Wednesday, January 27, 2016

Site 5 snag? P.C. Richard sues Forest City to block condemnation, contends developer reneged on promise for replacement property

Site 5 (arrow) in model at Pacific Park sales center
The last round of eminent domain for Atlantic Yards/Pacific Park is not going so smoothly.

As the Real Deal reported yesterday, P.C. Richard, which owns part of the Site 5 site at the western end of the project footprint, has sued to block condemnation of the property, which is adjacent to a site owned by Forest City Ratner and occupied by Modell's.

The state also will condemn the Modell's lease, as well, with a 250-foot tower encompassing 439,050 square feet, including office and retail space (and possibly residential).

Promise of replacement space?

According to the Real Deal, a 2006 letter of intent (LOI) signed by P.C. Richard parent A.J. Richard and Forest City indicated that the electronics store would get comparable space in a new building at the project site. Forest City contends the LOI was nonbinding; P.C. Richard says it was ironclad.

The LOI is under seal, but conditions have certainly changed in nine years, with the retail picture far more glossy. In other words--and I speculate--it might have been plausible to include a competitively-priced electronics store in a retail space as of 2006. Now Forest City plans high-end retail, likening it to the Time Warner Center.

The LOI was signed 12/2/06, just before official approval of the project plan by Empire State Development, a state agency with which P.C. Richard had filed comments challenging the environmental review.

P.C. Richard, which filed its suit in the first week of December, seeks a preliminary injunction to stop the condemnation and to require a "Replacement Property at the same location in the lower floors of any tower erected on that site." Forest City responded 1/15/16, denying the allegations.

Hearing next month

A hearing in New York Supreme Court, Kings County, is scheduled for 2/18/16 at 9:30 a.m. Forest City is represented by its regular firm, Kramer, Levin. P.C. Richard is represented by Cravath, Swaine, and Moore, a comparably major firm.

The eminent domain process, which was supposed to take six months, began with a 9/2/15 letter from a lawyer for the state. Given the legal action, the process likely will take longer. Then again, I suspect this is the kind of case that will be settled before trial.

The Real Deal queried representatives for both P.C. Richard and Forest City, who declined comment. Note that the suit does not name Greenland USA, which is now Forest City's joint venture partner/overseer, which is supplying 70% of the project funds going forward.

Though the original agreement did not (obviously) mention Greenland, it seems to me that Greenland could become involved.

Nor does the suit yet name Empire State Development, the condemnor, though it seeks a preliminary injunction "enjoining and estopping Defendant [Forest City], and all those acting in concert with it" from taking various actions.

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