Skip to main content

Forest City files second lawsuit over modular stop, asking judge to reopen factory; suit says B2 may have to be completed conventionally

Well, I'm late to covering the news that, late Friday, Forest City Ratner filed its second lawsuit--and the third in recent volleys--against Skanska, its partner in the modular factory at the Brooklyn Navy Yard. (There was coverage in Crain's and, behind a paywall, Capital New York Pro. They got the press release before I did.)

The Forest City affiliate FCRC Modular sued Skanska Modular and CEO Richard Kennedy for unilaterally shutting down the modular factory where modules for the B2 tower are being fabricated, saying it had to be done by a vote of the board, which is split among the co-owners.

Forest City asked for an injunction to return matters to the status quo. "FCRC Modular continues to pursue every possible measure to re-open the factory and put more than 150 people back to work. Yesterday, we offered to take full responsibility for the factory, which Skanska rejected after having unilaterally stopped work and furloughed the workers," Forest City CEO MaryAnne Gilmartin said. "Today we are asking the Court for an injunction that would allow us to re-open the factory immediately. We remain committed to completing B2 as soon as possible despite Skanska's indifference to the wellbeing of these workers and the project."

"If they really did care about the workers, they would have engaged in dialogue with us and resolved the significant commercial and design issues facing the B2 Project," Skanska's Kennedy told Crain's.

Skanska blames Forest City for design problems causing cost overruns worth some $50 million. Forest City says Skanska signed a fixed-price contract to build the 363-unit tower and fabricate the 930 modules and mismanaged the process.

Political support

By the way, Forest City's p.r. team forwarded that curious statement by Borough President Eric Adams and Council Members Laurie Cumbo and Brad Lander supporting re-opening the factory, so it was obviously seen as supporting the developer's position.

In another Crain's article, Adams, somehow lumped in among a purported "many housing advocates... calling for work on the modular tower to resume," more pointedly said, "Legal battles have unnecessarily delayed this process long enough; while the dispute at hand makes its way through our court system, these workers should be allowed to proceed with construction."

From the lawsuit

As far as I can tell, the lawsuit covers much the same ground as the previous one. Forest City notes that Skanska USA and B2 Owner, a Forest City affiliate, signed a contract in which the former "agreed to construct the Project, including all module fabrication and on-site work, such as the structural brace frame, module erection, and connection of the modules to one another, for a fixed price of $116,875,078."

The modular company, co-owned by Skanska and Forest City but managed by the former,
was hired as a subcontractor to Skanska USA and agreed to furnish it with prefabricated modules for the B2 Project for a fixed-price of $31,450,087." Skanska Modular, the suit says, was responsible for all cost overruns.

The lawsuit adds some new details, including a protest by the unions representing the factory workers:
On August 27 Skanska Modular’s counsel responded to the letter from FCRC Modular’s counsel, asserting that the issuance of these notices did not require any Board approval because the Manager had the authority to control the Factory pursuant to Sections 7.1(b)(i) and (ii) of the LLC Agreement and that the prior Board meetings had been called merely “to report to the Board.” On September 2, FCRC Modular’s counsel again demanded, in a letter to Skanska Modular’s counsel, that Skanska Modular immediately withdraw the furlough and WARN Act notices and take steps to restart work at the Factory, or that management of the Factory be turned over immediately to FCRC Modular so it could attempt to prevent further harm and mitigate damages caused by Skanska Modular. These requests were rejected by Skanska Modular’s counsel on September 4.
...On August 28, 2014, counsel for the Modular Construction Division Affiliates of the Building and Construction Trades Council of New York City and Vicinity (“BCTC Modular Affiliates”), the trade unions representing the Factory’s workers, issued a letter to Susan Jenkins, the Factory’s Plant Manager, grieving the Company’s furloughing of its employees and deeming such action to be a violation of the collective bargaining agreement between the Company and BCTC Modular Affiliates (the “CBA”). Specifically, the grievance letter stated that the “[t]he parties’ CBA does not give the authority to the employer to unilaterally implement a furlough policy that impacts wages, benefits and other contractual and statutory rights under federal and state law.”
The impact of delay on modular business

The lawsuit notes that  the work stoppage not only will delay the project, already more than a year behind schedule, the specially trained workers may find new jobs, and that skilled workforce will be lost.

The lawsuit states:
Moreover, the work stoppage jeopardizes the viability of the Project as a whole. Without an operating Factory, B2 Owner may have to abandon the modular concept entirely and instead resort to completing B2 BKLYN using traditional construction techniques, resulting in a loss to the Company of this unique business opportunity. The actions of Skanska Modular and Kennedy also threaten the viability of a continuing modular business because, without a completed hi-rise building, the practicality of modular construction, and therefore the need for a modular factory business, will have been called into question.
(Emphases added)

This would make an odd hybrid.

Of course, Forest City's new partner, the Greenland Group, has already said the next three towers would be built using conventional construction.

And even if this tower is completed using modular construction, question marks will remain until a full building is built in a more rapid fashion.

The impact of delay on affordable housing

The lawsuit states:
Defendants’ actions also have a significant negative impact on third parties. The decision to lay off over 150 workers (over 70% of whom are minorities) and stop fabrication of modules hurts not only the workers themselves, who are now left to hunt for new employment, but also the community and government officials who were relying on a speedy and affordable solution to mitigate the City’s current housing crisis.
Though some people have placed considerable hope in modular as helping mitigate the housing crisis, even if this building is completed, it won't represent a "speedy and affordable solution," for the reasons noted above. That would have to come with the second modular building.

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…

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…