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- against-
Defendant.
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Golenbock Eiseman Assor Bell & Peskoe LLP and The Stolper Group LLP, on
knowledge as to its own status and actions, and otherwise upon information and belief,
Moinian Group, a substantial developer of market-rate real estate in New York City, of a
written agreement to purchase more than $40,000,000 in air rights from a developer of
affordable housing, Atlantic, who depends on the revenues from the sale of such rights in
order to finance the construction of affordable housing in the City. The Court should
declare The Moinian Group's affliate to be in breach of the agreement, thereby enabling
interest, supplied by The Moinian Group affiliate for this very purpose.
The Parties
laws of the State of New York, and having its principal place of business at 155 Avenue
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of the Americas, New York, New York 10013. Atlantic is one of the leading developers
of affordable housing in New York City, having developed more than 6,500 units of such
liability company organized under the laws of the State of New York, and having its
principal place of business care of Josephson LLC, d//a The Moinian Group ("The
Moinian Group") at 530 Fifth Avenue, Suite 1800, New York, New York 10036. The
Moinian Group is a substantial developer of market-rate real estate in New York City.
605 West 42nd is a special purose entity that was formed, and is beneficially owned, by
The Moinian Group and its principal owner, Joseph Moinian, to develop a high-rise
residential tower at 605 West 42nd Street (on the northwest corner of 11 th Avenue) in
'Manattan.
4. This dispute arises from the sale of unused floor area development
rights, otherwise known as "air rights," granted by the New York City Department of
Program."
(thereby creating a mil( of units for low- and moderate-income residents along with
market-rate apartments), through the issuance of negotiable floor area ratio ("FAR")
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6. The FAR is the City's principal means of regulating the size of
buildings. It refers to the ratio of a building's total floor area 1 to the area of its zoning lot.
Each zoning district in New York City2 has an FAR control, which, when multplied by
the lot area of the zoning lot, produces the ma)Cimum floor area allowable in a building on
that lot. For e)Cample, on a 10,000 square-foot zoning lot in a district with a ma)Cimum
FAR of3.0, the floor area ofa building on that lot cannot e)Cceed 30,000 square feet.
floor area of residential developments in e)Cchange for the provision of affordable (i. e.,
below market-rate) housing. Under the Program, the FAR increase may be utilized at
another location within the same community districe or within a half-mile of the
affordable housing submits an application to HPD; upon approval of the application, the
developer and HPD enter into a written agreement governing the development of
affordable housing; HPD then authorizes the Department of Buildings to issue a building
permit allowing for a zoning bonus, which the applicant then can sell to a developer of
affordable housing projects. The revenues received from the sale of FAR bonuses can
1 The "floor area" of a building is the sum of the gross area of each floor of the building, excluding
mechanical space, cellar space, floor space in open balconies, elevators or stair bulkheads and, in most
zoning districts, floor space used for accessory parking that is located less than 23 feet above curb leveL.
2 A "zoning district" is a mapped residential, commercial or manufacturing district with similar use, bulk
and density regulations.
3 There are 59 community districts in New York City, ranging in size from 900 acres to nearly 15,000
acres and in population from fewer than 35,000 residents to more than 200,000 residents. Each community
district is served by a Community Board, which acts as an advocate for the residents in its district.
4557M3 3
then be applied to pay down the debt and/or other costs of constructing and maintaining
which stil e)Cists today, was (and is) confined to those zoning districts in the City that
permit the highest residential density, known as RIO or RIO equivalent districts. Under
the RIO Program, paricipants are granted a floor area bonus of appro)Cimately four
square feet for each square foot of newly-constructed, off-site affordable housing
developed, up to a ma)Cimum FAR bonus of 20%. In RIO and equivalent districts, the
ma)Cimum FAR is 10.0. Thus, under the RIO Program, participants are permitted to sell
the right to increase the ma)Cimum allowable FAR of a building (in a RIO or equivalent
district) to 12.0.
11. In 2005, the City e)Cpanded the Inclusionary Housing Program (the
"E)Cpanded Program") to promote affordable housing in areas other than RIO or RIO
equivalent districts. The E)Cpanded Program applied, and applies, to districts that were
rezoned to encourage housing development in medium and high densities. Such rezoned
districts include Hudson Yards, West Chelsea, the Upper West Side, 125th Street and the
East Vilage/Lower East Side in Manhattan, Greenpoint- Willamsburg, South Park Slope,
12. Unlike the RIO Program, the E)Cpanded Program permits the
coupling of FAR bonuses with other forms of City subsidies, in order to encourage the
development of affordable housing. As a consequence, the FAR bonus granted under the
E)Cpanded Program is less than the FAR bonus granted under the RIO Program. Under
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the E)Cpanded Program, participants receive a floor area bonus of 1.25 square feet for
each square foot of affordable housing developed, up to a ma)Cimum FAR bonus, which
42nd, as "Purchaser," entered into an Inclusionary Air Rights Purchase Agreement (as
amended, the "Agreement") governing the sale of floor area development rights (i.e., air
rights) to be granted under the RlO Program (the "Rights") in connection with Atlantic's
development of affordable housing at 513 West 55th Street in Manhattan ("W. 55th
Street"). Specifically, under the Agreement, Atlantic agreed to sell, and 605 W. 42nd
agreed to purchase, 231,762 square feet of floor area bonus to be issued in connection
with W. 55th Street at a price of$176.90 per square foot or a total price of $40,998,697.80
14. The Agreement obligated 605 W. 42nd Street to pay into escrow a
deposit of appro)Cimately 10% of the Purchase Price (the "Deposit"). The Deposit was to
be paid in three stages. A "First Deposit," in the amount of $2,050,000, was due upon
e)Cecution of the Agreement. A "Second Deposit," in the amount of$I,025,000, was due
no later than March 15,2008. And a "Third Deposit," in the amount of$I,025,000, was
due no later than May 1,2008. The Deposit was to be paid to an "Escrow Agent,"
identified as the law firm of Bryan Cave LLP ("Bryan Cave"), and held in escrow,
pursuant to the terms of a written escrow agreement (the "Escrow Agreement") attached
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as Emibit A to the Agreement, until the earlier of either (i) 605 W. 42nd,s subsequent
W. 42nd was required to deliver a clean, irrevocable letter of credit (the "Letter of
Credit") in an amount equal to fifty percent of the Purchase Price to be held by a different
escrow agent, the law firm of Roemer Wallens & Mineu)C LLP ("Roemer"), under terms
substantially similar to those in the Escrow Agreement. The Letter of Credit was to
name Roemer as the beneficiary, be for an initial term of one year with automatic renewal
thereafter and provide that it may be drawn down upon a certification by Roemer that 605
W,42nd is in default under the terms of the Agreement beyond any applicable cure period.
Upon delivery of the Letter of Credit, the Deposit was to be released back to 605 W. 42nd.
16. The Escrow Agreement provides that, within five business days
after receipt of an appropriate notice from Atlantic, the Escrow Agent is obligated to mail
such notice to 605 W. 42nd and that, unless the Escrow Agent receives written objection
from 605 W. 42nd within ten days thereafter, it shall disburse aU proceeds in escrow to
Atlantic. However, if 605 W. 42nd delivers a written objection to the Escrow Agent
within 10 days after the Escrow Agent's mailng of Atlantic's notice, the Escrow Agent is
required to await either (i) a joint instruction from Atlantic and 605 W. 42nd or (ii) a
copy of a final judgment resolving the paries' dispute, before disbursing the escrowed
proceeds.
In the event that Purchaser fails to deliver the Letter of Credit as required
herein and such default is not cured within twenty (20) Business Days
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after notice, TIME BEING OF THE ESSENCE WITH REGARD TO
SUCH EXTENDED DATE, then, as Seller's sole remedy, this Agreement
may be terminated by Seller upon written notice to Purchaser, in which
event Seller shall cause Escrow Agent to disburse the Deposit to Seller as
its sole and liquidated damages, whereupon neither party shall then have
any other rights or claims against the other arising from or through this
Agreement (other than those rights or claims which are e)Cpressly provided
herein to survive the Closing), it being agreed that Seller's damages are
impossible to ascertain with certainty and said amount represents an
agreed upon liquidation of any and all claims by Seller hereunder.
18. The Agreement further provides that, "(i)n the event a dispute
arises between the parties and any litigation, arbitration or other proceeding is
commenced to enforce the provisions of this Agreement, the prevailng pary in litigation,
arbitration or proceeding shall be entitled to seek, claim and receive from the non-
prevailing pary reasonable attorneys' fees and disbursements, including court costs
through all appeals, incurred by the prevailng pary with respect thereto."
Inclusionary Air Rights Purchase Agreement (the "Amendment"). Among other things,
the Amendment eliminated the obligation of 605 W. 42nd to pay a Third Deposit,
redefined the term "Deposit" to include solely the First and Second Deposits, i. e., a total
of $3,075,000, e)Ctended the deadline by which 605 W. 42nd was obligated to provide the
later than November 1, 2008, and provided that the Letter of Credit shall be payable and
455780.3 7
605 W. 42od,s Payment of the Deposit, But Failure to
Provide the Letter of Credit in Breach of the Agreement
Escrow Agent the First Deposit in the amount of $2,050,000, which the Escrow Agent
Escrow Agent the Second Deposit in the amount of $1 ,025,000, which the Escrow Agent
also has been holding under the terms of the Escrow Agreement.
than November 1,2008,605 W. 4Znd was obligated to provide the Letter of Credit to the
accordance with the terms of the Agreement, delivered notice to 605 W. 42nd that 605 W.
42nd was in default of the Agreement for failng to deliver the Letter of Credit and that,
unless such default was timely cured, Atlantic would e)Cercise its rights under Section
24. 605 W. 42nd Street did not cure its default. In fact, it did not
respond to the default notice at all -- at least not for the ne)Ct si)C weeks.
25. With 605 W. 42nd in default, and having failed to cure that default
within the applicable period of twenty Business Days after having been provided notice,
Atlantic, by letter dated December 5,2008, made written demand upon the Escrow Agent
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26. By letter dated December 15,2008,605 W. 42nd delivered a
written objection to Atlantic's escrow demand and demanded that all escrowed property
be relinquished to it.
dated December 19,2008, notified the paries that it would continue to hold in escrow the
Deposit, and all interest thereon, until it receives either written instructions jointly signed
by the parties or a certified copy of a final order directing the Escrow Agent to deliver the
CAUSE OF ACTION
(BREACH OF CONTRACT)
29. Atlantic and 605 W. 42nd entered into the Agreement, pursuant to
which, among other things, 605 W. 42nd agreed to deliver a Letter of Credit in the amount
the Letter of Credit to the Escrow Agent by no later than November 1, 2008.
dated November 4, 2008, gave written notice to 605 W. 42nd of 605 W,42nd,s default
Atlantic is entitled, as liquidated damages, to direct the Escrow Agent to disburse the
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33. Pursuant to section 1O(f) of the Agreement, Atlantic is further
entitled "to reasonable attorneys' fees and disbursements, including cour costs through
34. Atlantic has performed all of its obligations under the Agreement,
e)Ccept for those obligations for which performance has been e)Ccused or otherwise
judgment:
failng to deliver the Letter of Credit and that, pursuant to section 1 O( c) of the Agreement,
Atlantic is entitled to instruct the Escrow Agent to disburse to Atlantic the Deposit (in the
attorneys' fees and costs it incurred in enforcing the Agreement, including its reasonable
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C. Awarding such other and further relief as the Court deems just and
proper.
By:
Adam C. . verstein
Pamela . Zimmerman
-and-
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