Just recently there was news that the developers of Willimasburg’s massive Domino Sugar Refinery building into a huge mixed-used project heavy on housing were quietly shopping around the site. This morning, Crain’s has a story detailing just why the plans are far from being realized, and the bottom line is that the Katan Group is alleging in a lawsuit that Domino the firm’s partner, CPC Resources, has mismanaged the development process and played fast-and-loose with financing. Katan also wants to block the sale of the site to the lender, and CPC Resources is denying Katan’s charges. Here’s the legal back-and-forth and charges that the suit are based on:
“In 2004, CPC Resources and Katan acquired the site for $55 million, each contributing $10 million in capital to the deal, according to the court filing. A total of $65.5 million in financing was obtained from CPC Resources’ parent company, Community Preservation Corp., which provides financing for affordable housing development, and from Marathon Structured Finance. Since the acquisition, as the partner designated to oversee the development, CPC Resources has collected $25 million in fees for legal services, architects, unspecified consulting fees, environment fees and security for the development. CPC Resources “has effectively depleted all of Refinery’s available capital, while virtually no construction work has been performed,” the filing said, adding that the ownership is “devoid of operating budget.” According to the filing, that is despite the $20 million in capital put into the Domino project, the $25 million in fees collected since the start of the project, and the $120 million in financing obtained in 2007 to pay off the original lenders on the project. In 2009, due to the market collapse and uncertainty about the granting of zoning approvals for the project, it became clear that the effort would need additional financing, the filing said, but instead, CPC Resources began to negotiate with its existing lender, Pacific Coast, which in September 2010 extended its loan. Katan claims that CPC Resources refused to permit it to meet with Pacific Coast to negotiate terms.”
Meanwhile, the Katan Group also alleges that CPC rebuffed high offers from a couple firms looking to buy the site in favor of continuing to tango with Pacific Coast.
Domino Sugar Plans on Verge of Meltdown [Crain’s]
Photo by Loozrboy