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Long IslandNassau

Developers file $100M suit against Long Beach over Superblock

IStar Financial officials say they are seeking damages after plans for luxury apartments along the boardwalk stalled.

The proposed Long Beach Superblock would be located

The proposed Long Beach Superblock would be located between Long Beach and Riverside boulevards, seen on Jan. 1, 2016. Photo Credit: Barry Sloan

Manhattan developer iStar Financial filed a $100 million lawsuit Wednesday against the City of Long Beach.

Developers are seeking damages for lost revenue following a settlement paid to the city to develop a parcel of oceanfront property along the boardwalk. iStar had submitted plans in 2014 to build 522 luxury apartments and 11,000 square feet of boardwalk-level retail space in a pair of 15-story apartment towers.

Long Beach officials said they could not comment until after they had reviewed iStar’s complaint, filed in Nassau County Supreme Court.

In the lawsuit, iStar accuses the city of violating the settlement agreement in which iStar paid the city $5 million after the previous property owner defaulted on millions of owed costs. A condition of the settlement drafted in 2014 included the city’s support for tax breaks. Also, the Long Beach City Council authorized then-City Manager Jack Schnirman to sign a host community benefits agreement in 2015 with iStar that promised the city an additional $4 million in infrastructure costs after the first tower was built.

The project stalled after the Nassau County Industrial Development Agency twice rejected tax breaks for up to $129 million to build on the parcel known as the Superblock, between Long Beach and Riverside boulevards. Developers have said they cannot complete the $336 million project without tax breaks.

Corporation Counsel Rob Agostisi gave the city’s initial support during a 2015 IDA hearing, but iStar officials said the City Council failed to sign a letter of support for tax breaks. City officials said later “the city would remain completely neutral,” and refused to offer support for tax incentives, according to iStar’s lawsuit.

“The City’s myriad breaches of its obligations under the Settlement Agreement have endangered the existence of the Project and caused damages to the Company in excess of $100 million,” iStar officials wrote.

Developers said the city’s attorneys and officials had spoken against the development or tax breaks to undermine the project.

“It is with a great deal of reluctance that iStar filed this suit today,” said Karl Frey, iStar’s executive vice president. “For nearly a decade, we’ve worked closely with the City of Long Beach to create a development plan that would be both economically viable and provide extraordinary benefits to the city and its residents.”

IDA officials cited unprecedented public opposition to the project, but iStar officials said that the Nassau County IDA was ready to approve tax breaks if given city endorsement. IDA officials could not be reached Wednesday, but said last year that city support was “not a deciding factor.”

The Long Beach Zoning Board of Appeals is reviewing whether to extend or revoke a previously granted building permit and variances from 2014 that allowed iStar to exceed the city’s height and density requirements after developers said they would be ready to start construction within the first year.

The company has invested $80 million in the project, and Frey said he hopes it can “amicably come to terms” with the city to move the project forward.

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