Appeal Judge Centra's Decision on Destiny

The decision seems poorly defended.

Mar 14, 2006

I believe a requirement for a legally binding contract is that it is entered into willingly and in good faith by both parties (i.e, neither party intentionally misled the other). Though the letter of the PILOT agreement requires only a minimum expansion of Carousel Mall by 800,000 sqft, it was offered with the understanding of Pyramid's good faith intention and imminent plans to build a multi-billion dollar expansion. Pyramid's good faith is very much in question for the following reasons.

1. Six years after first announcing its DestiNY project, Pyramid still has not announced definitive construction plans, financing arrangements, or tenants for the huge development.

2. A number of deadlines related to project agreements with local government were set many months or years in advance. And yet, Pyramid consistently asked for extensions and/or filed documents and closed on loans at the last hour.

3. Pyramid heavily promoted the idea that the DestiNY project would not involve public subsidy. Suddenly, a property tax exemption is not a subsidy; and sales taxes (to be used to repay the bond financing of the project) are not public money.

3. J.C. Penny et al sued Pyramid for initiating new construction without their approval as specified in their lease agreements. Pyramid's argument to the court is that the beams placed in the ground were just "test pilings". However, residents will recall that the event was actually a DestiNY groundbreaking ceremony heavily promoted by Pyramid.

4. Pyramid submitted a $375M plan to expand Carousel Mall by 848,000 sqft. It now tells judge Centra that the same expansion will only cost $195M (just equal to the private financing Pyramid claims to have).

5. On Dec 17, 2004, Pyramid submitted to the city a $375M financing agreement with Deutche Bank, which the city accepted, triggering the PILOT agreement. On Dec 28, 2004 Pyramid switched that agreement with a new one from Citigroup, which the city did not find acceptable.

Pyramid and judge Centra claim that the agreements are equivalent and the city acted in bad faith in rejecting the Citigroup loan. But ask yourself: if the agreements are equivalent, why would Pyramid obtain a new one just 10 days after the first?; and if the city accepted the first agreement---triggering the PILOT---how can it legitimately be accused of acting in bad faith?

After reading judge Centra's decision, I found it to be surprisingly poorly defended. His argument that the two financing agreements were equivalent went essentially undefended. Also, I presume a summary judgment is considered when there is an apparent preponderance of evidence on one side. That seems hardly the case here.

Finally, since the agreement has not yet been activated, and Pyramid has yet to announce concrete project plans, much less begin any construction, the city should appeal judge Centra's decision and start negotiating a new agreement from scratch. Anything less may result in an agreement entered into in bad faith and under duress.

Carlo Moneti

Published in full in The NewTimes.