M E M O R A N D U M 

				 January 19, 2010

To:		Members of the Board of Trustees

From:		Nancy L. Zimpher, Chancellor

Subject:	Amendment of Ground Lease for a Hotel/Conference Center at State University of New York at Stony Brook

	I recommend that the Board of Trustees adopt the following resolution:

Whereas by Resolution 87-24 adopted January 29, 1987, this Board of Trustees authorized the Chancellor, or designee, in accordance with the provisions of Chapter 830 of the Laws of 1986 to enter into a ground lease with Stony Brook Foundation Realty, Inc. (�SBFR�) for development and operation of a hotel/conference center at the State University of New York at Stony Brook; and

Whereas pursuant to this authorization a ground lease in substantially the form approved by this Board of Trustees, was executed and approved on 	December 5, 1989 (State Comptroller�s No. L000592) and was amended on August 2, 1996 to postpone the rental payment obligation of the SBFR through 1997; and 

Whereas by Resolution 98-179 adopted September 23, 1998, this Board of Trustees authorized the Chancellor, or designee, to approve modifications to the ground lease to further postpone the rental payment obligation of the SBFR through 2001 to facilitate the solicitation of a second potential developer of the project, and such modifications were approved and implemented; and

Whereas by Resolution 00-92 adopted May 31, 2000, this Board of Trustees authorized the Chancellor, or designee, to approve modifications to the ground lease to again postpone the rental payment obligation of the SBFR through 2003 to facilitate the solicitation of a third potential developer of the project, and such modifications were approved and implemented; and

Whereas by Resolution 01-162 adopted December 18, 2001, this Board of Trustees authorized the Chancellor, or designee, to approve amendments to the ground lease to reduce SBFR�s annual rental obligation from $100,000 to $1 until such time as the hotel/conference center is operational, and, by inadvertence, such amendments to the ground lease were not effected; and 

Whereas despite continued and worsening adverse economic conditions, Harbor Construction Management, Inc. has responded to SBFR�s request for proposals and is engaged in negotiations with SBFR and the University to construct and operate a hotel/ conference center on the Stony Brook campus; and

Whereas in order to facilitate the successful conclusion of these negotiations, SBFR has requested that certain amendments to the ground lease be authorized to extend for an additional period the postponement of SBFR�s rental obligation until the earlier of 2014 or such time as the hotel/conference center is operational; and

Whereas it is in the best interests of the University to grant such request as a 	modification of the ground lease terms approved by this Board of Trustees; now, therefore, be it 

Resolved that the Chancellor, or designee, be, and hereby is, authorized to approve any and all amendments to the ground lease and related agreements with the Stony Brook Foundation Realty, Inc. necessary to postpone for an additional period the rental payment obligation of the Stony Brook Foundation Realty, Inc. until the earlier of 2014 or such time as the hotel/conference center at the State University of New York at Stony Brook is operational; and, be it further

Resolved that Resolution 01-162, adopted December 18, 2001, be, and the same hereby is, rescinded.

Background

        By action of the New York State Legislature in 1986 (L. 1986 Ch. 830), the State University Board of Trustees was authorized to enter into a ground lease for the development of a hotel/conference center, with related service, commercial and recreational facilities on the Stony Brook campus.  It was determined that such a facility would benefit the University community and the region by attracting more educational and research conferences to the campus and providing convenient overnight accommodations for campus guests.

        On January 29, 1987, by Resolution 87-24, the State University Board of Trustees confirmed the need for such a facility and authorized the Chancellor to execute a ground lease �...substantially in the form and content on file in the Office of the Secretary of the University, with such modifications and revisions as the Chancellor, or designee, may deem advisable . . . .�  The resulting lease between the State University of New York and the Stony Brook Foundation Realty, Inc. (not-for-profit affiliate of the Stony Brook Foundation, Inc.) dated December 5, 1989 was executed and approved by the Attorney General and the Office of the State Comptroller (L000592).

        The approved ground lease has been amended three times to postpone the rental payment obligation of the Stony Brook Foundation Realty, Inc. for fourteen years, through December 4, 2003.  The most recent amendment was effected in expectation of engaging the Thayer Lodging Group of Annapolis Maryland to build the hotel facility.   That enterprise withdrew from negotiations in 2001 but SBFR was then able to successfully negotiate an agreement with another developer, the Shaner Hotel Group, in early 2004.  

        The prior ground lease amendments were deemed necessary and justifiable in light of the fact that extraordinary delays in the project�s initiation had been caused by the deterioration of financial institutions and market conditions on Long Island and nationally during the late 1980�s, the early 1990�s and early 2000�s.

        After a three year delay caused by unsuccessful legal challenge to the ground lease and authorizing legislation, the Shaner Hotel Group withdrew from the agreement in 2007.  Since then, a radical decline in the integrity of economic conditions on Long Island and nationally again impeded SBFR�s continued efforts to identify a reputable developer for the University�s hotel/conference center.  

        This past year, a fourth developer approached SBFR with a proposal for a hotel that conforms to legislative restrictions, State LEED certification guidelines and the University�s interest in maintaining its environmental vistas.  Harbor Construction Management Inc. is run by Stony Brook alumni who view this project as a way to give back to the area and to Stony Brook University in particular, enabling it to remain a strong community presence.  Because construction will take several years to complete, SBFR here seeks an additional period of rent payment abatement, until the earlier of 2014 or such time as the campus hotel becomes operational.
        The requested modification is strongly supported by the Stony Brook campus president and his staff.





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Board Resolution		January 19, 2010