City Extends Deal for Brooklyn Navy Yard With De Niro’s Rivals

Casting new doubts on plans by Robert De Niro and Miramax Films co-chairman Harvey Weinstein to build a $150 million movie studio at the Brooklyn Navy Yard, a rival group of investors claims to have seized control of the site until early autumn, The Observer has learned. The competing investors are pressing ahead with efforts to wrest the tension-fraught project from Mr. De Niro and his chief financial backer, powerful developer Steven Roth.

The rival group includes the two little-known entrepreneurs, Louis Madigan and Cary Dean Hart, who dreamed up the studio plan three years ago. The city originally awarded them the right to develop the project, and they had been working with the De Niro-led group until talks fell apart in May.

Mr. Madigan’s and Mr. Hart’s control of the site was due to expire on Aug. 2–and Mr. De Niro and his team were expected to begin developing the site without them. Mr. Madigan and Mr. Hart threatened to block the project with a lawsuit.

In response to those threats, The Observer has learned, top city officials have quietly signed a so-called “tolling agreement,” freezing the deal and preventing any litigation until Sept. 30. Sources close to Mr. Madigan, Mr. Hart and their company, New York Studios, assert that the tolling agreement extends their control over the site until at least the end of September–a direct challenge to Mr. De Niro and Mr. Roth.

“The purpose of [the agreement] is to freeze our position until Sept. 30, and our position is that we have the right to develop the property,” said Barry Weprin, an attorney with Milberg Weiss Bershad Hynes & Lerach, which is representing New York Studios.

City officials disputed that interpretation. They said the agreement merely preserved New York Studios right to sue them, but not their right to develop the property. They insisted it was merely designed to buy time to patch things up between Mr. De Niro’s group and Mr. Madigan and Mr. Hart, who have vowed to block the project if they are not included.

“It’s much more sensible for everyone to negotiate rather than litigate,” City Corporation Counsel Michael Hess told The Observer . “And this problem can be resolved.”

The ambitious scheme would replace 15 acres of rotting industrial landscape with 12 soundstages grand enough to compete with Hollywood. But efforts to launch the studio have become caught up in an increasingly bitter battle between the De Niro-Weinstein-Roth team and Messrs. Madigan and Hart, who were not satisfied with their stake in the deal that Mayor Rudolph Giuliani announced with great fanfare in May.

The exact meaning of the tolling agreement will likely be left to a judge. Either way, it’s a sign of just how tense things have become between the warring camps.

On one side are some of the city’s most seasoned deal makers: Mr. De Niro, who has successfully poured millions of dollars into real estate projects in TriBeCa; and Mr. Roth, who as chairman of Vornado Realty Trust is one of the city’s most powerful landlords. On the other side are two little-known, seat-of-the-pants entrepreneurs: Mr. Hart, a dapper set designer who sports a square soul patch on his chin; and Mr. Madigan, a bespectacled Internet whiz whose heavyset frame betrays his taste for dark beer.

Mr. Madigan and Mr. Hart certainly seem to have strengthened their hand with the recent agreement. “It obviously gives more time to accomplish whatever it is they are trying to do,” said Jay Neveloff, a real estate attorney at Kramer, Levin, Naftalis & Frankel L.L.P. Indeed, the agreement seems to have caught people close to Mr. De Niro and Mr. Weinstein by surprise: City officials apparently hadn’t even told them about it, and they learned about it only after a call from The Observer .

They Won’t Go Away

What makes these maneuvers even more surprising is that, for a time, it looked as if Mr. Madigan and Mr. Hart were going to be cut out of the project altogether. After talks fell apart in the spring, Mr. Giuliani held a press conference at the Navy Yard to announce that Messrs. De Niro, Roth and Weinstein were moving forward with the project. Mr. Madigan and Mr. Hart were conspicuously excluded from honored positions alongside the Mayor on the dais. At the time, city officials confidently predicted that they would easily roll over the two little-known entrepreneurs, who were reportedly $2.4 million in debt–either by buying them out or waiting until their control over the site expired.

But the two upstarts refused to go away. Even before the press conference, they began secret negotiations with Doug Steiner, a New Jersey-based developer whose father, David, is a top fund-raiser for the Democratic Party. Those efforts appear to have worked: A source familiar with the thinking of Mr. Madigan and Mr. Hart told The Observer that Mr. Steiner has assembled a financing package for the project to compete with Mr. De Niro’s group, and that Mr. Steiner is prepared to sue if the city doesn’t allow him and his partners to build the project.

That’s not all. Setting the stage for a nasty developer-versus-developer showdown, the source added that the Steiner-New York Studios alliance would sooner sue than enter into a compromise partnership with Mr. Roth, unless Mr. Roth’s role is dramatically scaled back.

“While they’d be happy to work with Miramax and TriBeCa, they will not go forward with Vornado as a controlling partner,” the source said.

Blood is so bad between both camps that compromise seems unlikely. And if New York Studios does succeed in winning control of the project and ousting Mr. Roth, Mr. De Niro and Mr. Weinstein would probably pull out. A source close to Mr. De Niro and Mr. Weinstein told The Observer : “They have no interest in going along with anyone but Vornado.”

That doesn’t concern the people at New York Studios. “We don’t need any of them to go forward–the company is ready today,” a source said.

Still, that could imperil the success of the immensely risky project, because Mr. De Niro and Mr. Weinstein might provide the dose of credibility it needs to attract big production companies used to the sprawling lots of Hollywood.

Mr. Madigan and Mr. Hart appear to be taking a risk by refusing to compromise with Mr. De Niro’s group. After all, the city might decide to call their bluff, let them sue, and hope for a victory. After that, Mr. De Niro’s group could develop the property in peace–leaving Mr. Madigan and Mr. Hart alone with a cluttered office in the shadow of the Williamsburg Bridge, three years of wasted time and a couple of million dollars in debts.

But a source close to New York Studios predicted that won’t happen. “They know what they have to lose. They just won’t accept having their lives in Vornado’s hands. They’re hoping the Mayor will see that.”