In win for P.C. Richard, judge orders state to refrain from condemnation while related case is pending. Judge finds ESD "not credible."
A new court ruling adds a further complication to the long-delayed plan to build a giant two-tower project at Site 5, long home to P.C. Richard and Modell's (though the latter is closing).
In a win for retailer P.C. Richard, hoping to stay at Site 5 catercorner to the Barclays Center and gain a replacement store at a future project there, a state Supreme Court judge has agreed to stay a state condemnation action while a separate, related case proceeds.
In that related case, P.C. Richard last year won the initial round; a judge ordered that original developer Forest City Ratner was required to deliver replacement space in the yet-unbuilt successor building at Site 5. That case is currently on appeal.
Site 5 was approved for a 250-foot single tower but, since no "Miss Brooklyn" tower was built at what's now the arena plaza, the project developer has since 2015 aimed to move that unused bulk across the street for a much larger project, nearing 800 feet tall, which would require a new round of project approvals--after, of course, the site was cleared of current occupants.
Tangled history
In the new condemnation case, the 8/12/20 decision by Justice Wayne Saitta noted the tangled history of the dispute. (Here's the decision, also at bottom. Note that the retailer's parent company is A.J. Richard, which the judge refers to as A.J. Richards.)
Just before Atlantic Yards was approved in 2006, Forest City and P.C. Richard executed a Letter of Intent (LOI) regarding a plan for the retailer to sell its property to the developer and gain a replacement space.
Though some negotiations proceeded--and Forest City successfully got P.C. Richard to accept half the annual payment during the future construction period--the implementing documents were never completed or executed. Forest City considered the plan abandoned.
In 2015, a year after Forest City sold 70% of the project going forward to Greenland USA, Forest City directed Empire State Development (ESD, or ESDC) to begin condemnation proceedings. That stalled as P.C. Richard went to court for enforcement--aka "specific performance"--of the LOI.
In January 2019 (decision at bottom), Justice Sylvia Ash found for the retailer, ordering Forest City to perform its obligations. Forest City has appealed that decision, but no date for argument has yet been set, according to the judge.
(The separate case file indicates that mandatory mediation was designated in June, and that Forest City and P.C. Richard--but not Greenland--met in June. Meanwhile, Forest City's request for a Stay Pending Appeal will be heard 9/23/20 at the earliest.)
Complications
Complicating that, of course, is that Forest City no longer controls the future of Site 5. By 2018, Forest City sold all but 5% of the project going forward to Greenland. By late 2018, parent Forest City Realty Trust was absorbed by Brookfield Asset Management.
Forest City has argued that P.C. Richard knows that, without Greenland's consent, nothing could proceed and that "for months after the January 2019 Order, the parties and Greenland negotiated the possibility of an alternative transaction." That, apparently, led nowhere.
Meanwhile, Greenland has told P.C. Richard that the 2006 LOI was not disclosed to Greenland before it acquired its interest in Atlantic Yards/Pacific Park in 2014.
In a win for retailer P.C. Richard, hoping to stay at Site 5 catercorner to the Barclays Center and gain a replacement store at a future project there, a state Supreme Court judge has agreed to stay a state condemnation action while a separate, related case proceeds.
In that related case, P.C. Richard last year won the initial round; a judge ordered that original developer Forest City Ratner was required to deliver replacement space in the yet-unbuilt successor building at Site 5. That case is currently on appeal.
Site 5 was approved for a 250-foot single tower but, since no "Miss Brooklyn" tower was built at what's now the arena plaza, the project developer has since 2015 aimed to move that unused bulk across the street for a much larger project, nearing 800 feet tall, which would require a new round of project approvals--after, of course, the site was cleared of current occupants.
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| 2016 plan for transferring bulk to Site 5 |
In the new condemnation case, the 8/12/20 decision by Justice Wayne Saitta noted the tangled history of the dispute. (Here's the decision, also at bottom. Note that the retailer's parent company is A.J. Richard, which the judge refers to as A.J. Richards.)
Just before Atlantic Yards was approved in 2006, Forest City and P.C. Richard executed a Letter of Intent (LOI) regarding a plan for the retailer to sell its property to the developer and gain a replacement space.
Though some negotiations proceeded--and Forest City successfully got P.C. Richard to accept half the annual payment during the future construction period--the implementing documents were never completed or executed. Forest City considered the plan abandoned.
In 2015, a year after Forest City sold 70% of the project going forward to Greenland USA, Forest City directed Empire State Development (ESD, or ESDC) to begin condemnation proceedings. That stalled as P.C. Richard went to court for enforcement--aka "specific performance"--of the LOI.
In January 2019 (decision at bottom), Justice Sylvia Ash found for the retailer, ordering Forest City to perform its obligations. Forest City has appealed that decision, but no date for argument has yet been set, according to the judge.
(The separate case file indicates that mandatory mediation was designated in June, and that Forest City and P.C. Richard--but not Greenland--met in June. Meanwhile, Forest City's request for a Stay Pending Appeal will be heard 9/23/20 at the earliest.)
Complications
Complicating that, of course, is that Forest City no longer controls the future of Site 5. By 2018, Forest City sold all but 5% of the project going forward to Greenland. By late 2018, parent Forest City Realty Trust was absorbed by Brookfield Asset Management.
Forest City has argued that P.C. Richard knows that, without Greenland's consent, nothing could proceed and that "for months after the January 2019 Order, the parties and Greenland negotiated the possibility of an alternative transaction." That, apparently, led nowhere.
In court, P.C. Richard argued that Forest City "never raised this “impossibility” or claimed that Greenland was a necessary party during the more than four years of litigation in this case, and has therefore waived this argument."
Judge's rationale: ESD not credible
Atlantic Yards/Pacific Park, of course, has gone far more slowly than touted.
By November 2019, ESD--the state authority that oversees/shepherds the project--faced a ten-year expiration date on its powers to pursue eminent domain, since the first condemnation milestone was in 2009.
So ESD went to court in November 2019 and said it expected condemnation to move forward. P.C. Richard sought to stay that action, saying it would lose out on the more value award of specific performance, granted in the earlier, contested case.
ESD countered it was not bound by the separate case, and was pursuing its independent right to condemn the property. The judge didn't buy it.
"ESDC's argument that it is not acting in concert with FCRC or its affiliates is not credible," Saitta wrote, noting that his fellow judge Ash "found that FCRC directed ESDC to commence the condemnation proceedings."
Also, a state Land Acquisition Funding Property Management and Relocation Agreement (LAFPMRA, also at bottom) with a Forest City affiliate allows the project developer to consult with the state authority about the condemnation proceedings, and weigh in regarding settlement, the judge wrote.
P.C. Richard "has already partly performed" under the LOI, as it did not join community opposition to the project, Saitta noted. (Here's my coverage of that, noting that P.C. Richard had filed a criticism of the project's environmental review but refrained from challenging condemnation now.)
Forest City has argued that, in an email accompanying the first draft of the LOI, its lead negotiator, Andy Zlotnick, wrote that "the parties will only be bound when they sign definitive written agreements," and that his counterpart at P.C. Richard, Thomas Pohmer, acknowledged that.
The judge wrote noted that, if ESD proceeded with condemnation now, P.C. Richard would only get the the value of its property and fixtures, not for any business loss, but specific performance under the LOI would offer business benefits. So "just compensation" under the eminent domain law would be inadequate.
(In a legal filing, ESD said, "To the extent the LOI created a property interest in A.J. Richard in Site 5, that will be considered in the condemnation valuation proceeding." That "to the extent" offers a lot of wiggle room, I think.)
Would stay cause delay?
A stay, countered ESD, would delay the project. The judge scoffed, noting that the state "has waited ten years since the final determinations of the challenges to the project and four years after they gave notice of their intent to take the property to commence this proceeding."
"There is no indication that the developer is ready to proceed with the project at this time if the property were vested," he wrote. (Indeed, the pandemic makes it less likely that a project, periodically billed as offering flagship high-rise office space, would proceed soon, given the decreased demand for urban office space and skittishness about elevators.)
Saitta, citing the developer's aim to build a much larger building at the site, doubted ESD's claim that "as of today the project will be developed according to" the existing plan as approved in 2006.
"It appears probable that no development on this property will occur until a decision is made on whether to seek the transfer development rights to enlarge the planned building and any necessary reviews are completed," the judge wrote. "Thus, a stay pending decision on the appeal will not actually cause a significant delay in development of the site."
State disingenuousness
Regarding the claim that the original building might be built, see p. 57 of this PDF, in which ESD states, in a footnote:
Atlantic Yards/Pacific Park, of course, has gone far more slowly than touted.
By November 2019, ESD--the state authority that oversees/shepherds the project--faced a ten-year expiration date on its powers to pursue eminent domain, since the first condemnation milestone was in 2009.
So ESD went to court in November 2019 and said it expected condemnation to move forward. P.C. Richard sought to stay that action, saying it would lose out on the more value award of specific performance, granted in the earlier, contested case.
ESD countered it was not bound by the separate case, and was pursuing its independent right to condemn the property. The judge didn't buy it.
"ESDC's argument that it is not acting in concert with FCRC or its affiliates is not credible," Saitta wrote, noting that his fellow judge Ash "found that FCRC directed ESDC to commence the condemnation proceedings."
Also, a state Land Acquisition Funding Property Management and Relocation Agreement (LAFPMRA, also at bottom) with a Forest City affiliate allows the project developer to consult with the state authority about the condemnation proceedings, and weigh in regarding settlement, the judge wrote.
P.C. Richard "has already partly performed" under the LOI, as it did not join community opposition to the project, Saitta noted. (Here's my coverage of that, noting that P.C. Richard had filed a criticism of the project's environmental review but refrained from challenging condemnation now.)
Forest City has argued that, in an email accompanying the first draft of the LOI, its lead negotiator, Andy Zlotnick, wrote that "the parties will only be bound when they sign definitive written agreements," and that his counterpart at P.C. Richard, Thomas Pohmer, acknowledged that.
The judge wrote noted that, if ESD proceeded with condemnation now, P.C. Richard would only get the the value of its property and fixtures, not for any business loss, but specific performance under the LOI would offer business benefits. So "just compensation" under the eminent domain law would be inadequate.
(In a legal filing, ESD said, "To the extent the LOI created a property interest in A.J. Richard in Site 5, that will be considered in the condemnation valuation proceeding." That "to the extent" offers a lot of wiggle room, I think.)
Would stay cause delay?
A stay, countered ESD, would delay the project. The judge scoffed, noting that the state "has waited ten years since the final determinations of the challenges to the project and four years after they gave notice of their intent to take the property to commence this proceeding."
"There is no indication that the developer is ready to proceed with the project at this time if the property were vested," he wrote. (Indeed, the pandemic makes it less likely that a project, periodically billed as offering flagship high-rise office space, would proceed soon, given the decreased demand for urban office space and skittishness about elevators.)
Saitta, citing the developer's aim to build a much larger building at the site, doubted ESD's claim that "as of today the project will be developed according to" the existing plan as approved in 2006.
"It appears probable that no development on this property will occur until a decision is made on whether to seek the transfer development rights to enlarge the planned building and any necessary reviews are completed," the judge wrote. "Thus, a stay pending decision on the appeal will not actually cause a significant delay in development of the site."
State disingenuousness
Regarding the claim that the original building might be built, see p. 57 of this PDF, in which ESD states, in a footnote:
The fact that the developer may have plans for a larger development that may or may not be approved by the ESD Directors in the future does not change the fact that as matters stand today Site 5 is to be developed pursuant to the already approved MGPP, and staying this proceeding would delay the development of Site 5 to the prejudice of ESD and the public.That somehow reminded me of an equally non-credible 2008 ESD legal argument:
Finally, Appellants labor to fortify their argument by calling the Arena the 'Barclays Center.' There is no record evidence that this name will be used, although this name has been reported in the press."
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