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SUPREME COURT FOR THE STATE OF NEW YORK COUNTY OF NEW YORK ----------- ------- --- --------- ---- ---- --- ----------------- --- ---------- )(

ATLANTIC DEVELOPMENT GROUP LLC, Inde)( No.

Plaintiff, - against-

COMPLAINT

99 CHURCH INESTORS LLC, Defendant. -------- ------ ------- ------- ---------------- ------- ------- -- ----------- )(

Atlantic Development Group LLC ("Atlantic"), by its attorneys, 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, for its Complaint, alleges as follows: Nature of the Action 1. This action arises from the wilful repudiation by a company

beneficially owned and controlled by Larr Silverstein -- one of the largest and most publicized developers, owners and managers of

real estate in New York City -- of

two

agreements to purchase negotiable ta)( certificates from plaintiff Atlantic, who relied on

the millons of dollars in revenues from the sale of such certificates in order to finance its development of affordable housing in the South Bron). 2. Under a City program designed to promote and subsidize the

development of affordable housing, developers such as Atlantic are issued negotiable t~ certificates that can be sold to market rate developers such as Mr. Silverstein, who, in

tum, apply the certificates to reduce their real estate t~ burden on new construction of market rate apartments. In this case, Atlantic entered into two agreements to sell

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certificates to promote and fund Atlantic's construction of low income housing on

Crot?na Parkway and Jessup Avenue in the South Bron)(, to an affiiate of Mr.

Silverstein, who agreed to purchase the certificates to offset ta)(es from his planed development of an 80-story lu)(ury hotel/condominium tower in lower Manattan, known

as 99 Church Street.

3. When as a result ofthe recent credit crisis, however, Mr.

Silverstein found himself unable to finance further construction of 99 Church Street, and

thus determined to put the project indefinitely on hold, his affiliate -- no longer in need of the ta)( benefits it had agreed to purchase from Atlantic -- decided to renege on its written

agreements, thereby depriving Atlantic of a significant source of funding for its

construction of affordable housing in the South Bron)(. Rather than accept the consequence of that decision -- which, under the agreements, is the forfeiture of two letters of credit totaling 50% of the certificates' purchase price as liquidated damages --

Mr. Silverstein and his company then contrived to string Atlantic along and delay the closing of

the transactions, in an il-conceived attempt to run out the clock and use their

own delay as a prete)(t for terminating the agreements. Their transparent attempt to manipúlate their way out of

two binding contracts is unsustainable. Mr. Silverstein's

company plainly and unequivocally repudiated its agreements with Atlantic, and no

manipulation on its par can alter that fact. 4. Atlantic is entitled to judgment declaring that Mr. Silverstein's

company has repudiated its agreements with Atlantic and that Atlantic, as liquidated

damages therefore, may direct the drawing upon of two letters of credit, totaling milions of dollars, supplied by Mr. Silverstein's company for that very purpose.

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The Parties 5. Plaintiff Atlantic is a limited liability company organized under the

laws of

Avenue of

the State of

New York, and maintains its principal place of

the Americas, New York, New York 10013. Atlantic is one of

business at 155

the leading

developers of affordable housing in New York City, having developed more than 6,500 units of such housing since 1995, including at 1926 Crotona Parkway, Bron)(, New York

("Crotona"), and at 1510-1530 Jessup Avenue, Bron)(, New York ("Jessup"). 6. Defendant 99 Church Investors LLC ("99 Church") is a limited

liabilty company organized under the laws of the State of Delaware, and having its principal place of business care of Silverstein Properties, Inc. ("SPI") at 7 World Trade

Center, 250 Greenwich Street, New York, New York 10007. SPI is one the largest developers, owners and managers of

market-rate real estate in the City. 99 Church is a

special purose entity that was formed, and is beneficially owned, by SPI and its

principal owner, Larry Silverstein, to develop what they herald would be the tallest residential building in the City, located at 95-101 Church Street, New York, New York (and known as "99 Church Street"). As planed, 99 Church Street would house a Four

Seasons Hotel in its lower 22 floors and private lu)(ury residences in its higher 58 floors.

421-a Tax Certificates 7. This dispute arises from the sale of 421-a ta)( certificates issued by

the New York City Department of

Housing, Preservation and Development ("HPD")

pursuant to the "Section 421-a Affordable Housing Program." 8. The Section 421-a Program was created in 1971 as a means of

stimulating new construction throughout the City. The certificate program effectively

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creates private subsidies for developers of affordable housing by providing such developers with negotiable certificates that can be sold to developers of market rate housing, enabling them, in tum, to enjoy certain ta)( benefits with respect to new market rate residential construction. The program operates initially by HPD authorizing the sale

of four to si)( certificates per unit of affordable housing constructed and maintained as

affordable housing for a defined period of time; the certificates then are sold to market

rate developers; each certificate offers the market rate developer 1 a to 20 years of t~ benefits per unit. 9. The Section 421-a Program has proven to be critical to the

finaicing of affordable housing development in the City. The sale, or e)(pected sale, of the e)(pected revenue stream on

421-a ta)( certificates is often a significant component of

which lenders finance affordable housing projects. The revenues received from the sale of 421-a ta)( certificates are applied to pay down the debt and/or other costs of

constructing and maintaining affordable housing projects.

The 421-a Agreements 10. Effective November 29,2007, Atlantic, as "Seller," and 99

Church, as "Purchaser," entered into two 421-a Purchase Agreements (each a "421-a

Agreement," and collectively, the "421-a Agreements") governing the sale of 421-a t~ certificates to be used by 99 Church in connection with the development of 99 Church

Street. Other than the quantity and price of the certificates to be purchased, the terms of the two 421-a Agreements are substantially identicaL. In one agreement (the "Crotona Agreement") (the financial terms of

which are confidential), Atlantic agreed to sell, and

99 Church agreed to purchase, a certain number of 421-a ta)( certificates to be issued by

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HPD in connection with the construction of Crotona, at a defined per certificate purchase which also are

price. In the other (the "Jessup Agreement") (the financial terms of

confidential), Atlantic agreed to sell, and 99 Church agreed to purchase, a certain number of 421-a ta)( certificates to be issued by HPD in connection with the construction of

Jessup, at a defined purchase price. The 421-a Agreements comprised a significant

source of Atlantic's fuding for Crotona and Jessup. 11. Under each 421-a Agreement, 99 Church was obligated to deliver

a deposit equal to ten percent of the purchase price to an escrow agent, the law firm of Bryan Cave LLP, to be held in escrow pursuant to the terms of a written Escrow Agreement attached as E)(hibit A to the 421-a Agreement, until the earlier of either (i) 99

Church's subsequent delivery of a letter of credit or (ii) the termination of the 421-a Agreement. the 421-a Agreements, no later than February

12. Pursuant to each of

1, 2008, 99 Church was required to deliver a clean, irrevocable letter of credit ("Letter of

Credit") in an amount equal to fift percent of the purchase price to be held by a different escrow agent, the law firm of

Roemer Wall

ens & Mineu)( LLP ("Roemer"), under terms

substantially similar to those in the Escrow Agreement attached as E)(hibit A to the 421-a

Agreement. Each 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 in the event that 99 Church is in default under the terms ofthe 421-a Agreement beyond any applicable cure period.

Credit, the Escrow Agreement

13. As applied to the Letters of

provides that, within five business days after receipt of an appropriate notice from

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Atlantic, the escrow agent is obligated to draw down on the Letters of Credit and disburse

the proceeds to Atlantic. However, if 99 Church delivers a written objection to the escrow agent within 10 days after Atlantic's notice, the escrow agent is required to await

either (i) a joint instruction from Atlantic and 99 Church or (ii) a copy of a final judgment resolving the parties' dispute, before drawing upon the Letters of Credit. 14. By the terms of

transactions,

the 421-a Agreements, the closing of

the purchase

at which Atlantic was to deliver the certificates and 99 Church was to the

deliver the purchase price, was to take place on the "Closing Date," defined in the agreement as "the date on which Seller elects to deliver the Purchased Amount to

Purchaser, as specified in the Closing Notice. . ., provided that the Closing Notice shall

be no later than December 31, 2008 (the 'Outside Date')." At that time, 99 Church could elect either to (i) wire transfer the entire purchase price under each 421-a Agreement or (ii) have the escrow agent draw down the Letters of Credit in favor of Atlantic and wire the difference.

15. The 421-a Agreements contain e)(tensive provisions regarding either pary's failure to perform. Section 1 O(b) of each agreement provides:

In the event that Seller is ready, wiling and able to deliver the documents set forth in Paragraph 4(b) (e.g.., the Negotiable.Certificates signed and sealed by (HPD) and endorsed by Seller), but Purchaser fails or refuses, for any reason whatsoever, to deliver at the Closing the Purchase Price and such default is not cured with ten (10) Business Days after written notice, TIME BEING OF THE ESSENCE WITH REGARD TO SUCH EXTENDED DATE, then this Agreement may be terminated by Seller upon written notice to Purchaser, in which event, Seller shall be entitled to cause Roemer to draw upon the Letter of Credit and pay proceeds thereof to Seller as its sole and liquidated damages, whereupon neither pary 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)(pressly provided herein to surive the Closing), it being agreed that Seller's damages are impossible to ascertain with certainty and said

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amount represents an agreed upon liquidation of any and all claims by Seller hereunder. 16. The 421-a Agreements furher provide 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 prevailing 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 cour costs

through all appeals, incured by the prevailing pary with respect thereto."

Closing 17. On or before Februar 1,2008,99 Church delivered to Roemer the

two Letters of Credit, one under the Crotona Agreement and the other under the Jessup Agreement, which Roemer has been holding as escrow agent in accordance with the terms of the Escrow Agreement. 18~ On December 2, 2008, Atlantic delivered a Closing Notice, in accordance with the terms of

the Jessup Agreement, setting the Closing Date for

December 17,2008.

19. On December 4,2008, Atlantic delivered a Closing Notice, in

accordance with the terms of the Crotona Agreement, setting the Closing Date for

December 30, 2008. In response, 99 Church, by its counsel, requested that the Closing Date under the Jessup Agreement be adjoumed to December 30, 2008, so that both transactions could be closed simultaneously; Atlantic agreed. 20. Atlantic was ready, willng and able to close both transactions on

the Closing Date of

December 30, 2008. To confirm that 99 Church likewise was ready,

willng and able to close, counsel for Atlantic, bye-mail dated December 22, 2008, asked

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counsel for 99 Church: "Wil you be able to close (on both contracts) ne)(t week or would you prefer to close the week of January 5th?"

21. A week went by with no response. Then, the day before the Closing Date, counsel for 99 Church responded that 99 Church, in fact, was unable to close on the Closing Date due to the unavailability of its principals, and thus preferred to

close after New Year's Day. In an e-mail sent on December 29,2008,99 Church's

counsel wrote: "Both Mike (Levy) and Larry (Silverstein) are out this week. We wil

touch base after the New Year when they get back. Thans."

99 Church's Repudiation of the 421-a Agreement 22. In fact, unbeknownst to Atlantic, 99 Church had no intention of

closing the transactions. The credit crisis had left 99 Church without the ability to

I-a certificates it had

finance furher construction of99 Church Street, and thus the 42

agreed to purchase from Atlantic were no longer of use to it. Recent statements to the press by Mr. Silverstein make that plain. At a recent Dealmaker's Forum sponsored by New York, Mr. Silverstein was quoted

The New York Post and the Real Estate Board of

saying: "Is this (referring to 99 Church Street) going forward?' Can't do it without

financing. " 23. Rather than admit that it was repudiating the agreements, 99

Church instead sought to string Atlantic along until after the contractually-established Outside Date for the closing, i. e., December 31, 2008, so that it could claim that, because the closing had not occurred before the Outside Date, 99 Church was e)(cused from

having to close the transactions.

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24. Immediately after the New Year, counsel for Atlantic repeatedly

attempted to schedule the closing ofthe two transactions during the week of January 5,

2009. But 99 Church's counsel rebuffed those efforts, either stallng for more time or evading Atlantic's communications altogether. 25. After nearly two weeks of 99 Church's persistent refusal to close

the 421-a certificate purchases, Atlantic, by letter dated January 16,2009, delivered notice, in accordance with the terms of each 421-a Agreement, that 99 Church was in default under each 421-a Agreement and that, unless it cured such default, Atlantic would e)(ercise its remedies under the agreements.

26. 99 Church responded by letter that same day, claiming that,

because "the Closing Date was required to have occured no later than the Outside Date (i.e., December 31, 2008)," but did not, each 421-a Agreement "is terminated, null and void and of no further effect" and the Letters of Credit should be returned. 27. The only reason the Closing Date was actually postponed until

after the Outside Date was because 99 Church was unable to close on December 30,

2008, and requested to close after the Outside Date. Moreover, 99 Church did not have the right to unilaterally terminate the 421-a Agreements under any circumstance. To the contrary, under the e)(press terms of the 421-a Agreements, 99 Church's rights, if any, to

terminate the Agreements could be e)(ercised only after giving written notice and ten days' opportunity to cure. 28. 99 Church's refusal to close the transactions and its declaration that the agreements are terminated constitute plain and unequivocal repudiations of

421-a Agreements.

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the

FIRST CAUSE OF ACTION (DECLARATION OF REPUDIATION OF THE CROTONA AGREEMENT) 29. Atlantic repeats and realleges paragraphs 1 through 28 hereof, as if

fully set forth herein. 30. Atlantic was ready, wiling and able to close the Crotona

Agreement on December 30, 2008, and has been ready, willng and able to close the transaction at all times thereafter. 31. 99 Church's refusal to close the transaction and its plain and

unequivocal statement in its letter dated January 16, 2009 that the Crotona Agreement is terminated, null, void and of no further effect constitute an anticipatory repudiation of the

Crotona Agreement, thereby e)(cusing Atlantic of any fuher duty to perform under the Agreement and entitling it to the liquidated damages provided for in the Agreement. 32. 99 Church denies that it has repudiated the Crotona Agreement and

that Atlantic is entitled to liquidated damages provided for in the Agreement. A justiciable controversy, therefore, e)(ists as to these matters. 33. The Cour should declare that 99 Church has anticipatorily repudiated the Crotona Agreement and that, consequently, under Section 10(b) of

the

Agreement, Atlantic is entitled to instruct Roemer to draw upon the Letter of Credit supplied by 99 Church under that Agreement and to pay the proceeds thereof to Atlantic. 34. Pursuant to Section 10(t) of the Crotona Agreement, Atlantic is

further entitled "to reasonable attorneys' fees and disbursements, including court costs

through all appeals, incured" by it in enforcing the terms of the Agreement.

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SECOND CAUSE OF ACTION (DECLARATION OF REPUDIAITON OF JESSUP AGREEMENT) 35. Atlantic repeats and realleges paragraphs 1 through 34 hereof, as if

fully set forth herein. 36. Atlantic was ready, willng and able to close the Jessup Agreement

on December 17,2008, and has been ready, willng and able to close the transaction at all times thereafter. 37. 99 Church's refusal to close the transaction and its plain and

unequivocal statement in its letter dated January 16, 2009 that the Jessup Agreement is terminated, null, void and of no further effect constitute an anticipatory repudiation of the Jessup Agreement, thereby e)(cusing Atlantic of any further duty to perform under the

Agreement and entitling it to the liquidated damages provided for in the Agreement. 38. 99 Church denies that it has repudiated the Jessup Agreement and

that Atlantic is entitled to liquidated damages provided for in the Agreement. A justiciable controversy, therefore, e)(ists as to these matters. 39. The Cour should declare that 99 Church has anticipatorily

the

repudiated the Jessup Agreement and that, consequently, under Section 10(b) of

agreement, Atlantic is entitled to instruct Roemer to draw upon the Letter of Credit supplied by 99 Church under that Agreement and to pay the proceeds thereof to Atlantic.

the Jessup Agreement, Atlantic is

40. Pursuant to Section 10(t) of

fuher entitled "to reasonable attorneys' fees and disbursements, including court costs

through all appeals, incurred" by it in enforcing the terms of the Agreement. WHEREFORE, plaintiff Atlantic Development Group, LLC requests

judgment:

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A. On the First Cause of Action, (i) declaring that 99 Church has anticipatorily repudiated the Crotona Agreement and that, as liquidated damages, Atlantic

is entitled to instruct Roemer to draw upon the Letter of Credit supplied by 99 Church under that agreement and pay the proceeds thereof to Atlantic, and (ii) awarding Atlantic, as the prevailing par, the reasonable attorneys' fees and costs it incurred in enforcing

the Crotona Agreement, including its reasonable attorneys' fees and costs in connection with this action;

B. On the Second Cause of Action, (i) declaring that 99 Church has anticipatorily repudiated the Jessup Agreement and that, as liquidated damages, Atlantic

is entitled to instruct Roemer to draw upon the Letter of Credit supplied by 99 Church under that agreement and pay the proceeds thereof to Atlantic, and (ii) awarding Atlantic,

as the prevailing pary, the reasonable attorneys' fees and costs it incurred in enforcing the Jessup Agreement, including its reasonable attorneys' fees and costs in connection with this action; and

C. Awarding such other and fuher relief as the Court deems just and proper.

Dated: New York, New York April 22, 2009

..

By

437 Madison Avenue

New York, New York 10022 (212) 907-7300 -and-

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THE STOLPER GROUP LLP

Michael T. Stolper 155 Avenue of

the Americas

New York, New York 10013 (212) 337-3502 Attorneys for Plaintif Atlantic

Development Group, LLC

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