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January 27, 2010

ESDC claims arm's-length negotiation of damages for AY default, but relationship with FCR has been cozy (and developer has 25 years to build project)

Atlantic Yards Report

We've suggested once before that ESDC should stand for "every statement defies credibility" — excuse us while we dust that off again.

A fundamental question in the Atlantic Yards controversy is whether the Empire State Development Corporation (ESDC) is an enabler of projects and developers or, rather, an independent representative of the public interest.

The evidence favors the former--indeed, an ESDC lawyer once said so in court. However, in a key section of the Atlantic Yards development agreement, signed by Forest City Ratner affiliates and the ESDC, a passage improbably claims that the state and the developer have been negotiating at arm's length.

Such a claim seems aimed at dampening any questions about the damages facing the developer in case of default on various obligations associated with the project. The document essentially says that the damages would be significant but impossible to calculate, so "reasonable" damages have been negotiated.

(The agreement emerged as part of the Atlantic Yards master closing documents, first made available yesterday.)

How reasonable?

Are the damages reasonable? In a post tomorrow, I'll look in detail, but consider the outline: the transaction allegedly negotiated at arm's-length allows the developer 12 years to complete Phase 1 and 25 years to complete the entire project, with significant opportunities for extensions--even as the state and developer claim in legal papers that the project would take just a decade.

Just tonight, Forest City Ratner Senior VP Jane Marshall, speaking at a meeting of the 78th Precinct Community Council in Park Slope, said that "the construction schedule is ten years," a careful locution that avoids promising that the project would actually get built in that time.

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NoLandGrab: Arm's length? More like pulling our leg.

Posted by eric at January 27, 2010 12:24 AM