Domino Fight Turns Sour

Eliot Brown, in the Wall Street Journal fills in a few important blanks on the Domino saga:

[After defaulting a $125 million loan] CPC cut a tentative deal with [lender] Pacific Coast Capital, in which CPC agreed to give the company an 84% stake in the property in exchange for forgiving the debt… Under the deal, CPC would have day-to-day control over the project for now. But Pacific Coast Capital would have final say over major decisions such as sales and new partnerships…

And then there’s this:

The financial troubles of the Domino project also raise questions about some of the pledges CPC made when it won city approval for the project. According to city officials and [CPC CEO Rafael Cestero], the developer’s commitment to fulfill its pledge with regard to affordable housing isn’t binding… Mr. Cestero said CPC is still committed to developing the project as pledged. But he also acknowledged that the owners would be open to selling the project if the price were high enough. He said he doesn’t expect this to happen.

Reading between the lines, it sure sounds like Pacific Coast is in control of which entitlements will be taken (and which promises are fulfilled).

CPC Resources tells the Brooklyn Paper that they are not selling out, just looking for a “reputable developer” experienced in waterfront development and affordable housing to partner with on the project. Which is to say, they want to sell part of the project. CPCR also acknowledged that they are working to renegotiate a $120 million loan – the same loan they apparently defaulted on in late 2011.

Meanwhile, the developer has officially pushed back the start date for phase one of the project to a very squishy “end of 2013”. That puts it a full two years behind the original schedule, and a year and half behind the most recent party line.

Things Get Worse at Domino

03/21/2012 | Comment

Crain’s reports this morning that the partners in the Domino project are in court, with Isaac Katan, the long-silent partner in the deal, alleging mismanagement, “misdirection and inaction” on the part of CPC Resources. According to Katan, CPCR has nothing to show for the over $100 million in equity and financing that the project has received. Now CPCR is trying to restructure the project’s $120 million in debt, in a deal that (according to the plaintiff) leaves Katan out in the cold:

Last month, CPC Resources told Katan it would enter a Letter of Intent that would allow Pacific Coast to restructure its debt. Under the arrangement, Pacific Coast would be able to convert its loan into an equity interest in the project, therefore reducing Katan’s interest in the project to 8% from 50%. Katan said in the filing that it never consented to such an agreement. Also, the new structure would give the lender the right to remove the current partners in the development from the project at any time and without reason.

But, at the same time, leaves CPCR with a guarantee of something:

But CPC Resources would still be paid an annual management fee of about $750,000, plus expenses.

Suddenly, even CPCR’s supporters seem to be having second thoughts:

“The tenants associations and the area residents, who worked hard to support Domino with its 660 affordable housing [units], are shocked that this project is now in jeopardy of collapse because of the spending spree and unaccountability by CPC,” said Isaac Abraham, a Williamsburg community leader and housing advocate. “Residents hope and pray that 660 affordable units and the entire Domino project doesn’t go up in the refinery smokestack.”

Of course, the 660 units were never guaranteed, and are certainly not part of the entitlements that CPCR has been looking to protect.

Sweet Movie

Aaron Short interviews the makers of the Domino Effect, a (still) topical documentary about the New Domino approval process. I’ve seen the picture in preview, and it is very well done and quite powerful.

Lured by Profits

03/15/2012 | Comment

Charles Bagli has an in-depth piece in today’s Times on the fall of Community Preservation Corp. There is not much in here that I hadn’t been hearing in bits and pieces over the past few months, but still, seeing it all together is jus incredible. Real estate deals like Domino (though Domino is far from the only one) have almost shut down one of the most important conduits for funding affordable housing in the NY region. As I’ve said in the past (and despite their claims to the contrary), CPC is a funder of affordable housing, not a builder of housing – clearly they lost focus on their core mission.

For anyone who thinks CPCR (the for-profit arm at the root of the problem) is going to do the Domino project, let along do it as the community was promised, this has to be pretty sobering.

Passing the Sugar

Aaron Short does some good reporting to advance the Domino story. Among the enticing new nuggets is word that the owners had a deal to sell the project for $200 million back in December. According to Short, that deal fell through after some of the 15 investors on the buyer’s side “got skittish about the project’s finances and zoning variances”.

Domino for Sale

03/12/2012 | Comment

In news that should surprise no one (but is surprising nonetheless), the Observer reports that the Domino site is on the block. Apparently, the Katan Group and their development partner CPC Resources have been shopping all or part of it to potential buyers.

A spokesman for CPCR told the Observer:

We are pursuing various options that will achieve our goals: to realize value for ourselves and our partners, and to insure that development is consistent with all project entitlements

Chief among the entitlements CPCR received (and of primary value to them, their partner and any potential buyers) was approval from the City to redevelop the site for as many as 2,400 housing units. In exchange, CPCR promised to build 660 units of affordable housing, a lot of open space and a public school, all (nicely) designed by architects Rafael Viñoly and Beyer Blinder Belle. Most of this of these benefits were not guaranteed – something that was a very big issue for people opposed to the project back in 2010.

Hopefully we were wrong.

Building Heats Up Down By The East River

03/11/2012 | Comment

Crain’s looks at development on the East River and finds things are booming up and down the Brooklyn waterfront. From the next tower at Northside Piers, to a hotel at Brooklyn Bridge Park, to industrial redevelopment at Bush Terminal, a lot is happening. But no news on the Greenpoint waterfront, and nothing new at Domino, which “hopes to set a start date soon” (they originally had a start date in 2011).

Former HPD Commissioner to Head CPC, Domino Developer

Rafael Cestero, who headed HPD for two years, will take over the helm at Community Preservation Corporation/CPC Resources (the latter is the developer of the Domino project). Michael Lappin, who was CEO of CPC/CPCR for 30 years, announced his retirement in November.

State Supreme Court Rejects ‘Domino’ Suit

More news from the court dockets – this time on the suit brought by neighbors opposed to the Domino rezoning. The State Supreme Court (which is the lower court in NY) has rejected a suit by neighbors. Not surprising.

The neighbors plan to appeal. Also not surprising.

Meanwhile, there is no action at the Domino site (that has nothing to do with the suit, and is also not surprising).

Tag: domino