Two Trees Management has signed preliminary papers to purchase the sprawling Domino Sugar factory site in Williamsburg, Brooklyn, for $160 million. In a deal that could close as soon as the end of next week, Dumbo's biggest developer will take over the stalled project from CPC Resources and its partner, The Katan Group.
Despite recent efforts to save the by making the project's lender, Pacific Coast Capital Partners, an equity partner, and looking for a deep-pocketed developer to inject additional cash into the project, CPC wants to get out of the project.
"The market told us that now is the time to sell the property outright," said Rafael Cestero, chief executive of CPC, adding that since taking over the firm in January, his goal has been to rebuild the troubled CPC as an affordable housing lender and to make sure that the Domino site gets developed. "Two Trees understands waterfront development, is well-capitalized and is the best chance for this site to get developed into the mixed-income, mixed-use community it was intended to be."
See [ElectricWeb | Blogger, May 26, 2011], [ElectricWeb | Blogger, Apr 21, 2012]
Mr. Cestero said within the past six weeks CPC had received about a half a dozen offers to buy the site. A spokesman for Two Trees declined to comment. Two Trees is responsible for transforming the once-gritty waterfront Brooklyn neighborhood of Dumbo into a thriving community.
CPC has presented the offer to its partner, The Katan Group, which had sued CPC for mismanaging the project and asked the court to block CPC's earlier efforts to salvage the project. Last month, the court ruled against Katan, but since then, Katan has appealed the ruling and filed other suits against CPC.
"We are studying the possible deal, but one thing is already obvious: CPC is undervaluing the asset yet again. As we have said numerous times in court papers, CPC has mismanaged the asset and has wasted millions of dollars, " Y. David Scharf, a partner at the law firm of Morrison Cohen, who represents the Katan Group, said in a statement. "Should CPC seek to go through with the Two Trees transaction over Katan Group's objection, we will seek to enjoin that transaction. Katan has already exercised its right of first refusal and we will not stand idly by as CPC attempts to end-run that right with this new deal."
Mr. Cestero said under its joint venture agreement with the Katan Group, while CPC needs to consult and notify Katan of the sale, Katan does not need to agree to the sale for the deal with Two Trees to proceed.
If the sale goes through, the $160 million deal would be enough to cover the outstanding mortgage and interest of $125 million on the property. Mr. Cestero says it would also provide a return on capital plus a little bit more to the equity partners in the project. If all goes as planned, the sale could be finalized by the end of next week, he said.
According to Mr. Scharf, the Two Trees deal would not be that simple to pull off. "This new deal contains significant contingencies that could prevent it from ever being closed, leaving the project in limbo," he said in a statement.
