Five months after the Riverhead Industrial Development Agency accepted an application for assistance filed by the Triple Five affiliate in a $40 million land deal with the Town of Riverhead, the status of the application review remains something of a mystery.
Community members are continuing inquiries into how long the review process — which may ultimately determine if the deal goes forward — will take. Attempts by town and IDA officials to clarify the process continue to fall flat.
Triple Five has big plans for the site that one of its planning consultants calls “one of the largest development sites in single ownership in the entire New York Metropolitan Area,” an area that stretches into the Hudson Valley, northern and central New Jersey, portions of Pennsylvania and western Connecticut.
The Triple Five affiliate formed to purchase and develop the site, Calverton Aviation & Technology, will ultimately build more than 10 million square feet of industrial and commercial buildings, situated along and in proximity to the runways at the Enterprise Park at Calverton, according to application documents filed with the Riverhead IDA.
“CAT contemplates a research and manufacturing park which will rank as an equal to any other such park in the United States and internationally,” according to a Sept. 8 letter one of its attorneys, Peter Curry of the Farrell Fritz law firm in Uniondale, wrote to the Riverhead IDA.
CAT says to make the project’s $245 million first phase feasible, it requires financial assistance from the IDA, which is empowered by state law to assist commercial entities looking to do business within the town in various ways. CAT is seeking exemptions from sale and use taxes and mortgage recording tax, as well as real property tax abatements on new construction over a period of at least 10 years.
At a Sept. 21 presentation to the Riverhead IDA board of directors, CAT attorney Chris Kent, a partner in the Farrell Fritz law firm, said CAT was hoping to gain approval from the IDA by the end of 2022 or early in 2023. He said his client, which by then had been in contract with the town for nearly four years, was anxious to move the project forward. The IDA board unanimously agreed that day to accept the application.
Today, the status of the application review is unclear. The transaction counsel hired by the board to assist in its review was replaced in December and no financial consultant has yet been hired to review CAT’s finances.
About two weeks ago, the IDA posted on its website a document titled “Tentative Approval Process,” which lists the steps in the review and approval process for the CAT application. It contains no dates and does not indicate where the review currently stands in the process. See document here.
The document was prepared by IDA’s new transaction counsel, Milan Tyler of the law firm Phillips Lytle — the firm hired in December to replace IDA general counsel Nixon Peabody in that role. Tyler presented the document at the Feb. 6 IDA meeting and said the IDA’s governance committee recommended it be posted on the agency’s website.
Two residents brought questions about the status of the IDA’s review to the Town Board at its meeting last Wednesday. The Town of Riverhead Community Development Agency, which owns the Calverton Enterprise Park property being sold to CAT, is a co-applicant for IDA benefits as a result of a complex agreement between the town and CAT made necessary by an equally complex set of circumstances — circumstances that have prevented the town from transferring title to the 1,644 acres of vacant industrial land to CAT, as promised in the November 2018 contract of sale.
Council Member Tim Hubbard, in response to comments by John McAuliff of Riverhead about the EPCAL sale, said the process is “still very vague.”
“Obviously, you basically handed this over to the IDA, and are waiting for them. And we don’t know what’s going on in their processes,” McAuliff said. “Whatever it is, is not public in the least, though I think it should be at this point.”
Northville resident Kathy McGraw also asked if the Town Board, as CAT’s co-applicant to the IDA, could update the public on the status of the agency’s review.
Supervisor Yvette Aguiar told McGraw it was “a little premature” to ask when the application would be acted on.
“We have to find out what their finances are. We have to have them finish their process to make an informed decision,” Aguiar said.
Referring to the “Tentative Approval Process” document now on the IDA’s website, Aguiar told McGraw the IDA had “put down the whole agenda of what’s going to happen.”
The document is “certainly more than we had. But it doesn’t tell us anything about where we actually are in the process,” McGraw said.
“When you as co-applicant went to the IDA, it was with great fanfare about their ability to review the financial status of CAT. And that was a very good thing to review, for sure,” McGraw said.
“But it also seems to me that if I am a co-applicant, and I want to get this thing moving, I would be asking the IDA why haven’t I seen a resolution hiring a financial consultant,” McGraw said. “Because if they don’t hire a financial consultant as their [Sept. 21] resolution indicated, they haven’t made any progress on reviewing the financial status of CAT,” she said.
McGraw asked if the Town Board had inquired into whether the IDA had hired a financial consultant without a resolution.
Council Member Bob Kern, a former IDA board member and now the Town Board’s liaison to the IDA, told McGraw last week it is possible to hire such a consultant without a resolution and he would check into it and get back to her on Friday. Kern emailed her Friday to say no financial consultant has yet been hired.
The document posted by the IDA really doesn’t say much, McGraw said in an interview. It lists tasks to be undertaken, but contains no dates by which any of them are expected to be completed and it doesn’t indicate what, if anything, has already been done, she said.
Neither Tyler nor IDA Executive Director Tracy Stark-James responded to emailed requests from RiverheadLOCAL last week and this week seeking details about the “Tentative Approval Process” document, including dates and some indication of where the agency stands in that process.
The attorney representing CAT in the Riverhead IDA application, Peter Curry of Farrell Fritz, could not be reached for comment today.
Aguiar reassured McGraw that CAT “will be vetted. We will be looking at the finances. I will personally be looking at the finances and double-checking everything,” the supervisor said.
The supervisor said the IDA has a process and there is “also an open process because there’s going to be a public hearing on this. And we welcome everybody at that time, when we are more informed, have more knowledge, have a basis and a foundation to be able to make those decisions.”
Vetting the applicant is likely to be a complicated process.
CAT, a Delaware limited liability company formed on Dec. 18, 2017, is owned by Triple Five Real Estate I (75%) and Luminati Aerospace (25%.) According to CAT’s IDA application, Triple Five Real Estate I is wholly owned by Fundco International Limited, which is wholly owned by Global Investco Limited, which is wholly owned by Justin Ghermezian, according to CAT’s IDA application.
During a vetting process undertaken by the town prior to signing the contract of sale with CAT in November 2018, CAT declined to make complete financial disclosure to the town. It never presented the financial statements required by the town’s rules for approving a purchaser as “qualified and eligible” for purposes of a land sale in an urban renewal area such as the Calverton Enterprise Park.
Instead, CAT submitted a letter from the public accounting firm Grant Thornton stating “Triple Five Group of Companies” had a minimum of $40 million (USD) cash and equity balance as of March 9, 2018.
Triple Five Group is a Canadian privately held company owned and controlled by members of the Ghermezian family. Triple Five is a conglomerate of “single-purpose” entities formed for the purposes of owning, financing, leasing and operating various assets around the world — including the two largest malls in North America: West Edmonton Mall in Alberta, Canada and Mall of America in Bloomington, Minnesota.
Another major Triple Five asset is the $5.7 billion American Dream retail and entertainment complex in East Rutherford, New Jersey that has made headlines for a string of financial and legal difficulties that have included multimillion dollar operating losses in its first two years of operation — which coincided with the pandemic — and financing defaults.
“Triple Five Group consists of a hundred companies,” Triple Five chairman Nader Ghermezian told the Riverhead Town Board in June 2021, at a meeting where he fielded questions about possible impacts of American Dream’s difficulties on the Calverton development. “They are all single-purpose entities. Every asset is in a separate company,” Ghermezian said. “What is happening in the situation in the economy today has nothing to do with this property,” he told the board.
At that meeting, CAT attorney Kent submitted another letter from the Grant Thornton CPA firm, dated June 9, 2021, making the same statement it made in March 2018 about cash and equity available to purchase the property.
The use of single-purpose companies to shield assets and limit personal or corporate liability is a common business practice and, as Nader Ghermezian told the Town Board, a practice Triple Five employs.
A Ghermezian-owned limited liability company is at the heart of a federal lawsuit against Triple Five filed in 2021 by Nixon Peabody — the IDA’s own general counsel.
The lawsuit claims members of the Ghermezian family used a shell company to market counterfeit hand sanitizer under a trade name and logo belonging to the plaintiff. It claims family members used an entity called Triple Five Worldwide LLC as a “sham vehicle” to shield themselves from personal liability.
According to the Nixon Peabody complaint, Triple Five Worldwide LLC, formed in Nevada in 2000, is a shell company that, as of 2020, had no assets, no tax records, no record of who owned the company or information about when ownership interests in the company were acquired. The complaint states that the company was merely the “alter ego” of the individuals involved, and was “used only as one of numerous conduits through which the Ghermezian family ran various real estate operations.”
The complaint argues that the court should allow the plaintiffs to “pierce the corporate veil” to hold the individuals personally responsible for the plaintiff’s losses as a result of their counterfeit hand sanitizer “scheme.” The FDA put the counterfeit “Urbane” sanitizer on its “do not use” list for potential methanol contamination, according to the complaint, causing irreparable damage to the plaintiffs’ brand and business.
Lawyers for Triple Five Worldwide and the Ghermezian defendants, deny the plaintiffs’ claims.
A Triple Five spokesperson in February 2022 denied that the defendant Triple Five Worldwide LLC was related to the Triple Five Group whose affiliate CAT is doing business with the Town of Riverhead, though court documents in the case show that members of the same family were involved, using Triple Five company email addresses.
According to the application to the IDA, CAT plans to build three “flex” buildings totaling 400,000 square feet, eight 50-foot-tall logistics or distribution buildings totaling 9.24 million square feet, one 400,000-square-foot rail distribution building and two two-level parking structures each providing 4,320 parking spaces. The developer’s plans include the construction of new taxiways and aprons adjacent to both runways and adjoining the proposed logistics and distribution buildings to accommodate aircraft using the facility.
The project will be built in phases, according to CAT’s IDA application. The first phase of the project, labeled Phase 1A, carries an estimated price tag of $245 million, including land acquisition, according to the IDA application.
CAT will invest $45 million, including the more than $2.1 million it has already paid for deposits and legal and architectural fees, the application says. It will finance $200 million with a conventional mortgage.
Phase 1A will be built by a well-known builder in Riverhead, J. Petrocelli Contracting of Ronkonkoma, according to the application.
According to an economic analysis by CAT consultant James Lima Planning & Development, the construction of the first 1 million square feet in phase 1A, which will take place over five years, will result in a total capital investment of $171 million. “Upon buildout and lease-up” of the first million square feet, “the size of direct, on-site employment is estimated to be 1,047 to 1,425 permanent direct jobs, with approximately $95 million to $207 million in labor income,” the Lima report states.
To make the project feasible, CAT says it requires financial assistance from the Riverhead IDA, which is empowered by state law to assist commercial entities looking to do business within the town in various ways. The IDA benefits CAT seeks include a mortgage recording tax exemption of $1.5 million, sales and use tax exemptions of nearly $8.8 million and real property tax exemptions that will be reduced over time and eventually phased out. The amount of the real property tax exemptions, which apply to the value of new construction, were not specified in the IDA application.
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