Project Site to FCRC (subject to force majeure delays), FCRC will be required to remit agreed upon portions of the Reimbursement Obligation to ESDC for each year of delay.

Nothwithstanding the foregoing, in the event the State and the City elect not to proceed with the Project despite FCRC's willingness to proceed in accordance with the terms of this General Project Plan, and such election on the part of the State and the City is not the result of an inability of the parties to reach agreement on terms after negotiating in good faith, FCRC shall not be liable for the Reimbursement Obligation and any contracts to purchase land from FCRC shall be terminated.

Has the ESDC advanced any funds under the Funding Agreement? Apparently the state's $100 million has not been transferred. The city has begun spending some of its $205 million on project-related infrastructure, however.

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