Tuesday, January 06, 2009

Will December 19, 2009 be the decision date for Atlantic Yards? It depends on "reasonable steps"

A reader reminds me that I didn't read all the fine print before posting today on the future of Atlantic Yards in 2009. After all, a state document sets up December 19, 2009 as a decision date--but maybe not a final one.

Target: December 19

The State Funding Agreement, as I wrote last March, sets up an "Effective Date," defined as when litigation... shall have been sufficiently concluded so as to permit such financing and construction to proceed.... [and] ESDC has acquired and delivered vacant possession of the Project Site.

That could take a while, especially if George Locker's timetable moves litigation into 2010.

If the Effective Date does not occur prior to December 19, 2009 and Forest City Ratner fails to pursue or cooperate in the site litigation or take "reasonable steps, (including advancing design work and other predevelopment activities)" in furtherance of the project, it "will be deemed abandoned," and the ESDC will get its money back.

Is that likely? I'm not so sure. After, the conjunction is "or," not "and." As long as Forest City Ratner participates in the litigation it's meeting its obligations. And if the main litigation is over, it's not clear whether "reasonable steps" would include, for example, work on the MTA's Vanderbiltt Yard.

The City Funding Agreement, by way of a hypothetical to calculate damages, contemplates an effective date of November 10, 2014.

Remedies for Abandonment

What are the remedies if Forest City Ratner wants to walk away? The document states that if FCR abandons the project before the Effective Date, the developer would have to pay back the ESDC the "Required Amount."

The Required Amount

What's the "Required Amount"? The state payments (of up to $100 million), plus interest, plus Liquidated Damages.

Those Liquidated Damages are in the City Funding Agreement. They're relatively modest, at first; there's a more than threefold jump between the penalties if the project is abandoned in the first three years and the penalties if it's abandoned in the following three years.

And the city funds would be repaid by the ESDC, not the developer, perhaps because $100 million was disbursed for property that the government would then own.

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