The Mayor Joins De Niro; Guys Who Hatched Idea Start Talking Lawsuit

In a last-ditch effort to derail Robert De Niro’s plan for a $150 million movie studio at the old Brooklyn Navy Yard, two entrepreneurs who control development rights to the site are threatening to block the project with a lawsuit, The Observer has learned.

The threat is the latest round in a backstage power struggle over the project–pitting the investor group led by Mr. De Niro, which includes Miramax co-chairman Harvey Wein- stein and developer Steven Roth, against the two men who dreamed up the plan, Louis Madigan and Cary Dean Hart. The ambitious proposal would replace three dilapidated structures at the 129-year-old shipyard with 15 soundstages big enough to compete with movie lots in Hollywood.

Mayor Rudolph Giuliani unveiled the deal on May 3 as he stood alongside Messrs. De Niro, Weinstein and Roth in a cavernous Navy Yard building. Meanwhile, Mr. Madigan and Mr. Hart–who looked on quietly from the audience–have been secretly working to replace Mr. Roth, the key financial backer of Mr. De Niro’s group, with another developer, David and Douglas Steiner, a New Jersey-based father-and-son team. David Steiner is a top fund-raiser for the Democratic Party who has dined with President Clinton.

Just days before the press conference, attorneys for New York Studios–the company run by Mr. Madigan and Mr. Hart–launched a tacit threat of a lawsuit. In a letter to city officials, they contended that the city had no right to sign a deal without the approval of Mr. Madigan and Mr. Hart. They are the site’s designated developers through August, when their rights to the site expire.

“Please be advised that New York Studios has not agreed to any such transaction,” reads the letter, which The Observer obtained. “[A]nd we expressly remind you that any action … to enter into an unapproved transaction will represent a clear and material breach of the agreement, and will result in New York Studios taking appropriate steps to protect its rights and interests.”

Mr. Madigan and Mr. Hart are unlikely obstacles for a project backed by the likes of Mr. De Niro, Mr. Weinstein and Mr. Roth, the powerful chairman of Vornado Realty Trust. Mr. Madigan is a bespectacled, heavyset computer consultant, and Mr. Hart is a jaunty, amiable set designer who sports a triangular soul patch on his chin. But in their trek through the city’s boardrooms in search of financing for their dream studio, they have won over a host of believers for a project that had been derided by flinty investors all over town.

As The Observer first reported in its May 3 issue, the key parties have agreed to finance the agreement as follows: Mr. De Niro’s group is investing $35 million; the city-run Brooklyn Navy Yard Development Corporation, which runs the site, chips in $8 million; the Giuliani administration has agreed to subsidize the project with a $25 million low-interest loan; and the Union Labor Life Insurance Company is likely to complete the package with $80 million in financing.

Mr. Madigan and Mr. Hart are unhappy with their slim stake in the deal, which The New York Times placed at 5 percent. And, sources said, they have been in talks with the Steiners for weeks. Mr. Madigan and Mr. Hart reportedly believe that the Steiners could develop the project at a better deal for the city, which owns the site, than Mr. Roth.

But according to the sources, Tribeca and Miramax saw Mr. Roth as the man for the job–and made it clear they would proceed only with Mr. Roth. Thinking they already had a deal, executives in both companies were said to be surprised by the sudden surfacing of the New Jersey-based developers.

(Mr. Madigan, Mr. Hart, Tribeca Productions, Miramax Films, the Steiners and City Hall officials all declined to comment for this story.)

Adding to the intrigue, efforts by Mr. Madigan and Mr. Hart to place their stamp on the deal apparently have stirred up tensions at City Hall. Their right to develop the site was to expire this spring. But in a surprise to many involved in the deal, Deputy Mayor Rudy Washington, who oversees the Navy Yard, abruptly extended their control over the site’s lease until August.

According to a person close to the talks, the move angered Mayor Giuliani, who didn’t want the two men to be in a position to slow the deal.

Last-Minute Talks

New York Studios launched its implicit threat of a lawsuit when it became clear that the Mayor intended to proceed with Mr. De Niro and Mr. Roth. The letter set in motion a frenzy of negotiations that lasted through the weekend of May 1 and continued long after the May 3 press conference ended. Mr. De Niro’s group tried to buy out Mr. Madigan and Mr. Hart over the weekend. New York Studios asked for $3 million, but the group offered no more than $2 million. New York Studios rejected the offer, sources said, the night before the Mayor’s press conference.

The parties went ahead and announced the deal without them–leaving them no choice but to look on from the audience. But Mr. Madigan’s and Mr. Hart’s opposition did have one immediate effect: They refused to sign a letter of intent–a nonbinding document that outlines the basics of a deal–which helped dissuade the other key parties from signing the letter.

Yet it’s unclear just how much sway the two men maintain over the project. People close to the deal insist that New York Studios has no strong legal basis for a lawsuit, and add that the last-minute opposition is just a blip.

In fact, an administration official told The Observer that any lease deals over 200,000 square feet–like the studio project–must be explicitly approved by the Mayor. And Mr. Giuliani, the official said, will approve a deal only with Mr. De Niro and Mr. Roth.

One person close to New York Studios insisted they still had legal control over the site. “We have an agreement with the city that if we can achieve financing, we have a right to execute the lease,” the person said.

But, sources said, the key parties, while still hoping to keep New York Studios on board, are prepared to wait until August, when New York Studios’ control over the site expires. At that point, they will do the deal without them.

“We’re moving forward–either with these guys or without these guys,” the administration official said. “We’re hoping it will be with them. [But] if not, in August, the Navy Yard [Development Corporation] will redesignate somebody else, and we’ll move forward without them.”

That would be a huge loss for Mr. Madigan and Mr. Hart. Ever since the two men came up with the plan last spring, they have searched the city for financing. They reportedly have put up $2.5 million trying to launch the project. And they have vigorously advocated the plan, enduring the scorn of investors who derided them as dreamers who lacked the clout necessary to build their studio.

If completed, a 700,000-square-foot facility equipped for full production of major motion pictures, sitcoms, commercials and music videos would rise on 15 acres of industrial landscape. Although similar plans have been floated for New York in the past, this one has the benefit of Mr. De Niro and Miramax, who would shoot films on the site.

Forgotten Men

But now the deal may move forward without the men who had the idea in the first place. The predicament facing Mr. Madigan and Mr. Hart was on display at the May 3 press conference. As Mayor Giuliani went on about his Brooklyn roots, Mr. De Niro, Mr. Weinstein, Jane Rosenthal, the president of Tribeca Productions, deputy mayors Randy Levine and Rudy Washington, city Economic Development Corporation president Charles Millard and several others involved in the project were on the stage with him. Mr. Madigan and Mr. Hart were conspicuous by their absence from an honored position. From the audience, they listened to speakers talk about their hopes for the project and their love of Brooklyn. When Mr. Washington took the stage, Mr. Madigan and Mr. Hart applauded loudly–and the Deputy Mayor responded by hailing them as the embodiment of the American Dream.

After the press conference, as a clutch of reporters followed Mr. De Niro and his entourage out of the building, a lone television camera sought out the two men as they hovered in the shadows. Mr. Madigan mumbled a few words about the project moving forward “as planned.” There was no talk of their opposition, or what the future might hold for them.