Hawkeye Plant auction draws only one bidder. What does the NYC investor want to do with it?
A buyer has emerged for Kodak’s former Hawkeye Plant who is willing to shell out $9.2 million for the property – sight unseen.
The hulking seven-building complex on St. Paul Street went to auction after its current owner, a firm called WBS Capital, filed for bankruptcy.
A bankruptcy court judge last week approved the negotiated sale to Kundalini Corp., a real estate investment firm based in New York City. Kundalini’s Richard Raghunath plans to travel to Rochester and inspect the property on Saturday.
“The building has a lot of potential, a lot of flexibility, a lot of opportunity to be done here,” Raghunath said. “This is a big venture for us.”
He said the company has several multimillion-dollar deals in the works. But very little about Kundalini can be found online.
The immediate plan for the Hawkeye Plant, Raghunath said, is to bring the property up to code, then partner with WBS to restart and expand a failed import business, which was using the plant as a distribution hub to sell online.
Rounding out the new venture, Raghunath said, could be Henry Lam, an embattled developer currently fending off foreclosure of an unrelated property in Queens.
Here in Rochester, the Hawkeye Plant sits vacant, without power and uninsured. WBS filed for Chapter 11 bankruptcy protection in March, aiming to save the property from foreclosure. But it let its insurance coverage lapse, which had federal monitors urging dismissal before the sale was approved.
WBS’ attorney Scott Markowitz staved off that push, for now, but acknowledged the oddity.
“Usually the owner of a property doesn't let the insurance lapse during the Chapter 11 case,” he said. “But, you know, insurance is expensive now. And this building is — as you know — a big mess.
“It's not an easy property to insure.”
How we got here
The Hawkeye Plant once was home to a secret Cold War-era surveillance program and other clandestine government programs. Now it’s a relic, sitting empty and boarded up alongside a neighborhood and overlooking the Genesee River.
WBS paid Kodak $2.5 million for the vacant complex in 2018, proposing a redevelopment that – in addition to the e-commerce hub – was to include offices and low-rent apartments, which never materialized.
The company claims it invested $16 million in the property, part of that to build a state-licensed indoor hemp growing operation, records show. But the power went out and the plants died. A transformer blew inside the complex this past spring. As of a few weeks ago, it had yet to be repaired.
Lax security has led to a series of break-ins. Police responding to one such call in August found dozens looting the facility.
Raghunath said he plans to hire a security firm and invest upwards of $2 million in repairs and improvements. He said he doesn’t yet know what to do with the 23-room grow operation, or the entirety of the facility, for that matter. His focus, he said, is on getting the import hub restarted and generating income.
Kundalini came to the auction late. WBS President Sally Lu, acting through a broker, brought the property to Raghunath’s attention just a couple days before last month’s bid deadline in the bankruptcy auction, he said.
The $14 million minimum bid had been cut in half two weeks earlier, with a brokerage firm reporting no interest in the property. Kundalini submitted its offer just after the deadline, bidding $8.5 million, bypassing the stated requirement of a 10% deposit, and putting up $300,000 instead.
WBS' lender — owed $11 million — said it would take no less than $8.5 million for the property. That pushed Kundalini to up its offer to $9.2 million in order to cover closing costs and help offset other remaining debts.
Is $9.2 million a good price?
“I have no idea,” said Markowitz, the attorney for WBS. “It was marketed for many, many months and we didn't get any better offers — at least that were timely or close to timely. So, you know, the market dictates.”
In a moment of candor during last week’s sales hearing, Markowitz told the court the Hawkeye Plant would be more valuable if it just burned down. But it’s built of brick and concrete.
“For the sense of not tempting fate, I think we will bring that point to close,” Judge Elizabeth Stong said, cutting off Markowitz before giving her go-ahead on the sale.
Tracing kundalini’s origins
City officials are optimistic that the deal will close and, this time, promises of redevelopment will be kept.
In a statement, Dana Miller, the city’s commissioner for neighborhood and business development, said the city would work with Kundalini "in an effort to encourage full use of the facility and create significant job opportunities for Rochester residents.”
Kundalini Corp. formed in 2015. “Kundalini” is Sanskrit for coiled, and refers to a life force or energy that can be released through yoga or meditation.
The company has focused on residential and commercial real estate in Flushing, Queens, Raghunath said. That also is where WBS is based. Kundalini’s listed addresses track to a non-descript entrance adjacent to a pilates studio in the East Village of Manhattan. Or to a UPS store on Long Island.
Company filings with New York state and the bankruptcy court list people other than Raghunath as Kundalini’s president and CEO. But he said those are his titles, along with owner, and he has represented the company in court.
Raghunath envisions building on WBS’ e-commerce business plan that sought to import items from China and re-sell the merchandise online. His family roots trace to India, but also Guyana, and he expects to export — food items, specifically — into Latin America as well as the Caribbean.
WBS relied on Chinese investors and, by all accounts, ran out of money. The company stopped paying its mortgage more than a year ago and owes its lender $11 million. All of the sale proceeds, if finalized, will go toward that and other debts.
Kundalini has lines of credit, with hedge funds in the United State, London, and Dubai, Raghunath said.
“The timeframe is reasonable,” Raghunath said of the December deadline, after which he risks forfeiting his $300,000 deposit.
He estimates it will take 90 days to organize the foreign trade business, which would then see profitable returns in six months to a year. He sees WBS’ plan — as far as the import/re-sell business — as solid, just short on money.
"We will move very fast,” he said. “This will not be a concern.”