Wednesday, October 21, 2009

As AY endgame approaches, would judges stop the MTA/ESDC from proceeding? Or might the pending cases affect bond sale?

So, how exactly could the latest Atlantic Yards lawsuits, regarding the Metropolitan Transportation Authority's deal with Forest City Ratner and the Empire State Development Corporation's approval, stop progress on the project?

After all, both agencies are likely to go ahead and proceed toward a master closing--as described below--which would be void unless arena bonds are sold by January 1, 2010 or alternative financing is in place by March 1, 2010.

No injunction yet

"We are not seeking an injunction now because there is no physical construction activity to enjoin," Develop Don't Destroy Brooklyn (DDDB) attorney Jeff Baker said yesterday. "We are not seeking an injunction against the MTA, because even if they do close on the sale, it can be reversed."

"When construction begins or appears imminent, then we will seek an injunction to preserve the status quo and protect our rights," he said.

Yes, but can a community group with relatively little money go up against the government and a major developer with hundreds of millions of dollars at stake--and an urgency to get the arena bonds sold before an end-of-the-year deadline?

"Bonds are normally required if a preliminary injunction is granted," Baker acknowledged. "However, the amount of the bond is at the discretion of the court and of course we would seek a nominal bond that is appropriate. Obviously whether a bond is affordable will depend on what the amount is."

"In and of itself, while the MTA case is pending, it does not stop a closing," Baker said. "However, any parties closing on the properties and any financing proceed at their own risk with knowledge of the pending lawsuits."

In other words, those pending lawsuits might deter some forward progress.

Master Closing timetable


The last page of the MTA summary of its Atlantic Yards deal states:
A master escrow closing is contemplated, at which the executed Arena Block Parcel Sale Agreement, various Easement and Transfer Agreements, the Construction Agreement, Transit Improvement Agreement, Air Rights Transfer Agreement, and Air Rights Development Agreement shall be placed in escrow, together with completed ESDC project documents that are a condition of MTA's proceeding.

Escrow shall break upon both (i) the closing of the sale of bonds for the Arena construction or the closing of alternative financing adequate for the Arena construction and (ii) ESDCs vesting of title to the Atlantic Yards Phase 1 condemnation properties, including the property rights needed for the Upgraded Yard.

FCR shall be required to deposit in escrow the $86 million L/C [Letter of Credit] for the Upgraded Yard plus a $20 million L/C for the Arena Block Parcel purchase plus the L/C or insurance policy for environmental remediation work.

The Agreements shall be null and void and the instruments held in escrow returned if either (1) the sale of the Arena bonds does not close before January 1, 2010 and no alternative financing is closed before March 1, 2010; or (ii) the vesting of title for Phase 1 condemnation properties does not occur by the earlier of fifteen months of the sale of the Arena bonds or March 31, 2011.
(Emphasis added)

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