Thursday, April 02, 2015

Bitter lawsuits between Nassau Coliseum project partners Forest City Ratner and Blumenfeld Development Group

First Skanska, now Blumenfeld. In less than a year, Forest City Ratner and Bruce Ratner have become embroiled in bitter legal battles with former partners.

The latest involves a lawsuit (bottom) filed by Blumenfeld Development Group (BDG), a Nassau County-based developer that worked with Forest City on East River Plaza and was a rival bidder for the Nassau Coliseum project before joining up with Forest City's Nassau Events Center (NEC) to win the bid over rival Madison Square Garden.

The lawsuit portrays Ed Blumenfeld and Ratner of having developing significant ties, "beyond a mere business relationship into a long-standing personal friendship and one of confidence and trust." Not any more.

BDG's lawsuit contends that its role--bringing local expertise and connections--was key to the successful bid, and cites email from Forest City principals confirming that.

BDG believed it would be equal partners with Forest City in the retail and entertainment portion of the site. As reported in Long Island Business News, Blumenfeld sues Forest City over Coliseum project:
BDG has been busy designing the retail/entertainment portion of the redevelopment which would have contained about 300,000 square feet of restaurants, retail and entertainment businesses, including a 100,000-square-foot Bass Pro Shops mega-store, a Dave & Buster’s, Modells, an indoor trampoline park, a multi-screen movie theater and a few eateries.
But in February, Forest City Ratner told BDG that it wanted to build a much smaller retail/entertainment component—around half the size of BDG’s plan–that would have a bowling alley, a movie theater and a restaurant to complement its $229 million, 13,000-seat revamped arena.
Forest City spokeswoman Ashley Cotton told Newsday (Blumenfeld Development sues Forest City Ratner Cos. over Coliseum project) that "our concern is the long-term economic viability of a project that we believe meets the needs and expectations of the county. Unfortunately, their vision was at odds with ours."

Dueling lawsuits

Last week, Forest City filed a pre-emptive suit against BDG, asking a judge to formally rule the partnership broken--a move BDG's lawsuit says "contains numerous blatant falsehoods." Long Island Business News reported that Forest City accused BDG of making arrangements with tenants behind its back.

At this point, given that legal documents are by nature self-serving, it's hard to tell who's right. But the more detailed BDG lawsuit has detail that bolsters the argument that the company was, at the least, misled.

Drilling down

The joint venture (JV), according to the BDG lawsuit, meant BDG and Forest City would be 50/50 partners regarding the Retail Space and the Future Development Space, while BDG would have an option to buy 5% in the Arena Space. The lease for the Nassau Coliseum site site listed BDG as a member and owner of NEC.

In August 2014, after working for more than a year, BDG and Forest City executed a Memorandum of Understanding to memorialize the terms of the joint venture, including the 50/50 partnerships.

In September, BDG, on behalf of the JV, signed a letter of intent with Bass Pro Shops to lease 80,000 to 120,000 square feet in the retail space. Ratner sent congratulations. In November, Forest City's Jim Lester sent David Blumenfeld a revised lease for Bass Pro and raised concerns about it.

Although the parties were supposed to sign a formal JV agreement by 11/14/14, Forest City sent BDG a draft with only two days to go. Based on their history of trust and work, the parties "continued to act in furtherance of the Joint Venture" even after the deadline.

The complication, according to BDG's lawsuit, is that Ratner in September "apparently began unilateral discussions with Memorial Sloan-Kettering Hospital (MSK) about building a facility on the Coliseum site. (Ratner's a member of the hospital board.)

Parking became a concern, since the new facility would displace about 1000 surface parking spaces and also would require 450 spaces. But MSK was willing to build parking only for its own needs, not the displaced spaces.

Various parties at a meeting, including Forest City's Jim Lester, agreed another parking structure was needed. BDG and other business groups would ask Gov. Cuomo for state funds for a parking structure.

Ratner's intervention?

"Upon information and belief, Ratner became enraged when he learned that BDG and Forest City's Jim Lester had discussed the need for a parking structure with MSK and the possibility of getting state funding," the BDG suit says. "Apparently Ratner mistakenly believed BDG was somehow trying to unilaterally impose a new, onerous condition."

The suit says that Ratner's personal connection meant he wanted full control, so he wrongfully demanded that BDG stop communicating with any involved parties in the Coliseum Project. In December, Lester canceled weekly meetings regarding the Coliseum plan.

At a dinner 2/10/15, Ratner told BDG he wanted Forest City to control all aspects of the initial development without BDG "interference." Ratner said the parties had different visions; BDG said they'd filed a joint vision: a conceptual master plan (CMP).

But Ratner said he wanted to build only the minimum retail required, not the amount in the CMP, though that plan would not maximize revenues for the county or the JV. Ratner also reversed his previous enthusiasm about Bass Pro and said he was no longer interested.

"When BDG asked Ratner how he thought this new plan would work, Ratner admitted it might not work, and stated all he was really concerned with was 'getting a shovel in the the ground' to protect the arena component of the Lease," according to the lawsuit.

The lawsuit says that, after soliciting BDG as a partner, and using its expertise to gain an edge in the bidding and in the company's connections, Ratner wants sole control.

Pushing for resolution

BDG on 2/25/15 asked Ratner to resume the weekly meetings and warned of litigation. Ratner 3/5/15 rejected the request. BDG asked Nassau County Executive Ed Mangano to mediate, but Ratner refused to cooperate, the lawsuit says.

Om 3/26/15, after an article surfaced in Long Island Business News discussing the dispute, Ratner "caused NEC to preemptively file a frivolous lawsuit" that disavowed the JV and sought a declaration that BDG was not a partner in NEC. The earlier lawsuit claims that BDG caused "delays and gridlock," but the new suit says all deadlines have been met.

And while the first lawsuit claims that BDG had a "fundamentally different vision," the CMP filed in December has both firms' names on it and was a joint effort, according to the latest lawsuit.

"There was no 'unwillingness' to work through the issues" regarding MSK, according to the lawsuit, "only Ratner's desire to wrongfully usurp control of the entire Project, to the exclusion of BDG and to the detriment of Nassau County and its residents."

BDG wants the court to order the JV enforced, and asks for unspecified financial damages. BDG also says Ratner's relationship with the hospital means he's breached fiduciary duties to Nassau Events Center. The lawsuit also seeks damage from Ratner personally.

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