Wednesday, March 25, 2015

Tenants Quietly Settle Lawsuit

Willets Point United Inc. (“WPU”) congratulates the Sunrise Cooperative group of Willets Point tenant businesses, as they settled their lawsuit against Queens Development Group (“QDG”), the City, NYCEDC and NYCIDA two days ago. However, we find it odd that despite settling this lawsuit after a year of negotiating to do so, with the goal of Sunrise Cooperative to relocate its members to new workspace in the Bronx, no announcement of the settlement has been made by Sunrise, by its attorneys at the Urban Justice Center, by Council member Julissa Ferreras, by QDG, the City, or even the spin doctors at NYCEDC.

Before the Lawsuit

In the waning days of the Bloomberg mayoral administration, NYCEDC offered each tenant business operating on City-owned Willets Point Phase One property a payout equal to 12 months of its rent, if the business would vacate the premises by November 30, 2013. If the business remained until January 31, 2014, the offered payout dropped to 6 months rent. Most of the tenant businesses accepted one or the other of the paltry payouts, and vacated the premises. Businesses who didn’t were evicted, regardless of relocation. That is why, with some exceptions, City-owned property within the Willets Point Phase One area has been substantially vacant since early 2014.

Many of the businesses that vacated the area in 2013-2014 are members of the Sunrise Cooperative.

Event organized by the Sunrise Cooperative, August 2, 2013. 

NYCEDC never missed an opportunity to publicly promote that it had retained the Cornerstone Group as a business relocation consultant, but Cornerstone failed to relocate the overwhelming majority of Willets Point businesses despite being paid $700,000 or more for its services (which is a different story for another time).

NYCEDC also announced another financial assistance program in 2013: A “Co-Relocation Fund” available only to groups of five of more eligible tenant businesses that operated on City-owned Willets Point Phase One property within a certain time period – provided that the five or more applicant businesses would relocate together to a common site. Under this program, the Co-Relocation Fund would pay up to $60,000 per business directly to the landlord of a relocation site, or to a seller of property to become a relocation site.

The Sunrise Cooperative presented itself as a group of businesses desiring to relocate together to a common site, such that each Sunrise member qualified for up to $60,000 of Co-Relocation Fund dollars. Sunrise submitted approximately 32 applications for Co-Relocation Fund dollars that were deemed eligible by NYCEDC – equating to approximately $1,920,000 available to pay costs of Sunrise members’ relocation.

Urban Justice Center

Urban Justice Center and its attorney Harvey Epstein had long advocated for Willets Point tenant businesses. By 2013, Sunrise Cooperative had identified a vacant building in the Bronx, consisting of 80,000 square feet of ground floor space and an open yard of the building, as a possible relocation site for its members. However, the building interior would require costly renovation, infrastructure installation and subdivision of its space to become a suitable location where scores of automotive service businesses could operate.

Apparently, NYCEDC and Urban Justice Center recognized that if the Bronx space was to become viable, someone would have to manage the creation of architectural renovation plans and a budget for significant construction work, among many other tasks necessary to relocate the Sunrise Cooperative businesses to that space. So, on November 1, 2013, NYCEDC and Urban Justice Center entered into a contract, by which NYCEDC “agreed to provide Funding Recipient [Urban Justice Center], on a reimbursement basis, with up to seventy-five thousand Dollars ($75,000) for costs and expenses associated with co-relocation due diligence.” The funding amount was later increased to $150,000.

Urban Justice Center used those funds to pay itself, as well as an architect firm and a contractor firm that developed plans and estimates to upgrade the Bronx building as necessary for “use as an automotive repair garage for 50 shops.”

Floor plans were produced that subdivide the interior space into 45 distinct work bays suitable for various types of automotive service businesses, with circulation space for customer automobiles and separate administration offices and restrooms.

Detail portion of Sunrise Cooperative's floor plan for
Bronx site, showing automotive work bays arrayed in aisles.

The contractor has estimated the total cost of the necessary renovation work for the Bronx site to be $7,427,987.28.

The available Co-Relocation Fund dollars do not come close to covering that cost.


On February 4, 2014, petitioners Sunrise Cooperative and 33 of its members filed a lawsuit against developer QDG, Sterling Equities, Inc., The Related Companies, Inc., NYCEDC, NYCIDA and the City. Urban Justice Center provided all legal services representing petitioners in the case – while Urban Justice Center also remained under contract to NYCEDC and invoiced NYCEDC for, among other things, Urban Justice Center’s “project management of development” of the Bronx site.

Upon filing the lawsuit, as far as we are aware, Sunrise Cooperative and Urban Justice Center published no press release and essentially told no one – just as they are now doing with the settlement.

The lawsuit alleged that “the Developers and EDC’s relocation plan is in violation of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (“URA”),” that “there was no lawful relocation plan for current commercial tenants, as is required by federal law,” that “the relocation assistance has been ineffective” and that “only ten out of the approximately 110 businesses in Willets Point [Phase One], or only 9 percent, had been successfully relocated;” that the parkland where QDG intends to construct the “Willets West” mega-mall “cannot be redeveloped for non-parkland use without the express consent of the New York State Legislature” (a key argument also made in the separate lawsuit, Avella v. City of New York, which remains pending); that the 2013 City Council approval pertaining to the proposed Willets Point development is fatally flawed as it was made without knowledge that QDG “would receive over forty million dollars in tax abatements;” and that NYCIDA granted tax abatements of $42.6 million “without following its Uniform Tax Exemption Policy as it is required to do by law.”

Conventional wisdom has been that Sunrise Cooperative and Urban Justice Center filed the lawsuit not out of any actual desire to defend parkland, halt QDG’s development project or rescind NYCIDA’s $42.6 million tax credits to QDG – but instead, to provide leverage in negotiations with NYCEDC and QDG so that Sunrise could obtain the additional millions of dollars necessary to pay the estimated $7,427,987.28 cost to renovate the Bronx space, and facilitate the relocation of Sunrise members there.

Shortly after the lawsuit was filed, Sunrise Cooperative executed a lease agreement with the landlord of the Bronx site on February 15, 2014. The term of the lease is ten years (until January 31, 2024), with one five-year option to extend (until January 31, 2029).

The monthly rent for the entire Bronx space, which increases annually, begins at $73,333.33 per month.

NYCEDC has paid this rent on behalf of Sunrise Cooperative – $73,333.33 per month for the better part of the past year. NYCEDC is drawing from the Co-Relocation Fund to make these rent payments, and has likely already spent more than $800,000 to pay rent for the Bronx site through the present time.

NYCEDC also paid “Sunrise Cooperative’s, Inc.’s security deposit” in the amount of $439,999.98 on March 6, 2014.

Totaling the rent and the security deposit, it seems that NYCEDC has already spent roughly $1,240,000 on payments relating to the Bronx site – the lion’s share of the $1,920,000 in Co-Relocation Fund dollars for which Sunrise Cooperative businesses were eligible.

Meanwhile, as NYCEDC continued to pay rent of $73,333.33 to the Bronx site landlord month after month during the past year, renovation work did not begin and the Sunrise Cooperative lawsuit was repeatedly adjourned. All that has been accomplished by NYCEDC’s expenditure of taxpayer dollars totaling roughly $1,240,000 (and counting) is to take the Bronx site property off the market and keep it open for use by Sunrise Cooperative members if they can renovate it and relocate there.


As quietly as they commenced their lawsuit, Sunrise Cooperative and Urban Justice Center settled it two days ago. Given the substantial commitment of taxpayer dollars to hold the Bronx relocation site until the lawsuit was resolved, the fact that Sunrise now requires many more millions of dollars to renovate the Bronx space for use, and that the lawsuit may have been settled in exchange for NYCEDC providing additional taxpayer money to further Sunrise Cooperative’s relocation to the Bronx site, the parties to the lawsuit should come clean and fully disclose to the public whatever agreement they may have reached.

As much as we’d like to see the successful relocation of Willets Point Phase One tenant businesses, we are skeptical about the appropriateness of the Bronx site leased by Sunrise Cooperative. Queens-based workers will incur a daily bridge toll of $15.00 to be at the Bronx site – roughly $360.00 per month. That’s an additional business cost beyond what they now have at Willets Point, and will increase their prices charged to customers. The proposed layout and configuration of the Bronx site – an indoor automotive marketplace with scores of businesses in separate bays along labyrinthine aisles – raises questions regarding whether customers will visit all of the shops, or mostly stick with the ones located near the entrance.

We look forward to the answers to these and other questions. We also note that settlement of the Sunrise Cooperative lawsuit does not aid the Willets Point automotive business that are not members of the Sunrise Cooperative because they could not afford to pay the dues, were excluded from Sunrise Cooperative, or for any other reason. What will happen to the non-Sunrise businesses remains to be seen.

Meanwhile, although the Sunrise Cooperative lawsuit has settled, the separate lawsuit challenging the QDG project – filed by State Senator Tony Avella, City Club of New York, Queens Civic Congress, New York City Park Advocates, residents, business owners and WPU members – remains pending, with oral argument scheduled for April 15, 2015 at the Appellate Division, First Department.