When you’re doing a real estate deal—particularly one worth many millions of dollars—no “due diligence” is as relevant or valuable as your own experience with the other party. No credit checks, or letters of reference, are as meaningful as what you’ve learned in the course of ordinary business.
That simple truth led me to look into Luminati’s history leasing our runways. The record goes back over two years, and I surmised it would reveal much about Luminati as potential EPCAL owner.
Remember, town leaders have made it clear we’re not just looking for a check and a handshake; we must count on Luminati to turn EPCAL into a job-generating economic engine to secure Riverhead’s future. The stakes are high.
In pursuing data on whether Luminati is a good tenant — using the simple metric of whether they pay their rent on time — I learned four surprising things.
1) The Community Development Agency (AKA our town board, wearing different hats) doesn’t track rent payments. The CDA sends out invoices, but doesn’t record when — or if — Luminati pays.
2) Our overburdened accounting department has spent lots of time preparing invoices at Luminati’s request…as well as on collections. The deal, however, doesn’t require invoicing; rent is simply due.
3) The lease stipulates payment of annual rent, with no provision for installments. No one I spoke with at town hall could explain why monthly payments have been allowed. If Luminati wrote one check each year for the rent — as they’re supposed to — we’d have the money much quicker, earn more interest, and save many hours of accounting staff time.
4) The lease has no provision for late charges. When Luminati misses their (unauthorized) monthly payment, they simply submit the amount originally due — no matter how delinquent — with no interest or late fees. (It would be nice if the rest of us could pay our rent or mortgage when we choose, with no penalties or risk of eviction.)
To my knowledge, all these contractual and procedural deficiencies can be credited to the guy who negotiated all things Luminati: former supervisor Sean Walter. Let’s hope we have sharper eyes looking at town contracts going forward.
As to whether Luminati has fulfilled its simple obligation to make rent payments on time and without fuss, the answer is a resounding no. If we allow a 10-day grace period, Luminati made three on-time payments, and two were early.
Luminati was more than 10 days late an astonishing 21 months out of 26, or 81 percent of the time.
Their average tardiness, over more than two years, has been an equally astonishing 46 days.
Think about it: we’re considering a $40 million deal with a firm that, three years in a row, has been unable (or unwilling) to write a check, as their lease dictates, for rent of under $40,000 per year.
Apologists — the same folks who respond to stories that Luminati has stiffed contractors working on their site by saying “we don’t have all the facts” — might say this is small potatoes, and doesn’t matter in the “big EPCAL picture.” They might argue that Luminati’s new financial partner will take care of such pesky details so the rocket scientists can get on with their important work.
I disagree. This is not an absent-minded professor, but a company that employs professional staff to handle routine business matters. And in this case, we do have all the facts, which paint a clear picture of a firm that consistently fails to meet its obligations, and has been a nuisance to the town. If they can’t or won’t do easy things, how can we rely on them to do really hard stuff…like inventing great jobs?
In my long experience, their failure reflects character, and character doesn’t change.
Mostly, I fear that as dollars and responsibility are scaled up by orders of magnitude with an EPCAL sale, the problems — and their consequences for the town — will ratchet up in lockstep. I predict that if our hopes and dreams for EPCAL — including the new, sophisticated jobs we’re counting on — are pinned to a company that’s been an unreliable deadbeat in its business dealings with the town, we’ll be profoundly disappointed.
No amount of late charges can compensate us for getting this decision wrong.
Larry Simms is a resident of South Jamesport.
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