Skip to main content

Judge, deferring to MTA version of the case, dismisses lawsuit challenging revision of Vanderbilt Yard deal

As I wrote last week, the case challenging the Metropolitan Transportation Authority's revision of the Vanderbilt Yard deal with Forest City Ratner was an uphill battle for the plaintiffs, given that the legal standard are highly deferential to the agency.

State Supreme Court Justice Michael Stallman, in a ruling issued yesterday, dismissed the case. He wrote that not only did the plaintiffs--AY opponents Develop Don't Destroy Brooklyn, joined by four elected officials and the Straphangers Campaign--not have standing to challenge the alleged violation of the Public Authorities Accountability Act (PAAA), even with standing they couldn't make their case.

They charged that the PAAA, passed in 2005, requires an independent appraisal of the property and that a seller seek out competitive offers.

DDDB said it was considering an appeal and pointed to the MTA's willingness to leave $80 million on the table--money the agency asserts it will ultimately get--at a time of severe service cuts.

Stallman, in deferring to the MTA's version of the case, agreed that the limited response to the original 2005 RFP--only Extell responded along with Forest City Ratner--was due to "the unusual nature and scope of the project" rather than FCR's inside track.

Agreeing with the MTA

Stallman agreed with the MTA that the original plan and revised deal were essentially the same, subject to two modifications: the $100 million price would instead be $20 million down for the arena block, with the rest paid over 22 years, and the replacement railyard was value-engineered.

He also agreed that the process by which only two developers answered the RFP in 2005 was fair.

He left out the generous 6.5% interest rate granted Forest City Ratner and the extended time to operate a temporary railyard. He didn't comment on the rather surprising suggestion, by MTA CFO Garry Dellaverson, that FCR had the MTA over a barrel, rather than vice versa, given the developer's need to get the deal done in order to reap tax-exempt bonds by the end of the year.

Stallman didn't comment on the implication that the requirement of Forest City Ratner to leave an $86 million letter of credit to complete a railyard valued at $147 million cast doubt on the total valuation of the deal by the MTA and developer.

(Yes, the MTA would still have development rights, should FCR walk.)

And while the MTA argues that the 2005 Forest City Ratner bid ($100 million cash, after an initial offer of $50 million) was overall more valuable than the bid from rival Extell ($150 million cash), there's no way to fully compare them, because the MTA never let Extell develop its bid and thus offer comparable or greater noncash elements.


A non-bidder does not have standing to challenge the award of a contract by a public authority, Stallman wrote. The claim that elected officials represent users of the transit system who might be affected by the project is vague, without specific injury or interest required for standing.

As for DDDB, Stallman said that one claim for standing--that it aims to promote accountability--is "so broad and vacuous as to erase the concept itself." And he said DDDB's public statement of a competing offer at the June 24 board meeting was not a formal, detailed plan, and DDDB had not proven that it met the criteria of an RFP.

Otherwise, he said, opponents of other projects could claim to be last-minute bidders "and thereby bootstrap standing to challenge the determination."

In other words, the only aggrieved party was the losing bidder, Extell.

Allowing standing?

The petitioners argued that, because the contract award process and project are matters of public concern, the court should relax the requirements of standing.

Stallman disagreed, but wrote that he recognized there might be a larger issue at stake:
It is not for this Court of first instance to depart from the recognized rules of standing. Nevertheless, this Court is troubled that, were standing interpreted too restrictively, hypothetically there could be no way of judicially challenging what could be a clear violation of the appraisal and bidding provisions of the PAAA (e.g., if a rogue agency gave away land or contract, without appraisal or any public bidding process, to an official's relative or a political crony). It is appropriately within the province of the Court of Appeals to consider whether a different standard for standing should be applied to the subject provisions of the PAAA.
So Stallman did get to the merits of the case, observing that a long appeal limited to the standing issue, without an adjudication of the merits, would not be in the public interest, and noting that the issues of standing and merits are intertwined.

Need for an appraisal and a fair RFP?

Stallman disagreed with Forest City Ratner that no appraisal was required. He wrote:
Ratner, given the broad, remedial purpose of the PAAA, an appraisal was required. Assuredly, given the unusual nature and scope of the project, only two experienced developers--FCRC and Extell--came forward in response to the RFP in 2005, and the MTA, for rational reasons, not subject to review here, rejected Extell's bid.

...The MTA had a rational basis for believing no other responsible developer would come forward, and for continuing to negotiate with FCRC to refine the plan and bring it to fruition, without yet again initiating a new bidding process.
Yes, that decision is not subject to review, but the limited response might be attributed not to "the unusual nature and scope of the project"--remember, the bidders were bidding to develop the Vanderbilt Yard, not the Atlantic Yards project--but the fact that Forest City Ratner had been anointed the site 18 months earlier.

The robust responses to an RFP for the Hudson Yards site and to a similar request for the Willets Point site suggest much greater developer interest when one developer doesn't have an inside track.

A new plan?

Early in the decision, Stallman observed:
The resolution cannot be analyzed as a separate, newly minted plan in a vacuum. Rather, it was the culmination of a long negotiation process, prolonged by the extensive public land use process and debate, including environmental review and public hearings concerning the entire Atlantic Yards project, many lawsuits and the vicissitudes of planning and financing such a large development process, which was further complicated by the onset of the national economic crisis in the summer and autumn of 2008.
Later, he added:
If every change were to be viewed as a new plan so as to trigger anew each mandated review process, no development plan could ever reach final approval--let alone ultimate completion.
He said there was no dispute that a new appraisal would have estimated the site to be worth less than the 2005 appraisal. And he agreed that the value of Forest City's obligations had increased.

What he didn't examine--because it wasn't part of the case--was whether Extell's bid could have been more valuable:
To the extent that the petitioners suggest that there were legal infirmities in the 2005 RFP and the proposal selection process, the rejection of the Extell bid, or the 2006 SEQRA environmental review, or the December 13, 2006 MTA Board resolution which, in essence, affirmed the substance of the FCRC proposal, those determinations become final when taken and are not subject to review here.
He noted that the PAAA has an exception which allows public bidding to be bypassed if the disposal of the property is intended to further public welfare or economic development, and that the MTA had determined that.

He then deferred the Court of Appeals, which "found that the Atlantic Yards project constituted a public use." More precisely, the Court of Appeals deferred to the ESDC's finding of a public use.

Responding to the charges

Stallman wrote that the petitioners had not demonstrated that the plan gives the MTA less than the estimated market value and had not shown that the MTA did not attempt to "obtain such competition as was feasible under the circumstances," saying that the "process began with an open, competitive RFP."

The economic downtown and declining market "would have made solicitation of new bids a futile and unreasonable gamble," a statement challenged by the response in Willets Point. And, he wrote, it might have exposed the MTA to litigation by FCR.

The four elected officials named as plaintiffs are State Senator Velmanette Montgomery, Assemblymember Jim Brennan, Assemblymember Joan Millman, and City Council Member Letitia James. The case was known as Montgomery, et al vs. MTA.


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…

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…

So, Forest City has some property subject to the future Gowanus rezoning

Writing yesterday, MAP: Who Owns All the Property Along the Gowanus Canal, DNAinfo's Leslie Albrecht lays out the positioning of various real estate players along the Gowanus Canal, a Superfund site:
As the city considers whether to rezone Gowanus and, perhaps, morph the gritty low-rise industrial area into a hot new neighborhood of residential towers (albeit at a fraction of the height of Manhattan's supertall buildings), DNAinfo reviewed property records along the canal to find out who stands to benefit most from the changes.
Investors have poured at least $440 million into buying land on the polluted waterway and more than a third of the properties have changed hands in the past decade, according to an examination of records for the nearly 130 properties along the 1.8-mile canal. While the single largest landowner is developer Property Markets Group, other landowners include Kushner Companies, Alloy Development, Two Trees, and Forest City New York.

Forest City's plans unc…

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…