Following the recent news that the would-be developers of the massive Domino Sugar plant on the Williamsburg waterfront were looking to sell the site, there came word that one half of the development team, the Katan Group, had filed suit against the other developer, CPC Resources, alleging financial mismanagement. Now the latest, according to the Real Deal, is that a state Supreme Court judge says she will rule on Katan’s injunction request by May 4th. Here is the very happy legal back-and-forth between the two sides:
“We’re focusing on the fact that they’re taking our ownership interests and giving it away,” Morrison Cohen attorney Y. David Scharf who represents Katan Group, told Judge Eileen Bransten at the hearing. The company also claims it has found a “white knight” investor that would buy the site on the same terms as the proposed CPC sale back to the bank, according to lawyers. But, attorney Mark Walfish of Katsky Korins, representing CPC, launched a blistering array of charges against Katan, saying the injunction would result in a foreclosure against the project. He also said that CPC, as managing member of the entity that controls the project, only has the obligation to consult with Katan, and has the full authority to make final decisions on the project. “There is nothing we are doing that eviscerates their rights,” he told the court.
The Katan Group claims it has had multiple and very high offers from investors looking to buy the site, but that CPC isn’t playing ball with them. Construction on Domino wasn’t supposed to start very soon (if memory serves, perhaps by next year), but the legal squabble and possible sale makes us think the development process is going to take even longer to begin.
Judge to Determine Fate of Domino Sugar Factory Within Month [TRD]
Legal Battle Adds to Domino Development Drama [Brownstoner]
Photo by Loozrboy
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
Charles Bagli has an extensive piece in the New York Times about how the longstanding nonprofit Community Preservation Corporation has run into substantial money problems, and the article illuminates why the developer is now shopping around the Domino development site. Many of the organization’s money woes stem from its for-profit C.P.C. Resources arm, which was established in the ’90s to invest in projects that often involved elements of luxury housing. Here’s the long and short of it, in Bagli’s words: “At the time, Community Preservation defended the ventures, saying it needed to invest in condominiums and other relatively upscale developments in order to strengthen neighborhoods by creating mixed-income communities. But others pointed out that even if that had been the case, the group should not have allocated so much of its capital to such projects. At the peak of the real estate boom in 2007 and 2008, more than half of the $1.5 billion in loans originated by Community Preservation or its for-profit arm were for condos.” The article notes that C.P.C. Resources defaulted on its $125 million Domino loan last month. Meanwhile, here’s a quote from Councilman Brad Lander about how CPC needs to get back to its affordable, nonprofit roots: “C.P.C. was tempted into more speculative lending, which harmed the organization financially and left a big hole in the field of lending for multifamily housing. …Two-thirds of the city’s housing stock are rental units, and that’s why we need C.P.C. to return to its core mission.”
Seeking Real Estate Profits, Nonprofit Group Stumbled [NY Times]
Photo by scriptingnews
Wow, talk about big news on the Williamsburg waterfront: The Commercial Observer reports that developers Community Preservation Corporation and the Katan Group have been looking to sell all or parts of the Domino factory development to new buyers. The massive project, which was green-lighted in 2010, was supposed to involve the restoration of the factory in addition to the construction of several high rises. The development was supposed to result in 2,200 residential units, 660 of which would be affordable. The real estate folks the Observer quotes in the article point to several challenges the project faced, including the onus of constructing so much affordable housing and the high cost of renovating the factory itself. What’s surprising about highlighting those issues is that they were certainly obstacles as of a couple years ago, which was when the the project was approved and well after the market crash. Aside from Atlantic Yards, Domino is the biggest (would-be) development planned in Brooklyn.
UPDATE: If you’d like to get caught up on the entire history of the Domino redevelopment efforts, check out our Pinterest board on the subject.