From the latest brief in the ongoing fight, filed yesterday by CW Capital:

Without any explanation, PSW injects the doctrine of last antecedent to convince this Court that an entire clause that follows a semicolon modifies a sentence fragment that precedes the semicolon. Once again, PSW's assertions lack any legal support. Under New York law, it is well-established that a semicolon creates independent and separate sentences.

And this syntax attack came after PSW assailed CW Capital for a liberal use of ellipses in its first brief, saying "CWCAM needed to delete more than half of the language of the latter [a relevant section of the intercreditor agreement], including both the subject and the verb."

Ouch.

The CW filing from yesterday was a reply brief—the issue of the grammar is actually a bit more significant than it lets on in that excerpt—in advance of tomorrow's court hearing, in which a judge could render a highly significant decision for the 11,200-apartment complex. Specifically, Justice Richard Lowe III is bringing both CW Capital and the PSW team in to hear the merits of whether PSW, led by Winthrop and investor Bill Ackman, can legally whisk away the property from CW Capital, which has been trying for nine months to finish a foreclosure. Mr. Ackman and his team, who are holders of mezzanine debt, want to foreclose themselves, jumping in front of CW Capital, which represents the senior mortgage.

With the fate of the ever-desirable property at stake, the swords are certainly drawn.

CW Capital's latest brief, submitted by lead attorney Gregory Cross of Baltimore-based Venable, is more than a little caustic. Among other legal aspersions, the brief accuses PSW of "revisionist history;" it says the firm makes arguments that are "hollow and simply wrong;" and it vows that "the inaccuracies of PSW's assertions will be quickly revealed."

Here's another:

PSW does not cite a single case, industry expert or secondary source material in support of the intercreditor interpretations it advances. The absence of any support for PSW's assertions is striking, but explainable. No support exists.

Colorful language aside, the brief represents a CW Capital response that essentially reiterates its position that the intercreditor agreement bars PSW from foreclosing without first paying off CW Capital (for $3.6 billion). PSW holds that, by its reading of the agreement, it does, actually, have the ability to foreclose (and has invested $45 million in the assumption that its play will work).

The fun starts at 9:30 a.m. Thursday at 60 Centre Street.

Update 5:00 p.m.

In a reply filing this afternoon to CW Capital's reply brief (which itself was a reply to a reply by PSW), Winthrop CEO Michael Ashner hit back at CW Capital, which had accused him of "greenmail" when CW Capital was approached about buying up some of the mezzanine debt. (Greenmail is when one investor buys up shares of a target company's stock, and forces that company to buy the stock back at a higher price or to face takeover).

From an affidavit by Mr. Ashner: 

I deeply resent the implications contained in the Hundertmark Affidavit [a prior filing by CW Capital] that I engaged in 'greenmail.' I never solicited any offer from CWCAM. Any and all conversations regarding my intentions were conducted between myself and other Mezz 1-3 holders, and did not involve any requests for 'greenmail.'

The full reply brief from CW Capital is here. 

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The development is the last piece of Riverside South, the giant string of apartment towers along the West Side Highway that were started by Donald Trump in the 1990s (it was once called, affectionately, "Trump City.") The site has a long and contentious history, and now the developer of the final segment, Extell Development, is proposing to change the zoning to residential (it was intended to be a television studio for NBC), and add more density.

Mr. Stringer, a onetime assemblyman from the Upper West Side, took issue with a number of points, but principally focused on the density (he wants 480,000 square feet less), the open space (he wants it to be more open and inviting), and the schools (he wants Extell to fund a bigger school).

Specifically, on the density issue, Mr. Stringer's recommendation was critical of Extell for essentially seeking more density than it should be entitled to, given that Extell is leaving 60^th Street closed off, getting more development rights as a result (allowable density is based on the size of the site; with a street closed off, the site is significantly larger).

From the recommendation:

[T]he proposed project will result in unmitigatable traffic impacts associated with the project's density Consequently, this finding cannot be met unless there is a reduction in proposed on-site density. The reduction should reflect an amount that is, at minimum, equivalent to the density gained from not mapping West 60th Street - approximately 480,000 SF.

...

It is not sound public policy to encourage development with unmitigated impacts that strain existing infrastructure and reduce the quality of life of all residents in the neighborhood.  Consequently, the density increase remains unwarranted.  

While this is a common argument to be made by any elected official on any development, the question of density seems particularly relevant at Riverside Center. Extell, as Mr. Stringer points out, is asking for 600,000 square feet, more than a hard-fought mid-1990s agreement with the community and Upper West Side elected officials allows. Extell's argument is that it is both giving more to the community than envisioned a decade ago (it's planning to spend tens of millions to help pay for a school), and it would not be economically viable with a smaller project. As for the latter point, perhaps that is true given the amount Extell paid for the site, but no one forced Extell to spend such a high sum.

A spokesman for Extell, George Arzt, said the firm is "disappointed that the recommendations by Borough President Stringer do not adequately recognize these continuing difficult economic times.

"The proposed reduction in density, along with some of the Borough President's other recommendations, threaten the economic viability of Riverside Center," he said, adding that Extell would continue a dialogue with Mr. Stringer throughout the process.

The community board also recommended "no" on the project, with conditions that included removing one of the five towers, and it now heads to the City Planning Commission.

The final step is the City Council, which is expected to vote by December.

Late last month, Extell bumped up the amount of below-market rate housing in the project to 20 percent. 

Mr. Stringer's full recommendation is here. 

RiversideCenterULURP

The Related Cos. is a bit closer to paying rent on the West Side rail yards--valued at about $1 billion over the course of its 99-year lease with the M.T.A.

The commercial Architecture Billings Index has, for three months now, been slightly over 50 (it was 50.4 in July). Scores above 50 mean that billings increased month-over-month. Based on Related's deal with the M.T.A. for the development rights on the 26-acre site, Related must close on the deal and begin paying rent once three economic triggers are hit: the ABI must reach at least 50; the midtown office availability rate must be at or below 11 percent; and the average Manhattan co-op and condo sales price must pass $1,200 per square foot (this last trigger is slightly more complex).

Of course, all of these must be triggered at the same time, and, given the volatility of the economy, the ABI could fall below 50 once again.

As for the other indicators, there's a bit of breathing room for Related: CB Richard Ellis put the midtown availability rate for August at 13.5 percent (it's on the way down--it was 15.2 percent a year earlier), and Miller Samuel put the average Manhattan co-op and condos sales price for the second quarter of the year at $1,051 a foot.

ebrown@observer.com

From Work

Still confused?

While perhaps not the intended effect, the tangle that is the chart illustrates just why Stuy Town is so susceptible to a complex fight over ownership.

Unlike a simple home purchase gone bad -- one owner who defaulted on one loan from one bank -- in the $6.3 billion Stuyvesant Town deal there were a web of initial investors with equity (the top of the chart), followed by 11 layers of mezzanine debt (many of which were controlled by multiple investors), followed by the $3 billion first mortgage (which was securitized and sold off to an untold number of investors as bonds).

The chart was filed in the ongoing lawsuit between the holders of the first mortgage, special servicer CW Capital, and the investors who control the top layer of mezzanine debt, a team of Pershing Square Capital and Winthrop Realty Trust. 

ebrown@observer.com 

This he-said, she-said on the wording of the contract is significant, given that the judge on the case, Richard Lowe III, made clear that he was going to rule simply based on "whether you [PSW] are bound by the intercreditor agreement," according to a transcript of a court appearance.

The two parties are due in court on Sept. 2. The Ackman/Winthrop team--known as PSW--has scheduled a tentative foreclosure for Sept. 8, but CW Capital is arguing for an injunction, a point on which the judge will rule.

CW Capital's main argument is that "Section 6(d)" of the intercreditor agreement requires any second mortgage holder to pay off all the first mortgage ($3.6 billion, with interest) before foreclosing. The PSW team denies this, saying in its brief that CW Capital's brief engaged in "efforts to mangle Section 6(d) beyond recognition."

From PSW's brief:

"CWCAM needed to delete more than half of the language of the latter [the section], including both the subject and the verb, to attempt to make its argument based on the remaining nonsensical sentence fragment."

Further, PSW accuses CW Capital of itself bidding on the debt that PSW bought up (for 15 cents on the dollar), a sign suggesting that CW Capital may indeed have been concerned about the ability of PSW to foreclose. (Winthrop CEO Michael Ashner says in an affidavit that CW Capital offered the same $45 million that PSW paid.)

Should the judge grant the injunction, then the case would continue and the foreclosure would be averted. Should he deny it, it would be a huge loss for CW Capital. At that point, PSW could foreclose on the equity, take control of the property and throw it into bankruptcy in an attempt to restructure in court. Either that, or PSW and CW Capital could make nice and negotiate a restructuring of the debt outside of court.

Here's a statement from PSW attorney Edward Weisfelner:

"We are confident that the language of the contracts that govern this transaction support our foreclosure plan. We look forward to a successful outcome and are eager to move ahead to meet tenants' needs with a permanent affordable housing solution."

The brief is here. 

DOCS NY-#8266859-V1-PSW NYC LLC's Memorandum of Law in Opposition to Plaintiffs' Motion for Preliminary Inj...

Based on Extell submissions to the Department of City Planning filed last week, the developer apparently intends to increase the level to 20 percent of the units, up from 12 percent. The paperwork filed shows that Extell plans to rezone the area, by the West Side Highway and 59^th Street to qualify for the city's inclusionary zoning program, which gives an extra density bonus in exchange for low- or moderate-income housing.

The move is all part of the negotiating dance toward an approval. Extell is in the midst of the city's seven-month review process, and the community board recently weighed in with a large number of criticisms over density and other issues (notably, they want one of the towers to be removed).

The housing issue is one that was expected, given that 12 percent is rather low for developments these days (but was more customary back when the larger Riverside South area was initially planned). In addition, it was urged by City Planning director Amanda Burden.

ebrown@observer.com

Earlier this year, the mayor, upset about the stalled progress at a half-demolished, prime, Vornado-owned development site in downtown Boston, proclaimed his rage about comments made by Vornado chairman Steve Roth, who indicated he had encouraged blight on a prime New York site in order to win subsidies. (We reported the comments at the time; the subsequent developer bashing by the mayor is here.)

Now, per the Boston Herald, Mr. Menino's anger has been reignited by the attention paid to Vornado's giant planned office tower near the Empire State Building (called 15 Penn Plaza). The mayor apparently sent a message to Mayor Bloomberg about his feelings on the topic:

A furious Hub Mayor Thomas M. Menino yesterday notified Big Apple Mayor Michael Bloomberg that the developer proposing a controversial skyscraper beside the Empire State Building is the same builder that left an unfinished job - and a gaping hole - in the middle of downtown Boston.

...

"Just the arrogance of that corporation Vornado, saying we want to build a building (as high as) the Empire State Building when they have a project here in Boston that's been unfinished for over 2 years," Menino said. "Very, very, very arrogant."

Menino added, "They have no respect for the business community of Boston or the people of Boston."

To be fair to Vornado, it's not like the company is about to start development on 15 Penn Plaza tomorrow. The company says it needs a tenant, and it's just securing approvals now, not starting new high-risk projects. (Not that the lip-sealed Vornado would ever think of commenting in an article to explain this.)

The exchange with the Bloomberg administration was followed by a stern public warning in today's Boston Herald:

"This sheds a pretty harsh light on Vornado and the way they view development," said Boston Redevelopment Authority Director John Palmieri. "It obviously represents a determination on Vornado's part that Boston is not where they want to conduct business."

Yikes.

Vornado apparently saw a scaled-back plan for its stalled site—once meant to be a $700 million mixed-use development—nixed by Mr. Menino as well, according to the Herald. 

ebrown@observer.com

The board of the Port Authority today voted in favor of a deal struck between Mr. Silverstein, the agency's staff and the city and state governments that provides the developer a bailout package of sorts to allow him to build two towers on the site, provided he can find a relatively small tenant commitment and raise $300 million in capital. Given that the package accounted for hundreds of millions in new subsidies on top of old subsidies already in place, it was not a deal typical of government economic development efforts; but, in the end, the governmental powers that be opted for this over an unending stalemate that rendered the World Trade Center site paralyzed.

And thus the fighting is over. Finally. At least for now.

Assuming Mr. Silverstein (pictured) follows through on his commitments (he should have sufficient money to bring the eastern portion of the site—the only part still a large hole—up to grade), and the Port Authority sticks to its schedule, there will be two completed towers at the site by 2013: the centerpiece 1 World Trade Center and the austere 4 World Trade Center.

Should Mr. Silverstein win tenants and financing for 3 World Trade Center as he begins building it, that would be completed by 2015, according to Silverstein schedules.

With that, soon most every portion of the site will actually be moving up for the first time in the history of the redevelopment (there was a lot of excavation needed on the Silverstein sites to get them ready). All of this has meant a busy few months at the Port Authority, which finalized a purchase agreement for 1 W.T.C. with the Durst Organization, signed a letter of intent with Conde Nast to lease in that tower, and struck a deal with Delta to expand Terminal 4 at JFK.

The video of the board meeting is here.

ebrown@observer.com

In the end, the deal proved a headache for the Port Authority to finalize, and key to the final green light appears to be a maneuver that has a long history in the bi-state agency: a funding pledge to New Jersey.

According to multiple people familiar with discussions, in order to win the support of the Christie administration and the New Jersey side of the Port Authority board, the New York side of the Port Authority agreed to commit significant funds toward New Jersey regional transportation projects when the agency reevaluates its priorities for its capital plan in the fall.

The funding is justified as a means of achieving balance after the new World Trade Center deal, which is valued by the agency at about $1.2 billion in new subsidy and foregone rent. That expenditure is being treated as a New York-specific project, and thus, by the one-for-one logic often employed in Port Authority capital plans, corresponding money should go into New Jersey.

This is not all that unlike the trading that went on for years in the New York Legislature, when a governor and lawmakers wanting to spend money on a large project in New York City would need to devote an equal sum to some project upstate in order to make it politically palatable. (Former Senate Majority Leader Joe Bruno has boasted that this is how he won the money to rebuild the Albany airport.)

Still, it's hardly the cleanest system in the world to have deals such as this one. In the extreme, such trading paints a portrait of the Port Authority as an entity that is simply a vehicle for two separate governors who spend money on two separate sets of priorities. This is opposed to the ideal: an agency that solely has at heart the interests of the region as a whole, and prioritizes spending on transportation projects accordingly.

The result in the fall, particularly if there is a revenue increase, will likely be more money devoted to projects such as the renovation or replacement of the Bayonne Bridge, a top infrastructure priority of New Jersey (they want it raised up, or replaced with a higher bridge). Presumably this means there will be comparatively less to go around for New York priorities, such as Moynihan Station. 

A spokesman for Governor Paterson, Morgan Hook, said via email that "We do not comment on rumors." A spokesman for Governor Christie did not respond to requests for comment. 

ebrown@observer.com

The vote came this afternoon, less than two weeks after Empire State Building owner Anthony Malkin launched a public push to block the skyscraper, warning it would detract from his tower's iconic place amongst the skyline.

The Council, apparently, was unmoved by his criticism. In committee votes today, the bulk of the concerns centered around Vornado's commitments to hiring minority- and women-owned businesses, a top issue for many on the Council.

Much of their ire arose after David Greenbaum, Vornado's New York office chief, responded to a question by a Council member on the topic by telling an anecdote meant to illustrate that there are many women who work at Vornado: "I had a party at my house Saturday night, and there were certainly a distinctly large number of women," he said Monday at a committee hearing. His wife, he said, "saw the number of women there, and she couldn't figure out if they were the spouse or they were the employees--so, many of them were the employees."

This appearance of ignorance on the importance of the topic infuriated multiple Council members, and Vornado had to come back with a hiring pledge meant to soothe tempers over the issue.

The lone "no" vote in the 47-1 vote came from Councilman Charles Barron, who echoed the concerns of others on the minority hiring issues, although many of his colleagues ended up voting for the plan. (Two abstained in the committee vote.)

In all, Vornado essentially got what it wanted without having to give up much in return, a rare feat in the development world, particularly given that Vornado was asking for a major upzoning to allow a 2.8 million-square-foot building.

In a statement, a spokesman for Vornado said the building would be an "outstanding addition to New York's iconic skyline," thanking the Council for the vote.

After the vote, Mr. Malkin issued a statement that seemed to acknowledge he was going to accept the Council's vote without any further action (often opponents launch lawsuits).

"The City Council is the decision maker on this subject," he said in a statement. "They have gone out of their way to listen to our position.  In the end, they are the elected representatives of the City of New York, and it was up to them to decide."

ebrown@observer.com