Riverhead will retain new outside legal counsel to advise the town about its options in the Calverton land deal in light of the legal troubles of Luminati Aerospace, a principal in the deal and the centerpiece of the purchaser’s development plan for the site.
Town board members agreed last night to convene a special Riverhead Community Development Agency meeting next Thursday. The town board members sit as the governing body of the CDA, which holds title to the town-owned land at the enterprise park.
Supervisor Laura-Jens Smith asked board members if they want to have special counsel review the contract “in light of the recent revelations we’ve all seen in the paper regarding Luminati.”
As first reported by RiverheadLOCAL March 29, Luminati Aerospace is the defendant in a $12.5 million lawsuit by Hexcel Corporation, a publicly traded industrial materials company, which made a $10 million loan to Luminati Aerospace in May 2016.
As also reported here on March 29, Luminati was facing eviction for nonpayment of rent on a second facility at the enterprise park, a leased, 35,000-square-foot portion of the Plant Six building owned by Laoudis of Calverton. In an eviction petition filed in Riverhead Justice Court, Luminati’s landlord claimed past due rent of more than $53,000. Luminati on April 3 agreed to surrender the Plant Six premises to its landlord in settlement of the eviction proceeding.
Hexcel is seeking a court order granting it the right to seize equipment and property owned by Luminati in which Hexcel has liens pursuant to documents executed by Luminati to secure the $10 million loan.
The property pledged as collateral to secure the loan is located at both Luminati’s leased Plant Six space and at the property it owns through a shell company at 400 David Court, the former Skydive Long Island site.
In its lawsuit, Hexcel claims Luminati defaulted on its obligations under the promissory note and security agreements by failing to pay rent due on the Plant Six site — the location of some of the equipment securing the Hexcel loan.
Hexcel also alleges Luminati defaulted on its obligations to it by failing to maintain insurance policies on both the collateral equipment and the property at 400 David Court — the former Skydive Long Island property purchased by 400 David Court LLC, a wholly owned subsidiary of Luminati Aerospace, which holds title to the real estate and is a codefendant in the lawsuit. Hexcel has a $3.47 million recorded mortgage on the 400 David Court site, which Luminati purchased from Skydive Realty LLC in September 2015 for $3.4 million.
Luminati’s attorney Robert Hasday has not responded to RiverheadLOCAL’s requests for comment.
Three council members agreed at last night’s meeting to hire a new law firm to review the contract of sale and advise the town of its options.
“I think it’s a good idea,” Councilwoman Catherine Kent said.
“That’s a yes from me,” Councilman Tim Hubbard said quickly.
Councilwoman Jodi Giglio responded, “Yep.”
Hubbard voted in December 2017 against the contract of sale to Calverton Aviation and Technology, a company owned by Triple Five and Luminati Aerospace. The contract was approved 3-2, with Councilman James Wooten joining outgoing supervisor Sean Walter and councilman John Dunleavy at the last meeting of their tenures to support the deal. Hubbard and Giglio voted against the agreement, which was subject to a determination by the board that Calverton Aviation and Technology was “qualified and eligible” to develop the site.
But in November 2018, both Hubbard and Giglio voted to finalize the deal and authorize the supervisor — who opposed it — to sign the contract of sale with Calverton Aviation and Technology.
Since the contract’s development plan and the “qualified and eligible” record put Luminati Aerospace at the center of Calverton Aviation and Technology’s plans for the development of the site, the board wants legal advice on the status of the contract if Luminati is no longer in the picture.
Luminati CEO Daniel Preston pledged to begin manufacturing solar and wind powered unmanned aerial vehicles at EPCAL as well as the SeaMax amphibious aircraft — which he said would be in full production by November 2016. He said his operations would bring hundreds of jobs to Calverton.
Hubbard said in an interview after last night’s meeting he has lost faith in Luminati’s ability to make good on its promises of aerospace manufacturing and high-tech jobs.
“That’s why we need independent outside legal advice,” Hubbard said. “We need to know where we stand and what we might be able to do about it. We need fresh eyes and a legal opinion from an expert who’s never been involved in Riverhead,” he said.
Giglio said last night if Calverton Aviation and Technology does not perform its obligations under the contract, which she said include “building 1 million square feet of commercial-industrial space within five years,” the town can sue for breach of contract and get the property back. Giglio said that’s what the town board was told by its current outside counsel, who negotiated the contract on behalf of the town.
Triple Five attorney Christopher Kent said in a recent interview that he’s “very excited” about how development plans are taking shape for the project. He said the purchaser would likely be unveiling plans by the time its second due diligence period ends May 20.
Triple Five owns the controlling interest and is the managing member of Calverton Aviation and Technology.
Wooten said last night he’d like to speak with outside counsel Frank Isler before deciding whether to retain another lawyer to review the contract. Isler has served as outside counsel to the town for many years. He negotiated the contract of sale along with a second outside lawyer, Michael Heller, who was brought in as co-counsel at Hubbard’s insistence in 2017.
“We have more lawyers looking at this…” Wooten grumbled, shaking his head.
The town board at a special meeting last week hired another outside law firm to both collect more than $20,000 in past-due false alarm fees at the 400 David Court building and past-due rent under the runway use agreement and advise the town on its rights under the runway use agreement going forward. Luminati had been paying its annual rent monthly but has not made a payment since September, according to town records.
Those past-due fees and rents remain outstanding and unpaid, Jens-Smith said after last night’s meeting.
Meanwhile, town officials were unable to say whether Luminati had a current certificate of insurance on the town-owned 10,000-foot active runway at the site.
The Riverhead CDA in November 2015 entered into a 10-year agreement with Luminati, granting Luminati control over the 10,000-foot runway and taxiways, which abuts at the 400 David Court property.
The runway use agreement requires Luminati to maintain $10 million in general liability insurance, naming the Riverhead CDA as an insured party.
Riverhead Town was initially unable to produce a copy of the current general liability insurance certificate for the runway in response to a Freedom of Information Law request made by RiverheadLOCAL on April 2. The FOIL request was submitted to town clerk, the Riverhead CDA and the town attorney.
In response to the FOIL request, the town clerk’s office said it does not have the document in its files.
The CDA did not respond to the FOIL request.
Town attorney Robert Kozakiewicz said last week his computer crashed and he was unable to access the files on his computer or his backup drive until his computer was repaired or replaced. He said an IT consultant was working on it and he expected to be able to access his files by Tuesday.
Last night Kozakiewicz said the computer work was still ongoing and he hoped it would be completed today. He said he did not know if there was a hard copy of the insurance certificate filed with any other town department, including the CDA. He said he might have received the certificate electronically and might not have printed it out. The town attorney’s office does not have a hard copy, he said.
The last insurance certificate, obtained by a previous RiverheadLOCAL request, expired Sept. 21, 2018.
“Given the allegations in the complaint about failure to maintain insurance policies, it’s important for the town to verify it is insured by Luminati as required by the runway use agreement,” Jens-Smith said.
The town attorney’s office emailed a copy of the current insurance certificate to RiverheadLOCAL this morning approximately 90 minutes after the original publication of this article.
The current insurance certificate became effective Oct. 21, 2018, one month after the expiration of the previous certificate of coverage.
The town has not yet responded to requests for copies of notices of cancellation of insurance, if any, or copies of any notices of default, if any, given to Luminati in connection with the license agreement.
Editor’s note: This article has been amended to reflect the town’s response this morning subsequent to publication to RiverheadLOCAL’s April 2 FOIL request.
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