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Death of Amazon Deal May Spark Legal Fights Over Real Estate Values, Attorneys Say

By Adam Leitman Bailey


By Andrew Denney 

February 14, 2019

Amazon made the surprise announcement that it was passing on Long Island City for its HQ2 project in a news release, in which the company said “a number of state and local politicians have made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward” with the proposed project.


Amazon’s announcement Thursday that it is dropping its controversial plan to move into Long Island City, Queens, may have a legal ripple effect for real estate developers and property owners who had pinned their hopes on the company moving into the neighborhood.

Amazon made the surprise announcement that it was passing on Long Island City for its HQ2 project in a news release, in which the company said “a number of state and local politicians have made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward” with the proposed project.

“For Amazon, the commitment to build a new headquarters requires positive, collaborative relationships with state and local elected officials who will be supportive over the long-term,” the release states.

According to a Siena College poll released just days before the announcement, 58 percent of New York City residents supported the plan.

The company also noted in the release that it has 5,000 employees working in Manhattan, Brooklyn and Staten Island. It also said that it would not seek to find additional sites as part of the HQ2 project and that it would concentrate on proceeding with the projects in Nashville, Tennessee and the Northern Virginia suburbs of Washington.

To aid it in its fight with the local opposition, Amazon enlisted the help of Big Law partners [redacted] and [redacted] of [redacted]. The company also has a contract with [redacted] to assist in its lobbying efforts in Albany, the Wall Street Journal reported.

The apparent death of the Amazon deal, in which the company was offered $3 billion in state and local tax incentives for its pledge to bring 25,000 jobs to town, was hailed as a victory by some New York City lawmakers and activist groups who balked at the size of the tax-incentive package being offered to the world’s wealthiest company, among other concerns.

Among them was State Sen. Michael Gianaris, D-Queens, who has spoken out against the deal and who was recently appointed to a state board that would have had veto power over it.

In a news conference that Gianaris posted to his Twitter account, the senator said Amazon’s proposal to move to Long Island City raised questions about the capacity of local infrastructure and schools, and the effect on the local housing market, that would have resulted from the influx of new residents and workers.

“Amazon took its ball and left town,” Gianaris said.

In a statement issued after the announcement, Greg LeRoy, executive director of Good Jobs First, a Washington-based nonprofit that speaks out on economic development incentive deals, said the site-selection process for the HQ2 project, in which local leaders in three countries handed over detailed site data to the company, will be considered a “negative turning point in the corporation’s reputation.”

“By exposing the seamy underside of America’s tax break-industrial complex, we assume Amazon had made itself a pariah in certain consulting, accounting and legal circles,” LeRoy said. “And we note that some other tech firms continue to expand in New York and other cities without any special tax-break deals.”

But for business groups and property owners, as well as some lawmakers and labor unions, Amazon’s announcement created a sense of doom.

The real estate market in Long Island City, a historically industrial neighborhood that has undergone rapid residential development in recent years, had begun to cool off through last year.

But the market began to heat up when news leaked in November that Amazon was coming to town.

According to a December report from StreetEasy, prices increased for 35 listings in the area, or 18.8 percent of the total homes for sale, once the Amazon news leaked.

Real estate attorney Adam Leitman Bailey, whose firm represents property owners and developers with business in Long Island City, said the news was especially hopeful for developers with vacant units they were having trouble unloading.

“Amazon was the white knight, or the angel, coming to save the day in this barren market to take over these units,” Leitman Bailey said.

Additionally, Amazon had agreed to lease 1 million square feet of space at One Court Square, also known as the Citigroup Building, and had been in talks with plastics company Plaxall and a developer about building a multi-acre campus.

[redacted], a member at [redacted] who works with commercial real estate clients, said the Amazon project would have had a “ripple effect” that would have generated new business in the area and boosted existing ones.

But now, he said, that ripple effect might be happening in reverse and that there might be some legal ramifications in cases where developers had already plunked down deposits with the assumption that the Amazon project was a go or had secured financing for projects.

Leitman Bailey said, though, that real estate law tends to lean toward “buyer beware” and that buyers left holding the bag would likely be unsuccessful in the courts. As for the news about Amazon itself, he said he sees it as a negative development that could teach some New Yorkers a lesson.

“There’s no way we will be the no. 1 city in attracting talent if we’re not going to make this a comfortable landing spot for business to come and make this their home,” Leitman Bailey said.

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