SUPREME COURT FOR THE STATE OF NEW YORKCOUNTY OF NEW YORK

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ATLANTIC DEVELOPMENT GROUP LLC,

Plaintiff,

Inde)C No.

- against-

605 WEST 42nd LLC,

COMPLAINT

Defendant.

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Atlantic Development Group LLC ("Atlantic"), by its attorneys,Golenbock Eiseman Assor Bell & Peskoe LLP and The Stolper Group LLP, onknowledge 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 is an action to recover for the breach by an affiiate of The

Moinian Group, a substantial developer of market-rate real estate in New York City, of awritten agreement to purchase more than $40,000,000 in air rights from a developer ofaffordable housing, Atlantic, who depends on the revenues from the sale of such rights in

order to finance the construction of affordable housing in the City. The Court should

declare The Moinian Group's affliate to be in breach of

the agreement, thereby enablingAtlantic, as agreed-upon liquidated damages, to recover from escrow $3,075,000, plusinterest, supplied by The Moinian Group affiliate for this very purpose.

The Parties

2. Plaintiff Atlantic is a limited liability company organized under the

laws of the State ofNew York, and having its principal place of

business at 155 Avenue

455780.3

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

the leading developersof affordable housing in New York City, having developed more than 6,500 units of such

housing since 1995.

3. Defendant 605 West 42nd LLC ("605 West 42nd,,) is a limited

liability company organized under the laws ofthe State of

New York, and having its

principal place of

business care of Josephson LLC, d//a The Moinian Group ("TheMoinian Group") at 530 Fifth Avenue, Suite 1800, New York, New York 10036. The

Moinian Group is a substantial developer of

market-rate real estate in New York City.

605 West 42nd is a special purose entity that was formed, and is beneficially owned, by

The Moinian Group and its principal owner, Joseph Moinian, to develop a high-rise

residential tower at 605 West 42nd Street (on the northwest corner of 11 th Avenue) in

'Manattan.

Air Rights under the Inclusionary Housing Program

4. This dispute arises from the sale of unused floor area development

rights, otherwise known as "air rights," granted by the New York City Department ofHousing, Preservation and Development ("HPD") pursuant to its "Inclusionary HousingProgram."

5. The Inclusionary Housing Program was created in 1987 to promote

and establish economically integrated communities in Manattan, by subsidizing the

development of affordable housing in neighborhoods undergoing new development

(thereby creating a mil( of

units for low- and moderate-income residents along withmarket-rate apartments), through the issuance of negotiable floor area ratio ("FAR")bonuses to participants who develop such housing.

455780.3

6. The FAR is the City's principal means of

regulating the size of

buildings. It refers to the ratio of a building's total floor area 1 to the area of its zoning lot.

Each zoning district in New York City2 has an FAR control, which, when multplied by

the lot area of the zoning lot, produces the ma)Cimum floor area allowable in a building onthat lot. For e)Cample, on a 10,000 square-foot zoning lot in a district with a ma)Cimum

FAR of3.0, the floor area ofa building on that lot cannot e)Cceed 30,000 square feet.

7. The Inclusionary Housing Program provides for increases of the

floor area of residential developments in e)Cchange for the provision of affordable (i. e.,

below market-rate) housing. Under the Program, the FAR increase may be utilized at

another location within the same community districe or within a half-mile of the

affordable housing development.

8. At its most basic, the Program operates as follows: A developer of

affordable housing submits an application to HPD; upon approval of

the application, the

developer and HPD enter into a written agreement governing the development of

affordable housing; HPD then authorizes the Department of

Buildings to issue a building

permit allowing for a zoning bonus, which the applicant then can sell to a developer of

nearby market-rate housing.

9. The sale of

FAR bonuses to market-rate developers often is a

significant component of the e)Cpected revenue stream on which lenders finance

affordable housing projects. The revenues received from the sale of FAR bonuses can

1 The "floor area" of a building is the sum of the gross area of each floor of the building, excludingmechanical space, cellar space, floor space in open balconies, elevators or stair bulkheads and, in most

zoning districts, floor space used for accessory parking that is located less than 23 feet above curb leveL.

2 A "zoning district" is a mapped residential, commercial or manufacturing district with similar use, bulk

and density regulations.

3 There are 59 community districts in New York City, ranging in size from 900 acres to nearly 15,000acres and in population from fewer than 35,000 residents to more than 200,000 residents. Each community

district is served by a Community Board, which acts as an advocate for the residents in its district.