TMG Partners and Northwood Investors are set to take control of perhaps San Francisco's most valuable development site, an assembly of parcels at First and Mission streets set to be transformed into two soaring towers with 1.2 million square feet of office space and 605 condominiums.

The sale was tentatively agreed to today in United States bankruptcy court after a deal was hammered out between investor David Choo, the previous owner of the site, and MS Mission Holdings, which had bought the loan on the property and foreclosed on it after Choo had defaulted on a loan.

Under the agreement, TMG and Northwood Investors will pay $122 million for the property. Of that, $97 million will go to Morgan Stanley Real Estate and Lincoln Properties, the two entities that made up MS Mission Holdings. Choo will receive $20 million in cash at closing as well as $10 million in two $5 million installments later on.

MS agreed to sell the properties to FM Owner LLC, the TMG/Northwood partnership. In court documents, MS says they "wish to enter into a mutual release of all claims and causes of action." The "transaction is the product of months of negotiations between FM, MS, the debtors, Choo, and all other borrower parties," stated the agreement. "It achieves a complete resolution, including full payment of all claims against the debtors and their estates, and ends continuing litigation."

Under the Transbay Plan, a rezoning that was put in place to encourage density around the Transbay Terminal, the seven parcels at First and Mission were zoned for a 850-foot tower and a 605-foot tower. On May 22 attorneys for the project filed a revised preliminary project assessment that is consistent with the new zoning. The project would include a 59-story office tower with frontage on First Street and 56-story condo tower.

David Choo, who lost several businesses to bankruptcy during the recession, had originally hired Renzo Piano to design a series of slender skyscrapers the designer likened to bamboo shoots.

The deal is the latest coup for Michael Covarrubias, the president of TMG Partners. San Francisco's most prolific downtown dealmaker, Covarrubias is known for taking on the most thorny and arduous deals and somehow making them work. In past year Covarrubias has been on a roll. Last year he attracted Macys.com and Riverbed Technologies to an empty building at 680 Folsom St., eventually selling it to Boston Properties for $300 million in cash and stock. Along with DivcoWest TMG group bought 1275 Market St. for $44 million and turned around and sold it to Dolby for $109 million.