FILED: NEW YORK COUNTY CLERK 03/11/2016 01:03 PM INDEX NO. 651304/2016 NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 03/11/2016 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ------------------------------------------------------------------------------------ X : THE GEORGETOWN COMPANY, LLC; : GEORGETOWN 19TH STREET PHASE I, LLC; : GEORGETOWN 19TH STREET DEVELOPMENT LLC; and : IAC/GEORGETOWN 19TH STREET, LLC, : Plaintiffs, : - against - : : IAC/INTERACTIVECORP.; : HTRF VENTURES, LLC; and : IAC 19TH STREET HOLDINGS, LLC, : : Defendants. : ----------------------------------------------------------------------------------- X Index No. IAS Part COMPLAINT Plaintiffs The Georgetown Company, LLC, Georgetown 19th Street Phase I, LLC, Georgetown 19th Street Development LLC, and IAC/Georgetown 19th Street, LLC (collectively, Georgetown or the Georgetown companies ), upon knowledge of their own actions and upon information and belief as to all other allegations, allege against Defendants IAC/InterActiveCorp., HTRF Ventures, LLC, and IAC 19th Street Holdings, LLC (collectively, IAC ): SUMMARY 1. Georgetown seeks a declaratory judgment that it is entitled to 50 percent (50%) of a $35 million rights fee (the Rights Fee ) paid for property development rights on Block 690 between 18th and 19th Streets in the West Chelsea (High Line) district of Manhattan. The Rights Fee was received by both Georgetown and Defendant IAC, and was deposited in an escrow account pending resolution of the parties dispute over how the Rights Fee should be shared. 1 of 34
2. Georgetown is entitled to 50 percent of the $35 million Rights Fee under a March 9, 2004 written agreement (the Letter Agreement, attached below as Exhibit A) between Georgetown and IAC. The Letter Agreement was intended to cover exactly the circumstances presented by the $35 million Rights Fee payment. 3. Beginning at least as early as 2003, Georgetown and IAC worked together to develop a new IAC headquarters building on Block 690. Georgetown and IAC anticipated that the new building, which was to be designed by Frank Gehry, would be a magnet for further development in the area and both parties wanted to take advantage of the new investment opportunities it would create. The Letter Agreement provides that when the parties obtain rights or options to purchase an interest in any property adjacent to the new IAC building which was built on Lot 12 and Lot 54 on Block 690 Georgetown and IAC will participate in such transaction on an equal economic basis. The Letter Agreement was entered into at the same time that Georgetown and IAC agreed to develop the new IAC building 4. In 2014, Georgetown and IAC obtained an option from The Related Companies, L.P. ( Related, a property developer and owner) to purchase an interest in a new project on property adjacent to the IAC building. (The option letter is attached below as Exhibit B.) After discussion by all parties, Related monetized the value of the interest it provided by paying the $35 million Rights Fee to Georgetown and IAC to acquire certain property development rights involving Lots 20, 29, 12, and 54 on Block 690. Related paid the Rights Fee jointly to Georgetown and IAC under an April 14, 2014 contract between Related, Georgetown, and IAC (the Rights Fee Agreement ). Each party to the Rights Fee Agreement had an interest in lots on Block 690. Georgetown leased Lots 12 and 54. IAC subleased Lots 12 and 54 from Georgetown. Related owned Lots 20 and 29. Related provided the option to purchase an interest - 2-2 of 34
in its property so that it could use the rights covered by the Rights Fee Agreement for a new building to be constructed on Lots 20 and 29, which eventually resulted in the monetization. 5. Georgetown also is entitled to 50 percent of the $35 million Rights Fee under equitable principles. The Rights Fee was the result of work by Georgetown in 2004 and 2005 work undertaken at Georgetown s initiative in reliance on the Letter Agreement identifying and advocating new Zoning Resolution provisions for Block 690. The provisions advocated by Georgetown, which were adopted by the City, were not needed for the development of the IAC building, but were intended to capture future development opportunities pursuant to the Letter Agreement. As explained in summary form below, and in more detail in the body of the Complaint, without Georgetown s foresight, planning, and cooperation, Related would have never provided an option to purchase an interest in its property or monetized the interest into the $35 million Rights Fee. It was Georgetown s work that led to the Rights Fee Agreement and its $35 million Rights Fee, and there is no dispute that the Rights Fee was paid by Related jointly to both Georgetown and IAC pursuant to the Rights Fee Agreement. Georgetown and IAC Begin Developing Property on Block 690 6. Georgetown and IAC began working together at least as early as 2003. At that time IAC s offices were in Midtown, but IAC s Chairman Barry Diller, the former head of Paramount Pictures and Fox Broadcasting, wanted to build a new showpiece IAC headquarters in Manhattan. Georgetown took on the challenge of developing a building that would be an architectural icon and have the same occupancy cost as a high-end Midtown rental space. 7. Georgetown found several possible sites for IAC s new headquarters and put together a list of recommended architects which included renowned architect Frank Gehry. Georgetown had previously worked with Gehry on proposed renovations of Lincoln Center. - 3-3 of 34
After Georgetown recommended that Diller spend time with Gehry, IAC selected Gehry as architect. 8. Because of Georgetown s expertise and experience in developing Class A office buildings in New York City, IAC entered into a Development Agreement (the Development Agreement ) with Georgetown under which Georgetown, as Developer, oversaw the planning, design and performance of the construction of the IAC building. The Development Agreement, the ground lease (the Lease ) by Georgetown of property on Block 690, and the sublease (the Sublease ) by IAC of the same property on Block 690, were entered into on March 9, 2004. The building developed by IAC and Georgetown was completed in 2007. The Development Agreement terminated by its own terms in 2007 upon final completion of the IAC building. The 2004 Letter Agreement 9. The IAC building has been and remains a magnet for further development in West Chelsea, just as Georgetown and IAC predicted. The Letter Agreement is dated March 9, 2004, the same date Georgetown and IAC leased and subleased the property on Block 690 and entered into their Development Agreement for the IAC building. In the Letter Agreement, Georgetown and IAC agreed on how they would share the benefits of opportunities they expected to realize on property in the blocks adjacent to the new IAC building. The Letter Agreement provides, among other things, that if Georgetown or IAC has or obtains a right or option to purchase any interest in other property adjacent to Lots 12 and 54, then both Georgetown and IAC will share the benefits on an equal economic and control basis. (Letter Agreement at p. 2; see below 41-42 (Background, part C) for details.) - 4-4 of 34
Georgetown Identifies and Plans for Zoning Resolution Benefits 10. In reliance on the Letter Agreement, Georgetown identified and developed zoning proposals that would be attractive to the City and would create additional value for parties with interests in property on Block 690, but that were not needed to develop the building. 11. Georgetown worked with the City in 2004 and 2005 to develop special zoning provisions for Block 690 as part of the City s initiative to amend the Zoning Resolution to create a Special West Chelsea District promoting the development of the new High Line park. Georgetown spent significant time and effort doing this. Georgetown s efforts were separate from and in addition to any obligation under the Development Agreement with IAC for construction of the new IAC headquarters on Lots 12 and 54. 12. When Georgetown worked with the City and advocated adoption of zoning provisions for Block 690, Georgetown relied on IAC s promise to split on a 50/50 basis the future benefits for developments adjacent to Lots 12 and 54. Evidence presented at trial will show that Georgetown discussed with a senior IAC officer (and others) how Georgetown was acting pursuant to the Letter Agreement for both Georgetown and IAC, and that IAC confirmed that the discussions on zoning with the City were for the benefit of both Georgetown and IAC under the Letter Agreement. 13. In 2005, the City adopted new Zoning Resolution provisions for the West Chelsea District. These included the new provisions for Block 690 that Georgetown had discussed with the City. The advantages under the new Zoning Resolution provisions become available when lots on Block 690 are merged for zoning purposes. It is only with the merger of the lots that the full advantages created by Georgetown become available. - 5-5 of 34
14. The value of those Zoning Resolution provisions was realized in 2014 and 2015 when Related decided to take advantage of them by entering into the Rights Fee Agreement and agreeing to pay the $35 million Rights Fee to Georgetown and IAC. The Value of the Zoning Resolution Provisions: The 2014 Offer and the Rights Fee Agreement 15. In March 2014, Georgetown and IAC obtained an option from Related to purchase an interest in a new development on Lots 20 and 29 on Block 690 in exchange for Georgetown s and IAC s consent to merge lots on Block 690 for zoning purposes and their consent to allow Related to use development rights that would be made available through the zoning merger of the Lots. (See Exhibit B.) 16. The merger of Lots on Block 690 for zoning purposes, and the use of by Related of development rights made available through the zoning merger of the lots, required the consent of both Georgetown and IAC. The zoning merger gives Related substantial benefits for its planned development on Lots 20 and 29. When Lots 20, 29, 12, and 54 are merged for zoning purposes under the terms of the Rights Fee Agreement, Related can take advantage of a taller development envelope on its part of the merged lot, an additional mechanism for increasing development rights at below market rates, and the right to locate floor area on the zoning lot without regard to zoning district boundary lines. The additional mechanism for increasing development rights includes the benefit of the right to purchase Bonus Development Rights from the City of New York that can be used on other property on the merged lot, not just on Lots 12 and 54. 17. Obtaining the option from Related triggered the provision in the Letter Agreement for splitting the benefits of development options on other property on Block 690. - 6-6 of 34
18. After discussing and negotiating the option, and making counter offers, Georgetown and IAC decided (and Related agreed) to monetize the option which they had obtained from Related in the development on Lots 20 and 29 by the receiving the Rights Fee under the Rights Fee Agreement made April 14, 2014. 19. Related did not enter into the Rights Fee Agreement only with IAC, but instead with both IAC and Georgetown. Moreover, Related could not get the zoning merger it needed if it had the consent only of IAC. Related needed Georgetown s consent as well. No one could force Georgetown to consent to the Rights Fee Agreement. Related had to bargain for that consent. The bargain was the option to purchase an interest in their property, ultimately resulting in the $35 million payment made jointly to both IAC and Georgetown under the Rights Fee Agreement. 20. In the Rights Fee Agreement, Georgetown and IAC consented to merge Lots 20, 29, 12, and 54 for zoning purposes and consented to Related s use of certain development rights on Related s part of the merged lot in the construction of a new office building. Georgetown and IAC also agreed to negotiate and enter into all zoning documents necessary to implement the merged zoning lot and transfer development rights to Related. These included, among others, a Zoning Lot Development Agreement ( ZLDA ) and a Declaration of Zoning Lot Restrictions. The Justiciable Controversy and Request for Declaratory Judgment 21. On September 15, 2015, the parties closed on the Rights Fee Agreement, the ZLDA, the Declaration of Zoning Lot Restrictions, and related transactions. Related put the $35 million Rights Fee into an escrow account for the joint benefit of Georgetown and IAC. All or any part of the fund can be distributed if Georgetown and IAC agree to the distribution and instruct the escrow agent to release funds. - 7-7 of 34
22. Georgetown has performed all of its obligations under the Letter Agreement and has demanded 50 percent of the $35 million Rights Fee. IAC refuses to agree to release any funds to Georgetown. IAC claims that Georgetown is not entitled to any part of the Rights Fee. IAC wants all of the $35 million for itself. 23. Georgetown is entitled to 50 percent of the $35 million Rights Fee on three grounds. First, Georgetown is entitled to 50 percent of the Rights Fee under the Letter Agreement because Georgetown and IAC obtained an option from Related to invest in a development on adjacent property, an option that resulted in the $35 million Rights Fee. Second, Georgetown is entitled to 50 percent of the Rights Fee under the Letter Agreement because the Rights Fee Agreement by its terms covers a transaction involving an interest on other adjacent property. Third, Georgetown is entitled to 50 percent of the Rights Fee under principles of equity even without the Letter Agreement because the $35 million fund is held jointly by Georgetown and IAC and was the result of Georgetown s work. 24. There is a justiciable controversy between Georgetown and IAC over rights to the $35 million escrow fund. The parties dispute is definite, concrete, and substantial, and admits of specific relief through a court decree. 25. Georgetown therefore respectfully requests a declaratory judgment that it is entitled to fifty-percent of the $35 million Rights Fee currently held in escrow. COMMERCIAL DIVISION JURISDICTION 26. This action is within the jurisdiction of the Commercial Division of this Court under 22 NYCRR 202.70 because it seeks a declaratory judgment on rights to escrowed funds totaling more than $500,000 based on contracts arising out of business dealings and transactions involving commercial real property. - 8-8 of 34
BACKGROUND A. The Parties 27. Each of the four Plaintiffs and the three Defendants is a party to either the Rights Fee Agreement or the Letter Agreement. 28. Plaintiff The Georgetown Company, LLC is a privately-held real estate investment and development company based in New York City. It is formed under the laws of New York with offices at 667 Madison Avenue, New York, New York. 29. Plaintiff Georgetown 19th Street Phase I, LLC is an affiliate of The Georgetown Company, LLC. It is formed under the laws of Delaware with offices at 667 Madison Avenue, New York, New York. Georgetown 19th Street Phase I, LLC is the managing member, and owns 100% of the economic interest, of Plaintiff IAC/Georgetown 19th Street, LLC. 30. Plaintiff Georgetown 19th Street Development LLC is an affiliate of The Georgetown Company, LLC. It is formed under the laws of Delaware with offices at 667 Madison Avenue, New York, New York. 31. Plaintiff IAC/Georgetown 19th Street, LLC is an affiliate of The Georgetown Company, LLC. It is formed under the laws of Delaware with offices at 667 Madison Avenue, New York, New York. IAC/Georgetown 19th Street, LLC has two members: Plaintiff Georgetown 19th Street Phase I, LLC, and Defendant IAC 19th Street Holdings, LLC. IAC/Georgetown 19th Street, LLC leases Lots 12 and 54 on Block 690, and subleases those lots to HTRF Ventures, LLC ( HTRF ). 32. Defendant IAC/InterActiveCorp. (formerly known as InterActiveCorp) is a media and Internet company focused on the areas of search, applications, online dating, media and e- commerce. It is formed under the laws of Delaware and has offices at 555 West 18th Street, New York, New York. IAC/InterActive Corp. is a public company valued at over $5 billion. - 9-9 of 34
33. Defendant HTRF is an affiliate of IAC. It is a limited liability company formed under the laws of Delaware with an office at 555 West 18th Street, New York, New York. 34. Defendant IAC 19th Street Holdings, LLC is an affiliate of IAC, and a member of IAC/Georgetown 19th Street, LLC. It is a limited liability company formed under the laws of Delaware with an office at 555 West 18th Street, New York, New York. B. The IAC Project 35. In the early 2000s IAC s executive offices were in Carnegie Hall Tower on West 57th Street in Manhattan, but IAC s Chairman, Barry Diller, wanted to move IAC s offices and was contemplating building an architecturally ambitious new headquarters that would serve as an icon for IAC. 36. IAC retained Georgetown to develop the IAC headquarters project. 37. Georgetown proposed Frank Gehry to design the building, and also found the site in West Chelsea. On October 14, 2003, IAC announced that its new headquarters would be built in the Chelsea district of Manhattan and that IAC is developing the building in partnership with The Georgetown Company. IAC s press release quoted Barry Diller saying [t]hree things came together that made the decision for us. The first was being able to work with Frank Gehry, the second was finding a unique location, and the third was finding a trusted building partner in The Georgetown Company. 38. The four principal contracts for the IAC project were entered into as of March 9, 2004. As discussed in the following paragraphs, these included (1) the Lease of Lot 12 (and by amendment, Lot 54); (2) the Sublease of Lot 12 (and by amendment, Lot 54); (3) the Development Agreement putting Georgetown in charge of overseeing the planning and - 10-10 of 34
construction of the building; and (4) the Letter Agreement covering the division of benefits from additional developments on adjacent property. 39. Georgetown and IAC formed IAC/Georgetown 19th Street, LLC to lease the property on Lots 12 and 54. IAC/Georgetown 19th Street, LLC leased Lots 12 and 54 in Block 690 from the owner, Responsive Realty LLC, under the Lease dated March 9, 2004. IAC/Georgetown 19th Street, LLC subleased the property to HTRF, which is an affiliate of IAC, under the Sublease dated March 9, 2004. 40. Because of the expertise and experience of the principals of Georgetown and their companies in developing Class A office buildings, IAC agreed that Georgetown should develop the property and the new IAC headquarters on Lots 12 and 54. An IAC company, HTRF Ventures, LLC, entered into the Development Agreement dated March 9, 2004, with a Georgetown company, Georgetown 19th Street Development LLC. Under the Development Agreement, Georgetown 19th Street Development LLC and its affiliates were responsible for overseeing the planning, design and performance of the construction of the Project. (Development Agreement 2.1(a), recital E.) C. The 2004 Letter Agreement 41. IAC and Georgetown predicted that the IAC project would spur property development near the IAC building, and Georgetown and IAC expected they would both benefit from that development. To share in the benefits from that development, Georgetown and IAC entered into the Letter Agreement dated March 9, 2004 (the same date as the Lease, Sublease, and Development Agreement). The Letter Agreement provides, among other things, that if either Georgetown or IAC has or obtains rights concerning interests in property on Block 690 beyond their interests in Lots 12 and 54, then both Georgetown and IAC will share the benefits - 11-11 of 34
on an equal economic and control basis. (Letter Agreement at p. 2.) In Section 2 in the Letter Agreement, the parties agreed that: Each IAC Entity and Georgetown Entity agrees if it now has or hereafter obtains any right or option to purchase or lease any other property (or any interest in any other property) located within the same square block as the Land or within the five square blocks immediately adjacent to the Land (any and all such property is hereafter referred to as Adjacent Property ), IAC or an IAC Entity designated by IAC, or Georgetown or a Georgetown Entity designated by Georgetown, as applicable, shall have the right to participate with such IAC Entity or Georgetown Entity in such transaction on an equal economic and control basis.... [Letter Agreement at p. 2, 2, emphasis in original.] 42. The Letter Agreement defines IAC Entity to include all affiliates of IAC, and defines Georgetown Entity to include all affiliates of Georgetown. The Letter Agreement is signed, on the one hand, by The Georgetown Company; Georgetown 19th Street Phase I, LLC; Georgetown 19th Street Development LLC; and, on the other and, by InterActiveCorp.; HTRF Ventures, LLC; and IAC 19th Street Holdings, LLC. D. The Adjacent Property: Development Efforts and Options 2004-2014 43. From the start of the IAC project, Georgetown worked intensively with New York City to maximize the development rights available on Block 690. 44. This included identifying and advocating for provisions in the Zoning Resolution that would create valuable development opportunities. Even though the plans for the IAC building required only 5.0 floor area ratio ( FAR ), Georgetown worked with the City to provide mechanisms for acquiring additional development rights. 45. In 2004-2005, the City proposed changes in the Zoning Resolution for a Special West Chelsea Zoning District. The proposed special zoning district was designed to benefit the High Line and the surrounding properties. The City s proposal allowed for residential use along - 12-12 of 34
with commercial use, generally to a base of 5.0 FAR, and allowed additional density through the purchase of development rights from properties directly encumbered by the High Line. 46. In 2004 and 2005 Georgetown regularly met with and urged the City to adopt changes in the Zoning Resolution that would affect Block 690 and create valuable development opportunities. The Zoning Resolution adopted by the City in 2005 included special provisions that applied to Block 690, including provisions that increased the value of a zoning lot merger for the Lots on Block 690. 47. For the West 18th Street frontage on Block 690, if the Special West Chelsea text had been adopted as originally envisioned, the only mechanism allowing for additional development rights above the base FAR would be through a private negotiation with a High Line owner, and midblock development would be limited to a maximum height of 120 feet precluding the use of a significant portion of the unused development rights attributable to the IAC Lots. 48. After Georgetown s discussions with the City and the Department of City Planning, an alternate zoning scheme was proposed and ultimately adopted as part of the Special District text. This alternate scheme applied only in the event that all of the properties along West 18th Street were merged into a single zoning lot. This right is unique to the West 18th Street (Block 690) properties. Similarly zoned sites to the north do not have this right. 49. The changes identified, developed, and advocated by Georgetown reduced the cost of development above the base FAR and facilitated the use of development rights generated by the IAC site on adjoining properties. The additional development potential identified and advocated by Georgetown during the rezoning process includes the property rights Related is taking advantage of and the reason that it valued those rights at $35 million. The Zoning - 13-13 of 34
Resolution provisions advocated by Georgetown were unique to Block 690. The provisions adopted by the City reflect the work of Georgetown. 50. When Georgetown was working with the City in 2004 and 2005 on Zoning Resolution provisions affecting Block 690, Georgetown relied on the promises by IAC in the Letter Agreement to split future benefits on a 50/50 basis. Georgetown envisioned and planned for the added value that would come from changes in the City s Zoning Resolution connected with the special West Chelsea District and the High Line. E. The 2014 Option from Related and the Rights Fee Agreement 51. In March 2014, Georgetown and IAC obtained an option from Related to purchase an interest in property Related was going to develop on Lots 20 and 29 on Block 690, in exchange for the zoning lot merger. 52. The development option from Related explained that As part of this transaction the Lot 12 Lessee [Georgetown and IAC] and the Company [the joint venture with Related] shall sign a ZLDA ( Lot 12 ZLDA ) merging the zoning lots of Lots 12, 20, and 29, and any other associated documentation to effectuate the zoning plan of the Development. The purchase option from Related also explained that The Company would purchase High Line Improvement Bonus Floor Area ( High Line Bonus ) from Lots 20, 29, and 12. The zoning lot merger would allow the purchase of additional development rights under the Zoning Resolution provisions that Georgetown had identified and advocated in 2005. 53. The purchase option from Related also specifically envisioned that the ultimate ownership structure for the development on Lots 20 and 29 may change. It explained that To facilitate such new structure, changes to ownership structure may be required provided the same - 14-14 of 34
are fair and equitable. Georgetown analyzed the offer and discussed it with IAC and Related to determine what would be economic, fair, and equitable. 54. After making several offers and counter-offers, Georgetown, IAC, and Related determined that the best way for Georgetown and IAC to respond to Related s offer and participate in the benefits of development on Lots 20 and 29 would be for Related to monetize the value it ascribed to receiving certain consents concerning development rights and transferring to Related development rights for use on Lots 20 and 29. 55. To implement this mechanism for Georgetown and IAC to participate in the benefits of development on Lots 20 and 29, Georgetown, IAC, and Related affiliates entered into the Rights Fee Agreement made April 14, 2014. The parties to the Rights Fee Agreement are 18th Street Highline Associates, L.L.C. (a Related affiliate), IAC/Georgetown 19th Street, LLC (a Georgetown affiliate), and HTRF (an IAC affiliate). 56. Under the Rights Fee Agreement, Related agreed to pay $35 million jointly to Georgetown and IAC for: (a) (b) (c) Surrender and release of certain development rights; Consent to merger of Lots 12, 54, 20, and 29 for zoning purposes; and Consent to Related s use of certain development rights on its property. The Rights Fee Agreement also provides that Georgetown and IAC will grant a light and air easement over the portion of the IAC/Georgetown property bounded by the common lot line dividing Lot 12 and Lot 20, and required the parties to negotiate and enter into all zoning documents necessary to implement the merged zoning lot and transfer development rights to Related. The additional zoning documents included, among other things, a Zoning Lot Development Agreement and a Declaration of Zoning Lot Restrictions. - 15-15 of 34
57. Merger of Lots 20, 29, 12, and 54 for zoning purposes required the consent of Georgetown and IAC because they are parties in interest to the new merged zoning lot under the provisions of New York City s Zoning Resolution. 58. IAC had no contractual right or ability to compel Georgetown to agree to the Rights Fee Agreement. IAC could not and did not require Related to pay the Rights Fee solely to IAC rather than to both Georgetown and IAC. Georgetown agreed to the Rights Fee Agreement because Georgetown was entitled to fifty percent of the Rights Fee under the Letter Agreement. 59. Under the Rights Fee Agreement, the consents and transfers concerning zoning and development rights were to be effected on the Closing Date. The required zoning documents were subsequently negotiated and the parties closed on the Rights Fee Agreement and related transactions on September 15, 2015. F. Implementing the Rights Fee Agreement: The ZLDA, Declaration of Zoning Interests, and $35 million payment 60. The Zoning Lot Development Agreement dated September 15, 2015 (the ZLDA ) is between Related and the owner of Lots 12 and 54 (which was Responsive Realty LLC). Both Georgetown and IAC affiliates joined and agreed to the ZLDA under a Joinder Agreement also dated September 15, 2015. In the Joinder Agreement, IAC/Georgetown 19th Street, LLC and HTRF acknowledge, agreed and confirmed that they are deemed to have consented to the ZLDA, to be a Transferor under the ZLDA, and to be bound by the ZLDA. 61. The ZLDA explains that Related intends to construct a new building on Lots 20 and 29 which will contain more floor area than is permitted if the Development Site were a separate zoning lot (as such term is defined in the Zoning Resolution) and desires to utilize the - 16-16 of 34
procedure available pursuant to the Zoning Resolution for combining the Development Site [Lots 20 and 29] and Responsive s Land [Lots 12 and 54] into a single zoning lot. (ZLDA recital J.) 62. Combining lots into a single merged zoning lot requires the consent of all parties in interest, as defined in New York City s Zoning Resolution 12-10. Georgetown and IAC are parties in interest to the zoning lot that merges Lots 20, 29, 12, and 54. 63. The ZLDA includes agreement to a Declaration of Zoning Lot Restrictions in which tax Lots 20, 29, 12, and 54 are merged and combined for zoning purposes under the Zoning Resolution. The Declaration of Zoning Lot Restrictions is a separate document that is referred to and discussed in the ZLDA. 64. The ZLDA also provides, among other things, that the parties effectuate the transfer to Related of certain development rights from Georgetown and IAC. (ZLDA recital L.) These development rights include 2.0 times the lot area for Lots 12 and 54 that may become available to [Lots 12 and 54] through application of Zoning Resolution Sections 98-25, 98-26, 98-30 or other provision of the Zoning Resolution. (ZLDA 1.39.) 65. Under Sections 98-25, 98-26, 98-30 and other sections of the Zoning Resolution, the parties in interest to the merged zoning lot made up of Lots 20, 29, 12, and 54 obtain additional development rights. The additional development rights include the right to purchase Bonus Development Rights from the City of New York that can be used on other property on the merged lot, not just on Lots 12 and 54. The ZLDA provides for how the parties may take advantage of those additional rights. 66. Because of the ZLDA, Related can take advantage of a taller development envelope on its part of the merged lot, an additional mechanism for increasing development - 17-17 of 34
rights (including Bonus Development Rights purchased from the City), and the right to locate floor area on the zoning lot without regard to zoning district boundary lines. 67. Without Georgetown s consent and execution of the Rights Fee Agreement, and Georgetown s joinder to the ZLDA that was required by the Rights Fee Agreement and execution of the Declaration of Zoning Lot Restrictions, Related would never have agreed to pay the $35 million to Georgetown and IAC. Georgetown had no obligation to consent as consent would materially reduce the collateral of Georgetown s ground lease for Lots 12 and 54. 68. Without Georgetown s actions for development on Block 690, including its work with the City on the Zoning Resolution for the Special West Chelsea District, the development rights that were the subject of the Rights Fee Agreement would not have existed, and there would have been no cause for Related to have provided an option to purchase an interest in their development which eventually resulted in the $35 million payment to Georgetown and IAC. FIRST CAUSE OF ACTION (Declaratory Judgment on Contract Rights to the $35 Million Rights Fee) 69. Plaintiffs repeat the allegations in paragraphs 1-68 of this Complaint. 70. The Letter Agreement is a binding and enforceable contract. 71. Plaintiffs have performed all their obligations under the Letter Agreement. 72. Under the Letter Agreement, Georgetown is entitled to half of the $35 million Rights Fee because each of the requirements of the Letter Agreement is satisfied. 73. In March 2014, Georgetown and IAC obtained an option from Related to purchase an interest in property on Lots 20 and 29 on Block 690 in exchange for Georgetown s and IAC s consent to merge lots on Block 690 for zoning purposes and allow Related to use development rights made available through the zoning merger of the lots. When Georgetown - 18-18 of 34
and IAC obtained the option presented by Related s offer, it triggered the Letter Agreement s provision for splitting the benefits of development options on other property on Block 690. 74. After discussing and analyzing the option, Georgetown, IAC, and Related determined that the best way for Georgetown and IAC to respond to Related s offer and participate in the benefits of development on Lots 20 and 29 would be for Related to monetize the value of the interest on which it had provided an option in return for giving Related certain consents concerning development rights and the merger of lots for zoning purposes, and transferring to Related or otherwise allowing Related to use development rights on Lots 20 and 29. To implement this mechanism for Georgetown and IAC to participate in the benefits of development on Lots 20 and 29, Georgetown, IAC, and Related affiliates entered into the Rights Fee Agreement made April 14, 2014. 75. The Rights Fee Agreement and payment of the $35 million at issue in this action fall under the Letter Agreement. The Rights Fee Agreement was the direct result of obtaining the option from Related to purchase an interest in the property owned on Block 690, and discussions with Related that followed and resulted from the option. 76. The agreements that created a zoning lot combining tax Lots 20, 29, 12, and 54 in connection with the ZLDA, the Declaration of Zoning Lot Restrictions, and the Rights Fee Agreement, satisfy the conditions of the Letter Agreement. 77. Defendants have refused to agree to release of any of the $35 million Rights Fee to Georgetown. IAC claims it is entitled to all of the $35 million for itself. 78. There is a justiciable controversy between Plaintiffs and Defendants over rights to the $35 million escrow fund. The parties dispute is definite, concrete, and substantial, and admits of specific relief through a court decree. - 19-19 of 34
79. Plaintiffs therefore respectfully request a declaratory judgment that under principles of contract law, Plaintiffs are entitled to fifty-percent of the $35 million escrow fund. SECOND CAUSE OF ACTION (Declaratory Judgment on Equitable Rights to the $35 Million Rights Fee) 80. Plaintiffs repeat the allegations in paragraphs 1-68 of this Complaint. 81. In the alternative to the first cause of action, if Plaintiffs are not entitled to half of the $35 million Rights Fee under principles of contract law, Plaintiffs are entitled to half of the $35 million Rights Fee under principles of equity. 82. Without Georgetown s consent and execution of the Rights Fee Agreement, and Georgetown s joinder to the ZLDA that was required by the Rights Fee Agreement and execution of the Declaration of Zoning Lot Restrictions, Related would never have agreed to pay the $35 million to Georgetown and IAC. 83. From the start of Georgetown s involvement in seeking opportunities for development on Block 690, Georgetown has played an essential role. This essential role continued through the discussions with the City on rights on development on Block 690 beyond what was needed for the IAC building. It also included discussions with Related concerning development on Lots 20 and 29. Without Georgetown s actions concerning development on Block 690, including its involvement with the changes in the Zoning Resolution concerning the Special West Chelsea District, the development rights that were the subject of the Rights Fee Agreement would not have existed, and there would have been no opportunity for Related to provide an option to purchase an interest in its property which eventually led to the $35 million payment to Georgetown and IAC for the rights. 84. As explained above, Defendants have refused to agree to release of any of the $35 million Rights Fee to Georgetown. IAC claims it is entitled to all of the $35 million for itself. - 20-20 of 34
85. There is a justiciable controversy between Plaintiffs and Defendants over rights to the $35 million escrow fund. The parties dispute is definite, concrete, and substantial, and admits of specific relief through a court decree. 86. Plaintiffs therefore respectfully request a declaratory judgment that under principles of equity, Plaintiffs are entitled to fifty-percent of the $35 million escrow fund. REQUESTED RELIEF WHEREFORE, Plaintiffs demand judgment against defendants: (a) (b) (c) (d) Declaring that under principles of contract law, Plaintiffs are entitled to fiftypercent of the $35 million escrow fund; In the alternative to (a), declaring that under principles of equity, Plaintiffs are entitled to fifty-percent of the $35 million escrow fund; Awarding Plaintiffs their attorneys fees and costs to the fullest extent permitted by law; and Granting such other and further relief to plaintiffs as the Court may determine is just and proper. Dated: New York, New York March 11, 2015 DLA PIPER LLP (US) By: /s/anthony P. Coles Anthony P. Coles Michael R. Hepworth 1251 Avenue of the Americas New York, New York 10020-1104 (212) 335-4500 Attorneys for Plaintiffs - 21-21 of 34
Exhibit A 22 of 34
THE GEORGETOWN COMPANY 667 Madison A venue New York, New York 10021 March 9, 2004 InterActiveCorp 152 West 57th Street New York, New York 10019 Attention: General Counsel Gentlemen: Georgetown 19th Street Phase I, LLC, a Delaware limited liability company ("Georgetown Phase 1"), an affiliate of The Georgetown Company ("Georgetown"), and lac 19th Street Holdings, LLC, a Delaware limited liability company ("lac Holdings"), an affiliate of InterActiveCorp ("lac"), have formed and, as of the date hereof, are the only members of lac/georgetown 19th Street LLC, a Delaware limited liability company ("lac/georgetown"). Georgetown Phase I and lac Holdings have each executed the Operating Agreement of lac/georgetown (the "Operating Agreement"), and have caused IAC/Geo~etown to enter into (i) that certain Agreement of Lease, dated as of ft,1k{ f'(v\ _'1_, 2004, between lac/georgetown, as tenant, and Responsive Realty LLC, as landlord (the "Lease"), with respect to the parcel of land located in the City, County and State of New York, commonly known 527-537 West 18th Street, a/k/a 528-538 West 19th Street, a/k/a 82-92 11th Avenue (Block 690, Lot 12), New York, New York (the "Land"), and (ii) that certain Sublease, dated as of the date hereof, between lac/georgetown, as sublandlord, and HTRF Ventures, LLC, an affiliate of lac ("HTRF"), as subtenant (the "Sublease"), pursuant to which lac/georgetown subleased the Land to HTRF. In connection with the Lease and the Sublease, Georgetown and/or its affiliates and lac and/or its affiliates have entered into or intend to enter into other agreements with respect to the Land and/or the Project (as hereinafter defined) (collectively, the "Other Agreements"), including, without limitation, (i) that certain Development Agreement, dated as of the date hereof, between Georgetown 19th Street Development, LLC ("Georgetown Development"), as developer, and HTRF, as owner (the "Development Agreement"), pursuant to which HTRF has retained Georgetown Development to act as its agent in connection with the construction of certain improvements on the Land referred to in the Development Agreement as the "Project", and (ii) that certain Contract of Sale between Relyea French, Limited, a New York limited partnership, as seller, and Georgetown Development, as purchaser (the "Sliver Contract"), with respect to the parcel of land designated as Lot 54 of Block 690 in the City, County and State of New York and commonly known as 540 West 19th Street, New York, New York (the "Sliver Parcel"). Pursuant to the terms of the Operating Agreement, lac Holdings has certain rights with respect to the Land and any Additional Land (as hereinafter defined), including the right to acquire the interests of lac/georgetown in and to the Land, and the membership 9569699.4 23 of 34
InterActiveCorp March 9, 2004 Page2 interests in lac/georgetown. Because Georgetown, Georgetown Phase I, Georgetown Development and their respective affiliates (each a "Georgetown Entity" and collectively, the "Georgetown Entities"), and lac, lac Holdings, HRTF and their respective affiliates (each a, "lac Entity" and collectively, the "lac Entities") will each derive benefits under the Sublease and/or the Other Agreements, each Georgetown Entity and each lac Entity is willing to be bound by certain provisions of the Operating Agreement and/or the Other Agreements, to the extent such Georgetown Entity or lac Entity is not now or does not become a party to the Operating Agreement or any or all such Other Agreements, on the terms and conditions set forth in this letter agreement. As used in this letter agreement, the term "affiliate" shall mean, with respect to any person or entity, any other person or other entity that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first person or entity; and the term "control" shall mean, with respect to any entity, the ownership, directly or indirectly, of voting stock or a beneficial ownership interest of such entity and the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity, whether through the ownership of such stock or a beneficial ownership interest, by statute, or by contract. 1. Pursuant to Section 5.1 of the Lease, lac/georgetown has agreed to convey to Landlord any and all right, title and interest that lac/georgetown may acquire at any time before or during the term of the Lease in and to the Sliver Parcel and/or the parcel of land designated as Lot 46 of Block 690 in the City, County and State of New York (the "Garage Parcel"; the Sliver Parcel and the Garage Parcel are each and collectively referred to as "Additional Land"). Section 5.1 of the Lease further provides that, simultaneously with the transfer of the Additional Land by lac/georgetown to Landlord, lac/georgetown and Landlord shall amend the Lease to include any Additional Land so acquired and conveyed as part of the premises demised under the Lease. In the event that Landlord desires to sell the Land or the Additional Land, or to extend the term of the Lease or enter into a new lease of the Land, the Additional Land or the Building for any period following the expiration date of the Ground Lease, each Georgetown Entity agrees that lac Holdings or its designee shall have the exclusive right (without any Georgetown Entity) to negotiate for, and purchase or lease the Land, the Additional Land or the Building in accordance with Section 11.4 of the Operating Agreement. 2. Each lac Entity and Georgetown Entity agrees if it now has or hereafter obtains any right or option to purchase or lease any other property (or any interest in any other property) located within the same square block as the Land or within the five square blocks immediately adjacent to the Land (any and all such property is hereafter referred to as "Adjacent Property"), lac or an lac Entity designated by lac, or Georgetown or a Georgetown Entity designated by Georgetown, as applicable, shall have the right to participate with such lac Entity or Georgetown Entity in such transaction on an equal economic and control basis (except that, if any Georgetown Entity is retained to act as the developer of such Adjacent Property, such Georgetown Entity will be paid, and no lac Entity will share in, a reasonable developer's fee). If any lac Entity desires to occupy all or substantially all of any Adjacent Property, either at the time such Adjacent Property (or an interest therein) is purchased or leased or in the foreseeable future, (a) lac or an lac Entity designated by lac, and Georgetown or a Georgetown Entity 9569699.4 24 of 34
InterActiveCorp March 9, 2004 Page 3 designated by Georgetown, will, on an equal economic and control basis, develop such Adjacent Property for occupancy by such lac Entity on then fair market terms for that occupancy, taking into account the nature and cost of the development and the requirements of such lac Entity (except that, if any GeorgetoWn Entity is retained to act as the developer of such Adjacent Property, such Georgetown Entity will be paid, and no lac Entity will share in, a reasonable developer's fee) or, (b) if such Adjacent Property (or an interest therein) is purchased or leased prior to August 1, 2013, lac or an lac Entity designated by lac will own or lease such Adjacent Property and the terms of the development thereof, as between any lac Entity and any Georgetown Entity, will be substantially similar to the terms of the development of the Project, including the economic understanding of the parties and the making of payments by the lac Entity to the Georgetown Entity substantially similar to the payments to be made by HTRF to Georgetown Development with respect to the Project, proportionate to the cost to develop that Adjacent Property. 3. If any Georgetown Entity is a party to any of the Other Agreements, it shall take no action under or with respect to such Other Agreement without the approval of lac or the lac Entity that is a party thereto. 4. If lac Holdings shall require any amendment, change or alteration to the Operating Agreement, or if HTRF shall require any amendment, change or alteration to the Sublease, the Development Agreement or any of the Other Agreements to which HTRF is a party, or any other agreement which establishes and/or governs the relationship between lac and its affiliates and Georgetown and its affiliates in order to satisfy the requirements of any lender providing financing to lac Entity or HTRF in connection with the Land, each Georgetown Entity hereby agrees to make and/or hereby consents to such required amendment, change and alteration, provided that the same shall not materially change the economics or basic terms of that relationship. 5. This agreement (a) expresses the parties' entire agreement on the matters covered herein, (b) shall be governed by New York law, and (c) shall be binding upon and inure to the benefit of the parties hereto, their affiliates and their respective successors and assigns. 6. This agreement may be executed in one or more counterparts, each of which so executed and delivered shall be deemed an original, and all of which taken together shall constitute but one and the same instrument. [Remainder of Page Intentionally Left Blank; Signature Page Follows] 9569699.4 25 of 34
InterActiveCorp. March 9, 2004 Page4 Please acknowledge your agreement to the terms of this letter agreement by countersigning this letter agreement below where indicated and returning one originally executed counterpart of this letter agreement to undersigned. Very truly yours, The Georgetown Company Agreed: InterActiveCorp Agreed: Georgetown 19th Street Phase I LLC a Delaware limited liabil~ty company Name: Title: HRTF Ventures, LLC, a Delaware limited liability company By: InterActiveCorp, its sole member lac 19th Street Holdings, LLC, a Delaware limited liability company By: lnteractivecorp, its sole member By: Name: Title: By: Name: Title: Georgetown 19th Street Development LLC, a Delaware limited liabilit, company 9569699.4 26 of 34
InterActiveCorp. (lwiardt g, 2004 Page 4 Please acknowledge your agreement to the terms of this letter agreement by countersigning this letter agreement below where indicated and returning one originally executed counterpart of this letter agreement to undersigned. Very truly yours, The Georgetown Company Name: Title: Agreed InterActiveCorp -~-... -c1::~.4c.c~ B y: <z4_, ~-.~ Name: Dara Khosrowshahi;;;:::::::::::: Title: Executive Vice President & ChiefFinancial Officer Agreed Georgetown 19th Street Phase I LLC a Delaware limited liability company Name: Title: HTRF Ventures, LLC a Delaware limited liability company By: InterActiveCorp, its sole member lac 19th Street Holdings, LLC a Delaware limited liability company By: InterActiveCorp, its sole member ~ "'/,/ B y... /..L~:~ -~ ' Name: Dani:Khosrowshahr Title: Executive Vice President & ChiefFinancial Officer ~ :-.,...~..._._ 7 By: '.YL.. ~ c / S:..~ -...;. Name: Dara Khosrowshahi - ~.. Title: Executive Vice President & Chief Financial Officer Georgetown 19 1 h Street Development LLC a Delaware limited liability company By: Name: Title: 1-NY/1732314. 49569699.2 27 of 34
Exhibit B 28 of 34
March, 2014 Mr. Joseph Rose The Georgetown Company 667 Madison Avenue - 23rd Floor New York, NY 10021 InterActiveCorp 555 West 18th Street New York, NY 10001 Re: Proposed Joint Venture 515 West 18 th Street Dear Sirs: The following proposal summarizes the basic economic terms under which an affiliate of The Related Companies, L.P. ( Related ) would enter into a development agreement ( Development Contract ) with The Georgetown Company and InterActiveCorp (collectively, the Lot 12 Lessee ) for the purpose of forming an operating agreement (the Operating Agreement ) for a company (the Company ) to develop residential and retail property on certain land in the area of Manhattan on the block known as Block 690, lots 20 and 29. DEVELOPMENT PLAN AND OBJECTIVES: The parties desire that the Company will purchase the Development Site (as defined below) and the High Line Bonus (as defined below) for a development project (the Development ), which is currently contemplated to consist of parking below grade, retail on first floor and residential apartments to be sold as for-sale residential condominiums above. The Company and Lot 12 Lessee would execute a ZLDA and combine the zoning lots of Lot 12 and Development Site. DEVELOPMENT PROPERTIES: Development Site: As used herein, the Development Site shall mean (i) the land, improvements and air rights on Block 690, Lots 20 and 29. Lot 12 ZLDA: As part of this transaction the Lot 12 Lessee and the Company shall sign a ZLDA ( Lot 12 ZLDA ) merging the zoning lots of lots 12, 20, and 29, and any other associated documentation to effectuate the zoning plan of the Development. Lot 12 Lessee 29 of 34