Despite construction being nearly complete, more than 27 million obstacles stand in the way of the condominium complex at 21 West Water Street in Sag Harbor being sold.
The long-stalled, 56,000-square-foot project, owned by East End Development but in bankruptcy proceedings with more than $33 million in mechanic’s liens filed against it, is being put up for auction on August 20 in Manhattan.
In order to even qualify for the auction, prospective buyers need to prove they are flush with at least $27.1 million in cash by August 16.
Amalgamated Bank, which holds the largest lien against the property at about $32 million, is currently the only qualified bidder. Amalgamated opened the bidding at $27 million.
“Basically, $27 million gets you in the door on August 20,” explained Matthew Bordwin, co-president of GA Keen Realty Advisors, an international liquidation company, which is running the auction in conjunction with DJM Realty, an international real estate investment firm.
If no other qualified bidder enters the auction, Amalgamated Bank can either accept control of the property or suspend the auction for three weeks.
Also, if an auction is held and it so chooses, the bank can submit a higher bid on credit for no up-front cash, up to the $32 million it is owed.
“That $32 million they are owed is gone. Their lien on the property will be gone once there is an auction,” explained Mr. Bordwin. “The building was the collateral on the loan, so they’ll either get the building, or they will get the majority of the money coming from the winning bidder.”
According to Mr. Bordwin, Amalgamated Bank will only get a majority of the money because it will be put into a pool, with each lien-holder getting their fair percentage, as well as back taxes being paid out. Taxes owed on the property include $13,875 due to Sag Harbor Village and $31,704 due to Southampton Town.
Mr. Bordwin stressed that the winner of the property will be “free and clear of any previous liens — all taxes, all liens are wiped out, and they [the new owners] owe [starting] from that day forward.”
Based on market conditions, the property is predicted to be worth about $33 million when the development is complete, with an as-is value of $26 million, according to an April appraisal by Metropolitan Valuation Services. Metropolitan predicts the maximum value to be no more than $45.4 million.
Mr. Bordwin added that “some high net-worth people visit Sag Harbor in the summer, so we have had a pretty good response. They now have a few days to decide if the price is right.”
An open house for those with $27 million in cash lying around will be held August 14 from 9 to 11 a.m.
If the auction results in a sale, the final say goes to the bankruptcy court, which has a hearing scheduled for August 26 to approve or deny the sale.
Prices for the individual units will then be set by the winner of the auction.
Planning for the 19-apartment project started in 2006 and shovels were in the ground by December 2007. Construction, which is more than 90 percent complete, was stopped for about two years, but started up again in June of this year.