By Liana Grey
Two Trees, the DUMBO-based development firm, is in talks to acquire the long-troubled Domino Sugar factory site along the Williamsburg waterfront for $160 million.
The pending deal comes after the Community Preservation Corporation (CPC), a partner in the development along with Isaac Katan, sought to recapitalize the project after defaulting on a $120 million loan.
Over the last six weeks, according to published reports, the CPC looked over a handful of bids for the development site, and settled on Two Trees.
“Two Trees understands waterfront development, is well-capitalized and is the best chance for meeting our vision for Domino,” CPC president Rafael Cestero said in a statement. “Our goal is to find a partner who will develop Domino into the mixed-income, mixed-use community it was intended to be and to find a deal that works for CPC and all our various stakeholders.”
Katan and the CPC had planned to transform the factory, which they purchased for $55 million in 2005, into a master-planned community of rental towers, retail space, and an esplanade.
Katan’s attorney, Y. David Scharf, said news of the pending sale came as a surprise to the Katan Group.
“Looking at the papers, this deal clearly has been being negotiated for some time,” Scharf said in a statement. “Just weeks ago, CPC claimed this project had no real equity and was prepared to turn it over to the lender for a pittance and a hope interest.”
Katan had recently filed two lawsuits against the CPC in an effort to secure first right of refusal and block the CPC from handing a majority stake of the project to Pacific Coast Capital Partners, a California-based lender. The CPC claims that Katan has little more than a consulting role in financing matters.
So far, Katan and the CPC have spent $100 million preparing for construction on the 160-year-old site. Following a sale to Two Trees, the partners would break even on their investment.
“CPC is undervaluing the asset yet again,” said Scharf. “Katan Group has strong indications of interest in the Domino site, as well as the original white knight offer, which values the project’s equity at ranges between 50 and 75 million above the debt.”
In April, Katan was rumored to have located a potential “White Knight” investor to save the project from foreclosure. He declined to name anyone he’d spoken with, but made clear that he opposed handing over significant control to a firm headquartered on the West Coast.
With the CPC expected to finalize the deal with Two Trees within the next few weeks, Katan is gearing up for another potential legal battle.
“Should CPC seek to go through with the TwoTrees transaction over Katan Group’s objection, we will seek to enjoin that transaction,” said Scharf.