New Uncertainty for Atlantic Yards as Court of Appeals Takes Eminent Domain Suit

New York’s highest court has agreed to hear an eminent domain case over the Atlantic Yards project proposed for Brooklyn, a move that infuses new uncertainty into the planned $4.9 billion development that entails a new Nets basketball arena and 6,400 apartments.

The decision by the Court of Appeals was not expected by the project’s developer—Bruce Ratner and his Forest City Ratner—at least based on its public statements and actions. After a year and a half of stagnation, the development seemed to gain new momentum in recent weeks after an appellate court ruled against opponents. Mr. Ratner had been pushing for new public approvals and renegotiated deals with the stated intent of breaking ground on the arena this fall.

Mr. Ratner already confronts a tight schedule in securing $530 million in tax-free financing for the arena. Based on a Dec. 31 I.R.S. deadline for the financing, the cost of the arena would jump by tens of millions of dollars without a tax exemption, and the task of securing financing would grow substantially harder (the broader real estate financing market is more inclement than the tax-free bond market). Thus the viability of the project seems to depend in large part on how fast the court can turn around a ruling.

In a letter that landowners and tenants’ attorneys received Monday (by standard mail), the court said it would hear the case in its October session, failing to honor a request by the state to hear the case “no later than September 9.” From there, the court acts on its own timeline to issue a decision, so it’s unclear whether or not a ruling would be issued before Mr. Ratner’s year-end deadline for tax-free arena financing.

Just after the appellate court decision last month in the developer’s favor, Forest City seemed to be working under the assumption that the project opponents would be unsuccessful in their final appeal. Hours after the appellate decision was announced, Mr. Ratner broke months of press silence and told reporters that he would break ground on the arena later in the year.

At the time, in response to a set of questions I had for Forest City, the developer’s spokesman characterized the opponent’s chances as slim.

“The decision was pretty definitive—in fact, unanimous and strongly written,” the spokesman, Joe DePlasco, said in an email at the time. “They can seek to appeal but it is unlikely it will be granted and we are proceeding based on the victory that we won.

“We are proceeding with the financing. While ESDC [the Empire State Development Corporation] will handle eminent domain issues, we believe that we can finance this deal even if there is an appeal—but we do not anticipate an appeal.”

The viability of the project seems to depend in large part on how fast the court can turn around a ruling.

Based on the prior victory, last week, the developer renegotiated a deal with the M.T.A. to pay about $180 million less up front for the rights to build the project, and it is in the process of gaining new approval from the state.

On Tuesday, in a statement, Mr. DePlasco expressed confidence again:

The Appellate Division ruled unanimously in May in favor of the use of eminent domain because of the public benefits associated with Atlantic Yards. We’re confident that the Court of Appeals will come to the same conclusion.  We are moving forward aggressively following last week’s approval by the MTA and authorization by the Empire State Development Corporation. We intend to be in construction before the end of the year.

ebrown@observer.com