Monday, January 11, 2010

Toll Brothers' Toxic Towers On The Gowanus: Is It A Deal Or No Deal?



to read entire complaint, click here

(If you have difficulties accessing the documents, please email me at pardonmeinbrooklyn at gmail dot com and I will gladly send you pdf)




Toll Brothers, Inc. Gowanus Development
above photo credit: Toll Brothers

Gowanus Landowner
Claims Breach Of Contract Against Toll Brothers, Inc.

This, dear Reader, is the latest in the saga of Brooklyn's highly polluted Gowanus Canal, Toll Brothers and the proposed listing of the canal as an EPA Superfund Site.

Toll Brothers' proposed luxury housing development on the shore of the Gowanus Canal was always a highly risky endeavor. After all, everyone knew how very polluted this once thriving industrial waterway was. And it was no secret that its banks had been contaminated by the former manufactured gas plants, tanneries, paint, and chemical plants which once operated there. It was also commonly known that New York City's antiquated sewer system discharged raw sewage into the canal after a heavy rainfall.

Toll Brothers Inc., the national high-end home builder, knew as well. But in September 2004, Toll Brothers, Inc. entered willingly into a sales contract with Joseph B. Phillips and Citibank, N.A. (as Trustee Of The Trust under the will of David Phillips) to acquire the property at 365-379 Bond Street, which covers an entire city block and abuts the Gowanus Canal. Together with two adjacent properties, Toll Brothers hoped to market and develop the site into condominium units consisting of high and low rise residential buildings.
Toll Brothers made a down payment amount of $5.75 million of the set purchase price of $21,500,000 (later the sum was adjusted to $20,636,836). As per the agreement, the actual sale of the property would be contingent on the re-zoning of the site by New York City from manufacturing to residential.

After a Uniform Land Use Review Process (ULURP) set in motion by Toll Brothers, the property was successfully re-zoned by the City of New York in
March 2009. According to the agreement between the Seller and the Toll Brothers, the parties could now proceed to close the transaction. However, in April 2009, the Environmental Protection Agency (EPA) announced that it was proposing to include the dangerously toxic Gowanus Canal on its Superfund list.

By May 2009, Toll Brothers, Inc. notified the Seller's council that it had concerns about the EPA's announcement and sought to delay closing on the property to await the outcome of the Agency's designation process. The Seller, however, refused to a consensual delay and scheduled the closing for August 17th, 2009. In response, Toll shot back a letter stating that the company was under no obligation to close the transaction because , as a result of the EPA announcement, a "windfall lien", which arose prior to closing, now encumbers the property and makes it unmarketable. Therefore, Toll refuses to close until the lien is removed. This prompted the Seller to file a suit against Toll Brothers, Inc.

Though Toll Brothers conducted both a Phase I and Phase II environmental study of the property, which confirmed that hazardous substances and petroleum products were formerly stored on the site, the company believed that "the cleanup methods necessary to remediate the Property would be routine practice, not overly burdensome, and could be completed at a reasonable cost and within a reasonable time frame that would not frustrate or interfere with the timely residential development and marketing of the Property as planned and contemplated by the parties."

Toll Brothers now claim that as a result of the Superfund designation, "a monumentally costly and lengthy process has commenced" which would hinder development and which was not foreseeable at the time the parties executed the contract. (It is of course important to note that the EPA has not yet listed the Gowanus Canal as a Superfund site.)

In October 2009,
a counterclaim was filed by Toll Brothers, Inc.

Common sense would have dictated that the shores of the Gowanus Canal was no place to build approximately 460 residential units. But what seemed like common sense to most was overlooked by Toll Brothers in their eagerness to make a profit.
Their biggest mistake was that they simply chose to ignore the level of toxicity.

One has to wonder about the Toll Brothers' business acumen.

Answer, Defenses and Counterclaim


For Home Page, click Pardon Me For Asking


Lisanne said...

Yes the Toll Brothers have copped a supremely arrogant attitude from the get go. It was divine intervention when the EPA stepped in a month after the spot zoning was approved. Disgusting how they downplayed the toxity in the face of the community and basically sneered through all the Community Board Meetings...

I suppose it will only be a deal if the area is cleaned up by the city, who, in the past did not give a damn about who built what on the canal despite the known I hope that the EPA gets the go ahead and the area gets cleaned up with the right tools so future generations do not have to go through this b.s.

I feel positive that this is what is going to happen.

Batman said...

I realize I'm in the minority here, but let's tone down the rhetoric a little bit. Home builders such as TB "clean up" toxic sites all the time. It is part of how they are able to make money.

And whether or not common sense would dictate something matters not to companies like TB, only what they can make money doing. And their reading of the market happened to be off in this instance (though, only insomuch as it relates to Superfund designation). The people at TB are a lot better at real estate than any of us.

That being said, this suit is crap and they will get their asses handed to them.

Unknown said...


What a clear and concise rendering of the situation! You should think
about law school!


Anonymous said...

Toll is really trying to weasel out of this. They will probably try to claim that because of the costs incurred in litigating this due to their breach they should be allowed to build higher.
Despite testimony throughout the ULURP process regarding the canal's contamination Toll Brothers downplayed the hazards. They have been to the site numerous times and the sewage, oil, and coal tar are readily apparent. Toll willingly assumed the risk and given the infamous history of the canal it is certainly forseeable that the canal would be designated a superfund.
The EPA has been clear that Toll can go ahead with their plans but of course the EPA might require Toll to do a more thorough remediation or require a bit more oversight. In other words, a clean up that doesn't involve cutting corners and putting current and potential Gowanus residents at risk.
To date there is no "windfall lien" and the future existence of one is speculative.
This might be an attempt to renegotiate the purchase price.
David Von Speckelsten's bosses probably ripped him a new one many times over. I am surprised he is still employed.
I also have to wonder what Toll's reaction would be if they build their project and it sells out but before the first closing the canal is listed. I doubt they would be willing to return people's deposits and Toll would be the ones suing for specific performance.

Anonymous said...

They build the worst buildings and they are using non-union labor on out of the ground residential towers which is almost unheard of. I live at Northside Piers and this place is cheap as...
Thank God we rent. I say let them out and ban them from Brooklyn all together.

Anonymous said...

TO Batman,
while developers sometimes do a good job of burying contaminants on their sites so they don't pose a risk, Toll had NO PLAN to cleanup the canal running along this property.
The US Army Corp released their studies of the high level of contamination in this section of the canal well before the Sept 2004 agreement Toll entered into to purchase the site. It the Toll company was not fully aware of the level of contamination in this waterway prior to making their plan to put up residential housing here, then Toll should not be in the business of developing.

It seems evident that Toll (and the mayor's office) had every intention to build along this polluted water way and never address problem with the highly polluted waterway. This section of the canal is known to have high levels of heavy metals and regularly releases coal tar bubbles that create sheens across the surface of the water as it then releases a gas which is a know carcinogen. The Toll company and the city seemed fine with this as a condition to live with. Thank goodness the EPA stepped in when they did to bring a level of "common sense" to this planning!

Anonymous said...

Well, won't someone have to be the "PRP--Potentially Responsible Party" for this site?

Doesn't the Superfund law state that if a buyer purchases a polluted site knowing the extent of that pollution, then they take on the responsibility for that polluted site. It seem that would make Toll a responsible party should they buy the land.

On the other hand, isn't Phillips the same family of business that carried on all that paper and other manufacturing activities on the Gowanus. Wouldn't they be responsible parties?

No wonder there has been such a fuss from these parties to avoid Superfund.

Anonymous said...

What interests me is that the suit filed clearly states that the demolition of the all concrete building that was recommended for landmarking was done for Toll Bros. That should NEVER have happened.
Let these dogs now fight between themselves. Who will be left holding the bag? Opportunists beware! THere is a lesson here. And the community wins this time, by diving intervention.

Anonymous said...

On Gowanus, Toll plans to use Union labor and to remediate the property in compliance with NYS environmental law. They HAVE NOT been granted a DEC permit and CAN NOT proceed with plans because of the Superfund.

We DO NOT know if the EPA plans to sue the owners (current or future) of this property. The EPA has not stated this site is in the superfund. Ony a few Gowanus sites have been named.

With Superfund designation, the property will be stuck in legal battles and will never be cleaned. Canal properties will continue to leak contaminants into the Canal for decades while attorneys earn revenue from litigation.

Those who fear change will rejoice in the streets!

Anonymous said...

According to the filing Toll sought to delay closing, not terminate the contract. Phillips wants their money, and is trying to force the issue.

Toll wants to wait, and is using what arguments they can to force a delay in court if they can't get one by agreement -- not, I'd guess, to see if the canal gets listed, that seems pretty much in the bag -- but to see how the PRP liabilities shape up. If the process is orderly, and the actual responsible parties are pursued for the actual canal costs, I'd guess they stay in. They would have already budgeted for the cost of cleaning the land. In fact, if a listing were to actually speed up the clean-up process, I think they would see that as upside. The fear of a listing is not stigma, it's years of open-ended lawsuits.

As far as not having a clean-up plan, Batman's right, that's nonsense. You can't run a serious business on that basis. These are grown-ups running a public corporation. An oil company may try to cut corners operating in Nigeria, but nobody with a higher than room temp IQ would expect to get a pass in NYC. Yeah sure maybe they are all terrible people and deserve to die slow painful deaths, but don't confuse your ideology with facts.

Anonymous said...

Commenter on 1/11 at 6:12 pm is mistaken. Someone who buys a property that is contaminated, knowing that it is as a result of proper due diligence, is presumably a "bona fide prospective purchaser" -- or BFPP -- under the Superfund law and would not be liable as a responsible party. Toll Brothers' lawyers know this, of course. As for the windfall lien, that arises only when the purchaser has bought contaminated property, and EPA has cleaned it up after the purchase, increasing the value of the property. The point is that the BFPP should not get a "windfall" as a result of a cleanup conducted with taxpayer money. Only the incremental change in value directly attributable to the cleanup would be subject to the windfall lien. And it would only apply to the Toll Brothers' development if EPA spent had money on their property, not on a cleanup in the canal itself. I guess Toll Brothers was hoping someone would clean up their property for them for free? Sorry Brothers.

Anonymous said...

Toll once wanted the NY tax payers to help cleanup their site (paying 25% of those costs) but they pulled out of the NY State Brownfield program in order to take down the building on the site designated eligible for the National Historic Registry. Under the brownfield program the demolition could not take place without approval under the program.

The DEC brownfield program is a volunteer program. Toll pulled out of the program to take out the building. They could develop the site without any DEC brownfield oversight--no cleanup standards would be held over their head at all except what the City required under the rezoning--and who knows what kind of standards that may have been! The DEC permits needed to develop have to do with the bulkheads and wetlands, not the brownfield conditions.

But the good news is that Toll just doesn't want to (or financially can't) build along the Gowanus now. And it hard to feel sorry that the selling party lost out on a deal--they are the same people who displaced active businesses from the site.

Anonymous said...

And imagine what a place the Gowanus might be today for jobs and employment if this idea of residential development hadn't been dangled over the place these past few years. Besides the laundry service and dry cleaners, how many other businesses were displaced because of real-estate contracts based on promised zoning changes?

Anonymous said...

9:47 you are sooo right. Industry was killed to suit the speculators who hoped to make a windfall on residential development. And it is a crime, really, because we need the businesses, the jobs, now more than ever.