EPCAL buyer extends contract ‘due diligence’ period for 90 days

Calverton Aviation and Technology, the firm in contract with the Town of Riverhead Community Development Agency to buy most of its remaining vacant land at the former Grumman site in Calverton, has extended its contractual “due diligence” period for 90 days.

The buyer’s initial 90-day due diligence period expired today.

A due diligence period is intended to allow the purchaser an opportunity to conduct environmental inspection and assessment of the property. If site conditions do not meet with the purchaser’s expectations, it can walk away from the deal.

CAT’s initial contract down payment of $500,000, made when it signed the contract in November, can now be released by the escrow agent to the seller. However, the town may be required, under certain circumstances, to return the initial deposit to the purchaser. For example, if the town fails to secure approval of the agreed-upon subdivision map and file it with the county clerk within one year of the end of the second due diligence period, either party may terminate the agreement. If the contract is terminated for this reason, the full contract deposit must be returned to the purchaser.

If CAT give the town its notice to proceed to closing before 5 p.m. on the last day of the due diligence period, it will be required to make a second deposit of $500,000 within three business days of the end of the due diligence period. 

The town will have one year from the end of the due diligence period to have a subdivision map approved by the town and other governing authorities and filed with the county clerk. The eight-lot subdivision configuration was depicted in an attachment to the contract.

Riverhead Supervisor Laura Jens-Smith said today the town is working on the subdivision application and she expects it will be submitted to the town planning board next month. It will also require approvals from other agencies before it can be filed with the county clerk, Jens-Smith said, but she does not anticipate difficulty meeting the one-year deadline.

Stuart Bienenstock of Triple Five Group — the Alberta, Canada-based company whose affiliate is the managing member of Calverton Aviation and Technology LLC — said the purchaser has been “poring through all the existing documentation” and “working on the site plan configuration” during the first 90-day due diligence period. They have not yet begun any tests in the field, such as soil borings, he said. Bienenstock said he expects CAT will seek to begin its field inspection work “within the next week or so.”

In addition, Bienenstock said, Triple Five has been assembling its team for the development project and has been in discussions with its lenders to line up financing for the project.

“We have every intention to close on this property,” Bienenstock said.

The contract requires the purchaser to develop the site in accordance with the town’s revised reuse and revitalization plan for the site and with the current zoning of the property. It also requires the purchaser to develop phase one of the project pursuant to an “intended development plan” attached to the contract as an exhibit.

The intended development plan requires the purchaser to spend a minimum of $1 million in the first two years after the closing of title to improve the existing runways on the site with lighting, an enhanced GPS system and general maintenance. Performance of this requirement is backed by a “completion guaranty” given by the purchaser.

The plan also requires the purchaser to build out at least 1 million square feet of commercial and industrial development, but there is no hard deadline by which this must be completed, or penalties for failure to perform.

From Northrop-Grumman to Triple Five:
a brief history of the Calverton Enterprise Park

The Enterprise Park at Calverton was once the home of Grumman Aerospace Corp., which beginning in the early 1950s manufactured, assembled and tested military aircraft on a 2,900-acre site owned by the U.S. Navy. Grumman fighter planes built in Calverton included as the supersonic F14 Tomcat and the A-6E Intruder. When Grumman moved out of the facility in 1996, Riverhead lost 3,000 jobs and $1 million a year in real estate tax revenues (technically payments in lieu of taxes, known as PILOT payments, because the land was government-owned and tax exempt.)

Legislation authorizing the transfer of the site to the town was passed by Congress in 1994, after word of the impending closure was made public. The Navy deeded the site to the town in 1998, after the town had developed a reuse plan required by the federal government as a condition of transfer.

The town sold the 491-acre “industrial core” of the site to developer Jan Burman for $17 million in 2001. Since then it has struggled with the redevelopment of the remaining mostly vacant land, much of it zoned for recreational and entertainment uses pursuant to a reuse plan adopted in 1996.

The town subsequently attempted to sell about 800 acres of the site deemed developable, even entering into a contract with one prospective purchaser, Riverhead Resorts — a joint venture of a Scottish builder and the Bayrock Group — which sought to build an indoor ski slope, 3.8 million square feet of floor space, eight separate hotel-resorts, a water park. Those uses were allowed under the site’s previous zoning.

After the demise of the Riverhead Resorts contract in 2010, the town — over the next several years – revised its reuse and revitalization plan for the site, updated its environmental impact statement to reflect the new plans and adopted new zoning favoring industrial uses. The town began the process of creating an industrial subdivision of about 800 acres.

In 2015, the town signed an agreement granting the exclusive right to use the active runway at the site to Luminati Aerospace, a startup whose principal Daniel Preston had purchased the former Skydive Long Island property (which was part of the Burman subdivision.) Preston said he was working with a “Fortune 250 company” to develop technology that would achieve perpetual flight for the purpose of bringing the internet to portions of the planet that were lacking connectivity. Preston vowed to restore the Long Island aerospace industry to its former glory.

In 2016, Luminati took occupancy of a large portion of the former Plant Six building to gear up for its manufacturing activity.

In April 2017, the town board approved a letter of intent with Luminati, to sell nearly all of its remaining acreage at the enterprise park for $40 million.

At the last meeting of December 2017, the outgoing town board — which included a term-limited councilman and a town supervisor who had just lost his re-election bid — approved the purchase agreement with Calverton Aviation and Technology, an LLC owned by Luminati Aerospace and Triple Five Real Estate I, a wholly owned affiliate of the international conglomerate Triple Five Group.

The contract was subject to a finding by the town that CAT was a “qualified and eligible sponsor” pursuant to New York State Urban Renewal Law, which allows a municipality to sell land in a designated urban renewal area without a bidding process or appraisal. A split town board in November voted to declare CAT qualified and eligible and proceed with the sale.

The redevelopment of the former Grumman site has always been a source of controversy in the town. The proposed sale to CAT has been no exception. 

See prior coverage here.

Correction: This article originally misstated when the second contract down payment is required to be made. It is required within three business days of the purchaser giving notice to proceed to closing, not three business days after notice of an extension of the due diligence period.