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Forest City offers to take over modular factory; Skanska says no

Two days after filing dueling lawsuits blaming each other for cost overruns in the modular factory at the Brooklyn Navy Yard--a dispute likely worth at least $50 million--Forest City Ratner yesterday proposed that it take over the factory that it believes partner Skanska shuttered illegally last week.

They have an equal partnership in the factory that is supposed to supply modules to the B2 tower, aka 461 Dean Street, but Skanska is the managing member.

As noted in coverage in Capital New York, Forest City--via its affiliate FCRC Modular--said it was ready "to take over as managing member of the partnership … and assume operating control and responsibility for the factory so we can resume production of the module needed for the B2 project. We hope and assume that you share our belief that this is the fastest and best way to reopen the factory and bring back the workers you wrongfully furloughed."

It's unclear what that would mean contractually, but it might make it difficult for Skanska to pursue its case that Forest City is responsible for cost overruns. (Also see coverage in the Daily News and Crain's NY.)

Skanska bites back

However, Skanksa--one of the first antagonists Forest City has faced regarding Atlantic Yards which has significant money and clout--said no, calling Forest City's release of the letter to the press before sending it to Skanska a “a propaganda exercise to take the public’s eye off the serious consequences of its failures at the B2 Project.”

“As for the letter itself, it is completely devoid of substance and Skanska Modular will address it consistent with the parties’ partnership agreement,” Richard Kennedy, co-chief operating officer for Skanska, said in a statement. “Again, Skanska remains hopeful commercial and economic sensibilities will prevail and that Forest City will resolve its problems at the B2 Project so we can get back to building and get the factory workers back to work. But, Skanska simply will not be coerced into surrendering its contractual rights by Forest City’s inappropriate tactics.”

What next?

At the Atlantic Yards/Pacific Park Quality of Life meeting last night, Forest City executive Ashley Cotton gave the company's take, blaming Skanska for mismanagement and problems in this factory.

Noting the offer to take over the modular factory, she said, "We will continue to use every legal means to make sure we get this building going and get people back to work."

Cotton noted that new partner Greenland Group has no financial relationship to the arena or B2, and the next three buildings will be built conventionally, as "we have a factory that's full." It's a lingering question as to whether the later buildings would be built using the modular factory.

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