Zuckerman cries foul on Coliseum notice

Real Estate Weekly, Dec 15, 1993

Nearly nine years after becoming the designated developer for the Coliseum Center, Mortimer Zuckerman is still trying to build a $300 million building and there are still stumbling blocks in his way. But this time, rather than court actions directed at governmental decisions, Zuckerman and his partner in Boston Properties, Edward H. Linde, stand to lose $33.8 million dollars in the form of a letter of credit.

"It has been a nightmare experience working with the city, even though it has not been all their fault," said Zuckerman, referring to years of community based lawsuits, all won by the city.

But after an all night bargaining session in early December, city officials and the Metropolitan Transit Authority finally came to an agreement that Zuckerman charges has stripped the city of its only power over the MTA.

That power was the ability to hold back the MTA from issuing a 90-day closing notice to Boston Properties that could force them to build an earlier structure that no one now wants, or lose their money if no other construction plan met with the parties' approval. The closing notice was issued on Dec. 6 and the time runs out on Mon. March 14, 1994, according to the MTA.

"We don't think the city administration has acted in good faith ... and will not be able to follow through," said Zuckerman at a press conference in the Boston Properties office last week. "They will have nothing to do with the consequences. It might very well cost them millions of dollars out of the proceeds of sales that they could have received a lot earlier from this had we been able to put through this transaction."

Zuckerman said he believed the city changed its stance after the Daily News, which he owns, endorsed Rudolf Giuliani for Mayor. He claims First Deputy Norman Steisel confirmed that suspicion when he told Zuckerman "intervening events" had prompted the city's decision.

Steisel claims the intervening events were the failure of Vincent Tese, head of the State Urban Development Corp., to help mediate a settlement; Boston Properties failure to put forward "any reasonable proposal"; and the MTA being close to making the city a "co-equal partner" in future development plans and guaranteeing a share of the income for any interim rental of the Coliseum. Steisel also believes the arrangement increases the likelihood of a deal with Boston Properties that is in the city's interests.

Zuckerman said Steisel acknowledged earlier this year, in the presence of Barry Sullivan and John Zucotti, that Boston Properties needed a reasonable amount of time - about two years - and a reasonably restructured deal, so that Boston Properties could proceed with the development. "This is an unreasonable way to deal with somebody who stood by in good faith and spent a great deal of money trying to be responsive to the community," said Zuckerman, who tallies about $30 million in unrecouped costs at this time.

He also recalled the Watergate era when he was on Nixon's enemies list, and was upset by the thought of any interference with the independence of the free press. "If I am on [Drinkins'] enemies list I would have hoped I would have been on alphabetically and he wouldn't have gotten to me yet," he joked to reporters,

Zuckerman said he is prepared to build a beautiful building that will enhance Columbus Circle. But he is off for a Chanukah vacation and said the MTA should call him.

Linde said they have attempted to have a dialogue with the MTA since the summer and have been rebuffed each step of the way.

An MTA spokesperson said, "We wish we would hear from them. We really have not heard from them on sitting down and seriously discussing a proposal. The serious deadline in March will prompt Discussion. "

So all the parties claim they want to come to some agreement and get something built. And yet, like spoiled children, they they awaiting a call from the other.

Steven Spinola, the president of the Real Estate Board of New York, said neither Zuckerman nor any other developer, should be punished for conditions out of their control. There should be more discussion."

While there is concern the closing notice has now taken control away from the city, Spinola noted Giuliani will still be mayor. "It is an important position even for the MTA and the next mayor may be able to bring this to a rational conclusion," he added.

Some hope on the horizon may come from the appointment by Giuliani of either developer Donald Zucker or Gronich & Co.'s James Stuckey to head the city's Economic Development Corporation. Zucker emerged as a front-runner it the end of last week when the developer, "a $1 a year man" for former Mayor Ed Koch, decided he wanted something more to do than waiting for the market to get better.

"We have something that is particularly rare and particularly precious and something that deserves to be nurtured and not quashed," said Zuckerman.

"That is we have a tenant that is willing to proceed at a rental level that.. will support a land cost that is generally not supportable in today's market."