Triple Five agrees to provide more financial documents in EPCAL land deal

Calverton Aviation & Technology, the company in contract with the Town of Riverhead to purchase most of its remaining vacant land at the former Grumman site in Calverton, will submit updated financial documents to the town to demonstrate its ability to close the deal and develop the property.

The town has requested an update from the buyer in the $40 million, 1,644-acre deal, Supervisor Yvette Aguiar said in a press release yesterday. The request was made out of concerns raised by the global financial crisis caused by the coronavirus pandemic, she said.

The buyer’s attorney, Christopher Kent, said last night CAT intends to fulfill the town’s request.

“Although not required by the agreement or necessary under the qualified and eligible sponsorship process, as a courtesy, in response to the town’s request, CAT intends to voluntarily submit updated documents of financial capability,” Kent said.

It’s not clear exactly what documents the town is seeking from CAT.

The supervisor’s press release said the town has asked CAT for “updated financials and commitment confirming financial capability.”

But neither Calverton Aviation & Technology, a Delaware limited liability company formed in late 2017 by Luminati Aerospace and an affiliate of Triple Five Group for the purpose of buying the site, nor its member companies submitted financial statements to the town in the first place.

The extent of financial disclosure required by the town and provided by company principals was a hotly debated subject when town officials were going through a year-long “qualified and eligible” process to certify the buyer in 2018.

During that process, the town asked Triple Five Group, CAT’s managing member, for financial statements, but the family-owned conglomerate declined to provide them.

Instead, the company’s attorney submitted an April 11, 2018 letter from GrantThornton, a large Edmonton, Alberta public accounting firm, stating that Triple Five had the $40 million required to buy the Calverton property as of March 9, 2018.

The attorney also submitted documentation of an $800 million municipal bond authorization to partly finance the construction of Triple Five’s American Dream mega-mall in East Rutherford, New Jersey, as well as a letter confirming an A rating for the Triple Five affiliate that owns the West Edmonton Mall.

Then-supervisor Laura Jens-Smith and Councilwoman Catherine Kent both sought more detailed financial disclosure than CAT principals were willing to provide. They argued that the town’s own rules and procedures for designating a buyer as a “qualified and eligible sponsor” require the financial statements.

The town’s adopted rules for determining that a buyer is a “qualified and eligible sponsor” under the State Urban Renewal Law requires the buyer to have “the demonstrated ability to finance the acquisition and development of specific project proposed, including the review by the CDA pro forma financial statements for the proposed project, including sources and uses of funds, certified personal and corporate financial statements of the applicant sponsor, financial commitments of participating lenders, proposed security for the project, business plans and economic analysis of the project and past compliance with municipal laws, rules and regulations.”

The “qualified and eligible” determination was necessary because the property is in a designated urban renewal area and the sale is not the result of a competitive bidding process.

A municipality can sell or lease an asset in a designated urban renewal area without a bidding process and without an appraisal if the purchaser presents a development plan that furthers the town’s adopted urban renewal plan and if the purchaser is found to be “qualified and eligible” to complete the sale and develop the site as it has proposed.

The board split 3-2 on the qualified and eligible determination in November 2018, with council members James Wooten, Jodi Giglio and Tim Hubbard supporting the approval.

A year earlier, both Giglio and Hubbard voted against the contract with CAT. During the last meeting of 2017, Wooten and two outgoing board members — then-supervisor Sean Walter, who had lost his re-election bid to Jens-Smith, and term-limited councilman John Dunleavy — voted to approve the sale. The contract was subject to the “qualified and eligible” determination, a task to be taken up by the new board in 2018.

Jens-Smith and Kent had both made opposition to the sale a central part of their successful campaign for office in 2017. The decision by the lame-duck board to approve the contract was met with public outcry from civic and environmental groups and critics of the deal, who faulted the town for a perceived lack of transparency surrounding negotiations of a letter of intent with Luminati Aerospace founder Daniel Preston — and the last-minute addition of a new entity partnering with Luminati, an affiliate of Triple Five Group, a private company owned and operated by the Ghermezian family.

Prior to the letter of intent with Luminati, which called for the town to sell 1,644 acres of vacant land, the town had been marketing about 600 acres of land there and had entertained offers of roughly the same price from two different prospective purchasers. The addition of more than 1,000 acres for the same $40 million was and remains controversial. Walter argued that the additional land cannot be developed due to constraints imposed by environmental regulations and transferring title to it would save the town money and avoid future liability issues.

During the “qualified and eligible” process — which included a lengthy hearing held in two sessions in February and March 2018 — both Giglio and Hubbard changed their minds about the deal.

Giglio expressed confidence in Triple Five and her support for the deal after meeting with company officials privately in their New York City offices in March 2018, while the “qualified and eligible” hearing was ongoing. The meeting sparked controversy and led to complaints filed with the town board of ethics, which took months to deliberate before finally absolving Giglio of any ethics code violations.

With the board split 2-2 on the Q&E decision, Hubbard became the deciding vote. Before voting to approve CAT as “qualified and eligible,” Hubbard said he’d spent “countless hours reading up on and conducting my own research on Triple Five.” He said he reviewed “confidential material” provided to board members by their attorneys.

“I requested more financial disclosure and Triple Five provided that requested information,” Hubbard said.

Town officials, including Hubbard, have said that all of the documents provided by Triple Five were posted on the town’s website.

Councilwoman Catherine Kent said today she is happy the town is asking the buyer for more information.

“I’ve been pressing very hard for this since the beginning of April,” she said.

“I had my concerns about CAT all along, but in light of the recent developments in the economy I’m even more concerned than ever,” she said, noting that Triple Five, the Edmonton, Canada-based developer is best known for building and owning large retail-entertainment complexes, such as the West Edmonton Mall in Alberta, the Mall of America in Bloomington, Minnesota and the not yet fully opened American Dream Mall in East Rutherford, New Jersey.

The abrupt shut-down of most businesses, schools and government offices last month has had catastrophic impacts across many sectors of the economy, including retail.

Don Ghermezian, co-CEO of the American Dream Mall, told CNBC earlier this month that the economic impacts of the coronavirus pandemic have changed Triple Five’s plans for the $3 billion megamall in the Meadowlands. Original plans to have a mix of 55% entertainment tenants and 45% retail in the 3 million-square-foot mall have been shifted to a mix of 70% entertainment and 30% retail.

Ghermezian told CNBC he believes American Dream will emerge from the pandemic crisis “super strong…on the entertainment side” because when the crisis is over “people will be so stir crazy” they will seek out entertainment venues.

Before shuttering the mall in March because of the COVID-19 crisis, American Dream had opened a Nickelodeon theme park, an regulation ice rink and an indoor snow park for skiing and snowboarding. The only retail at American Dream, so far, had been a large candy store, according to CNBC. Additional retailers were expected to open in mid-March, but those plans have been put on hold, CNBC reported. Ghermezian told the financial news network that no retailers had backed out of the project to date.

After seeing what has happened to some large retailers during the current crisis — including Neiman Marcus and J.C. Penney, which are both expected to file for bankruptcy soon — Kent said she became determined to get an update from Triple Five.

“This is our town’s greatest asset and it’s our job to ask the hard questions and protect it on behalf of the town,” Kent said. “We’ve never seen a strong development plan,” the councilwoman said. “They haven’t shown us what they’re going to develop out there. I’ve been watching and waiting for a couple of anchor companies to come along. We have to make sure what we’re getting out there is what we’ve been promised.”

CAT’s other member, Luminati Aerospace, facing legal and financial difficulties in Calverton, moved its operation out of the building it bought at the Enterprise Park at Calverton in 2015. Luminati cofounder and CEO Daniel Preston relocated to the upstate City of Little Falls, where he announced plans to establish a VTOL [vertical take-off and landing] manufacturing company.

Preston partnered with Little Falls machine shop owners Peter and Isabella Stone to build helicopter blades. In December, a prototype electric helicopter inside the machine shop caught fire. Peter Stone told a local news outlet in Little Falls that the aircraft’s lithium batteries suddenly exploded. The fire destroyed much of the building, equipment and inventory.

“We are no longer associated with Preston or Luminati in any way,” Peter Stone said in an interview this week. The fire is still under investigation, he said, declining further comment.

While Luminati is still an owner and member of CAT, Triple Five is the managing member of the company. The contract of sale with the town identifies Luminati Aerospace and “companies which will support Luminati’s operations” as prospective businesses at the site. The plan also lists “businesses that can benefit from use of the runways… technology businesses that will have a synergistic relationship with the other companies located at or near the property” and “the Federal Aviation Authority. [sic]”

The lack of specific information about future development at the site is troubling, according to Rex Farr, who heads the EPCAL Watch group, a coalition of 25 civic and environmental organizations concerned about the future of the Enterprise Park at Calverton.

Farr said today he thinks the town seeking more information about Triple Five’s current financial position is a “a good thing.”

“But do I think anything is going to come of it? Hell no,” Farr said. “They didn’t give us proper information the first time around. What makes the town think they’ll get complete information now?”

He said his group has been trying to get a sit-down meeting with the new town supervisor since she took office in January, to share its perspective on the CAT deal and the future development of the site.

EPCAL watch sent a letter to the supervisor and he called her office, Farr said.

“We never had the courtesy of a response,” he said. “I mean we’re 25 environmental and civic groups. We have close to 4,500 signatures on a petition started by (EPCAL Watch member) Christy Hawkins. And we can’t get a response,” he said.

“We’re tired of being ignored.”

The town, meanwhile, is working to finalize the land subdivision it needs to complete in order to transfer the land to CAT. The subdivision requires approval from the Suffolk County Department of Health Services and a Wild, Scenic and Recreational Rivers Act permit from the State Department of Environmental Conservation. The town’s applications for those approvals remain pending at both agencies.

Should the town fail to file a final subdivision map with the county clerk by mid-May, the contract of sale allows either party to cancel the contract.