Members of the Riverhead Industrial Development Agency board of directors listen to public comment during an Aug. 10, 2023 meeting, from left: Anthony Barresi, Douglas Williams, James Farley (chairperson), Lee Mendelson and Lori Ann Pipczyzski. Also pictured (front, right): Council Member Bob Kern, a former IDA board member who is now the Town Board liaison to the IDA. Photo: Alek Lewis

Riverhead Industrial Development Agency board members on Wednesday questioned representatives of the Triple Five affiliate in contract to buy more than 1,600 acres at Calverton Enterprise Park from Riverhead Town about the company’s finances, bringing what has primarily been a closed-door vetting process out into the public eye.

The discussion revealed that  Triple Five affiliate Calverton Aviation & Technology, plans to finance its equity investment prior to closing on a more than $200 million construction loan for the project. It also provided insight into the company’s corporate structure and finances.The discussion also revealed that IDA board members had a number of significant, still-unanswered questions going into Wednesday’s meeting.

Public doubt about CAT’s financial ability  to develop the property has been festering for years, and has increased with reports of  financial losses suffered by mega-mall businesses owned by Triple Five. The forum was called to allow CAT to “describe its proposed financial structure for the acquisition and development of the project, as well provide an opportunity to demonstrate their market presence,” according to an IDA press release.

Wednesday’s discussion followed an IDA forum earlier in the month focused on CAT’s development plans. During that presentation, representatives continued to distance themselves from the presentation they gave the IDA last September where they pitched EPCAL’s full buildout as an air cargo logistics hub. 

MORE COVERAGE: EPCAL buyers work to distance themselves from air cargo hub plan, but residents remain skeptical

CAT and the Riverhead TownCommunity Development Agency, in a joint application to the IDA, are seeking to facilitate the development of the site without the town subdividing the land, a requirement of its contract of sale with CAT. The town, which owns about 2,100 acres inside the enterprise park, needs the subdivision to create the three lots comprising the 1,644 acres it’s in contract to sell to CAT. Riverhead  was unable to obtain key permissions from state regulators needed to finalize a subdivision and in early 2022 reached an agreement with CAT to apply jointly to the IDA, which town officials said would scrutinize the company’s financial status. The agreement requires CAT to obtain the subdivision at its own expense and will allow the town to collect the $40 million purchase price before the subdivision is completed.

CAT’s attorney Peter Curry, before any questions were asked, generally addressed the lawsuits Triple Five companies have been embroiled  in relating to their financial capability. 

“None of the litigations that Triple Five faces, whether considered singly or in the aggregate, pose any material risks to CAT’s ability to meet its financial obligations and commitments on the EPCAL project. We want the agency to understand that,” Curry said.

“So in summation, over the course of time, we’ve provided financial information to the agency, we’ve met with the agency, we’ve actually responded to questions that were raised, and we think at this time that we have shown the agency the appropriate information to indicate CAT’s ability to acquire the property, to develop the property, to obtain construction financing when the time is right…” Curry said.

IDA board member Lee Mendelson questioned Curry about the relationship between Calverton Aviation & Technology and other Triple Five entities.

“It’s part of a group of companies,” Curry answered. “So the Triple Five company is comprised of a lot of development organizations just like this. That’s how they typically own things. So it is, it is part of the overall Triple Five family.”

Mendelson noted that, according to an ownership chart provided to the IDA by CAT, Justin Ghermezian is indirectly the 100% owner of a Triple Five Real Estate I, an LLC that owns 75% of CAT, with the other 25% owned by Luminati Aerospace. Luminati owner Daniel Preston died earlier this year, Mendelson said. He asked who owns Luminati now. Curry replied that Preston’s estate owns the company.

Referring to an “acquisition loan term sheet” provided by the applicant, Mendelson noted Triple Five Investment Ltd. is listed as a guarantor for Triple Five Real Estate I, which is listed as the project sponsor. 

“Can you tell me the relationship between Triple Five Investment and Triple Five Real Estate?” Mendelson asked.

“Affiliates,” Curry replied.

“But what has [Triple Five] Real Estate pledged to [Triple Five] Investment for the guarantee? What type of security or anything have they given to one another?” Mendelson asked. 

“They’re affiliated companies, they really don’t need to give any security back and forth to each other. If one of the entities has assets, it can guarantee the obligations of the other one,” Curry said.

Mendelson asked if Triple Five Investment has acted as guarantor for other Triple Five projects.

Curry said he did not have the answer.

“Well it’s important,” Mendelson said. “We’re aware of certain alleged defaults in other projects that have been discussed. And the IDA, I believe, has a right to know whether or not the guarantor for the acquisition loan in this project, could be a potential defendant target, or guarantor in any of the other projects.” 

Curry said the lender would be vetting those things. “The lender has made a commitment based upon its analysis about the entity’s ability to guarantee the obligations of the other one. So it’s already done that analysis to consider that to have sufficient equity to guarantee the obligations,” Curry said.

“While I appreciate their word for it, that’s insufficient for the IDA’s purposes, which is to vet it ourselves,” Mendelson said. “So I’d like a response to that question, if not tonight, then shortly thereafter, so that we can make our own analysis of whether the lender has vetted it or not.”

IDA members discussed CAT’s resources for the project, asking whether CAT’s equity contribution — which, including land acquisition and pre-development costs, is roughly $65 million — will be financed. 

“Will the land purchase be entirely leveraged?” IDA Board Chairman James Farley asked. He noted that the $4 million CAT representatives said has already been spent to date “is an out- of-pocket [expense] of the conglomerate, not an out-of-pocket [expense] of the project company [CAT.]” He wanted to know whether CAT would have its own assets to pursue the project.

Curry said it would.

Board member Doug Williams asked if CAT’s resources are coming through a pledge of securities by another affiliate.

Triple Five Executive Vice President Meg Blakey answered. “As explained in our application, when we close on the land acquisition we will have a 25% developer equity. Our lending commitment is for 75% so whatever we’ve already expended will count toward our 25%,” she said.

“When we close on the acquisition of the land, the budget will include the land purchase price plus pre-development costs and will be funded 75-25,” Blakey said.

“The contribution of equity was largely identified as a promise to pledge,” Williams said.

“No, no. I want to make a point,” Blakey said. “We won’t be buying the land unless that equity is funded at the closing table.”

Farley said CAT was “looking for a financing mechanism for the equity that involved some liquid assets that would be available to basically provide that equity” in order to “remain independent of the conglomerate and any sort of Triple Five entity contribution.” 

“Correct,” Curry replied.

Williams said the IDA understood that those assets are marketable securities, and Curry agreed. Williams asked their value. 

“The value of that at this time is five times the equity,” Curry answered, indicating the value of the securities was its  net value, free of any liens He said $60 million of that would be set aside to cover the equity contribution. 

Curry said after CAT obtains site plan approval — which follows getting a subdivision map filed — the company will have five years to start construction, per its purchase agreement with the town.

Buildings will generally be built as tenants are secured, he said. They won’t all be built at once, so the entire construction loan won’t be drawn on at once. 

“We’re prepared to put a shovel in the ground once the site plan process is complete,” Curry said.

“What the IDA is doing right now is determining whether CAT is financially qualified,” Curry said. The decision with regard to economic assistance is not yet before the IDA, he said. He described that as “a whole separate process.”

“That process, in order for the agency to determine whether providing economic assistance, requires SEQRA findings, requires that the Town Board proceed with what it has to do,” Curry said. “So in terms of closing, it can’t close on a project that neither you nor it [the Town Board] has given final authority,” he said.

“We think… we have shown the agency the appropriate information, indicating CAT’s ability to acquire the property, to develop the property, to obtain construction financing when the time is right,” Curry told the IDA. “And we look forward to having a public hearing and working further with the agency, so that we can start the site plan process that we would like to undertake with the Town of Riverhead, so that we can develop this project,” he said. “We are raring to go.”

Mendelson also asked Curry about the experience of Justin Ghermezian, Triple Five’s Vice Chairman, CAT’s CEO and the indirect owner of the Triple Five affiliate that owns 75% of CAT.

“Justin is a family member of an organization that’s been developing for over 50 years. Although young, he’s experienced those developments,” Curry said.  “He’s involved in New Jersey, he’s involved in these various developments. And no company like this has just one person who has experience, the entire company has the experience.”

“And I think that what you just heard with regard to the development of the three malls indicates that the organization itself has significant development experience over several decades…” Curry said.

“I understand that completely, except that just saying that he’s part of the family does not give us a warm and fuzzy feeling,” Mendelson said. “Can you tell us what aspects of the 10 million square feet of projects Justin contributed to and how he made those contributions?”

Curry was not specific in his answer. “Well, the American Dream Mall right now. The development and operation of the mall, that’s the most recent,” he said.

Some residents expressed skepticism. 

Angela DeVito of South Jamesport, the Democratic candidate for town supervisor, said the company’s experience doesn’t “address at all the skills that they need in their toolbox to go forward with a project that is still quite nebulous.” 

Triple Five, DeVito said, “are mall builders. That’s what they do, primarily.” 

Andrew Leven of Riverhead, a Democratic candidate for town council, said CAT’s project has “no real-world viability.”  He questioned “the collateral for this speculative project that as a practical matter has no real world viability.”

“Common sense suggests to me that is actually the IDA approval,”  Leven said. “It is your decision to approve — that is going to provide value that doesn’t otherwise exist, that will act as the collateral for these tens of millions, hundreds of millions of dollars of loans,” he said.  

“If you approve this debacle, then the value of CAT’s rights at EPCAL increase by tens, or hundreds of millions of dollars, because EPCAL on the open market is worth tens or hundreds of millions more than our town has said CAT needs to pay for it,” Leven said. “That money comes right out of our pockets in abated taxes and a fire sale price and lost fair market value that will be suffered,” he said.

“I’m no expert on IDAs. This is what I see. This is a massive public subsidy. It is not a public-private partnership. You are creating the value that they’re going to use as collateral that otherwise would not exist,” Leven said. 

Calverton resident Claudette Bianco said CAT did not provide a lot of information. Their attorney did not have “a lot of answers for your questions,” she said. “The information is sparse.” 

“If they have so much money, why do they need the IDA and the taxpayers of Riverhead to subsidize their project? I pay enough for my house. I don’t ask you for any money,” Bianco said. I don’t think they need to be subsidized.”

Evan Philcox of Wading River, a teacher at Riverhead High School, complained about the impacts of IDA tax abatements on the Riverhead Central School District’s budget and its ability to educate the district’s children.  

MORE COVERAGE: Teachers, school district officials and state lawmakers take a stand against IDA school tax exemptions

“Of course they want the land for $40 million,” Philcox said. “It’s thousands of acres of property — $40 million is free. That’s a song. It’s a giveaway.”

Former Supervisor Laura Jens-Smith of Laurel, who opposed the sale to Calverton Aviation & Technology and was one of two votes on the Town Board in 2018 against finding CAT “qualified and eligible” to purchase and develop the land, asked the IDA to look into existing lawsuits against CAT. 

Jens-Smith called out in particular a federal action brought in June by American Dream Mall construction manager PCL Construction to recover more than $30 million it says is owed in connection with construction of the multi-billion mall and entertainment complex. 

The Triple Five affiliate developing that mall, Ameream LLC, funded the development “in substantial part” through a construction loan jointly arranged by Deutsche Bank Securities and JP Morgan Chase Bank, according to PCL’s complaint against JP Morgan Chase as administrative agent for the construction loan. 

“Ameream is now in financial distress,” PCL’s complaint states. “It failed to timely pay more than $24 million due to PCL for invoices covering the period from July 2020 to August 2021.” PCL issued notices of default of payment to both Ameream and JP Morgan Chase as administrative agent and as a result, JP Morgan Chase as agent has a contractual obligation to advance the amounts due and owing that Ameream failed to pay, the complaint states.  

Ameream is seeking to join the litigation. In proposed answering papers, Ameream said PCL breached its construction contract with Ameream multiple times. The company said PCL and Ameream have been in litigation in New Jersey state court for the past two years, where PCL is seeking to recover from Ameream the sums it is seeking in federal court from JP Morgan Chase. 

During Riverhead’s “qualified and eligible sponsor” hearing, Triple Five identified PCL Construction as its longtime construction partner and said the Colorado-based construction management company would work with Aurora Contractors of Ronkonkoma on the EPCAL project.

Manorville resident Kelly McClinchy, who is a member of the Navy’s Restoration Advisory Board for the undergoing environmental cleanup of the Calverton site caused by the operations by Northrop Grumman from the 1950s to the 1990s, questioned whether CAT has had any communications with the Federal Aviation Administration regarding the site.

“Is CAT willing to accept funding or benefits from the federal government to develop at the site?” she asked. 

“The company that operated at that site before it was transferred to the town was responsible for the legacy left behind. They closed up shop. And they left. We know how that story ends: destruction of the environment, and hundreds if not more unemployed. That company had no loyalty, no real ties to the community,” McClinchy said.  

“If an outside company with no ties to the community, especially one that might receive financial …backing from the federal government is allowed to step in, the results will be the same or worse. We have the ability to ensure that history doesn’t repeat itself. We have the chance to do better than our parents and our grandparents at that site,” McClinchy said.

Theresa McCaskie of Mattituck, a longtime member of the Southold Town Aircraft Noise Committee, told the IDA board that, should CAT obtain assistance from the FAA to improve the facility, the town would lose all control of the runways and the activity that takes place there. She pointed to the Town of East Hampton as an example of what can happen, noting that the town actually owns the airport and still can’t control its use because it once received assistance from the FAA.

Riverhead will be in the same position in Calverton, McCaskie warned. 

“The minute an aircraft lifts up off the ground by an inch or so it is considered FAA airspace,” she said. “I want the IDA to completely understand this.” 

Riverhead will not be able to regulate the aircraft that can use the site, McCaskie said. It will not be able to impose curfews to limit times of operation, she said. “If the FAA is involved in any way, shape or form and you will not find that out until the development documents are signed and the property is literally handed over to them, and they can go ahead and the very next day get the FAA to fix the runways. And this town is going to be suffering — not only this town,” she said, but all surrounding towns. “We’re all going to be suffering. So please keep that in mind.” 

Kathy McGraw of Northville pointed out that the town could not get the subdivision approved after two years of trying and now CAT is taking on that responsibility. 

“Are you going to forever hold title to this land?” McGraw asked. 

“I would like to ask finally just a direct question whether CAT has actually provided you with any certified financial statements,” McGraw said. “Can you tell the public whether your consultants or whoever is assisting you, did you actually receive any certified financial statements?”

The IDA board members did not respond to McGraw’s questions.

The IDA’s application form (Part VIII-“Submission of Materials”) lists documents required to be submitted as part of the application. The second item on the list is “Certified financial statements for the last two fiscal years (unless included in the Applicant’s annual report).” The third item is “Applicant’s annual reports (or 10-Ks if publicly held) for the two most recent fiscal years.” It is followed by “Quarterly reports (form 10-Qs) and current reports (form 8-Ks) since the most recent annual report, if any.”

Asked whether the applicant submitted any of those documents last September, when the Riverhead IDA accepted the joint application by CAT and the town, CAT attorney Peter Curry said in an email, “Calverton Aviation and Technology LLC (“CAT”) is an entity specifically created to develop the EPCAL site as an economic generator that will employ more than 1,000 people.  In connection with its application before the Riverhead IDA, CAT has provided IDA counsel with confirmation from recognized and respected financial and professional institutions that it has the financial strength to acquire the EPCAL land from the Town of Riverhead and develop it in accordance with the Agreement of Sale and other additional obligations made to the Town.”

Triple Five and CAT declined to provide certified financial statements to the town during the review process, as required by the town’s adopted rules for making a “qualified and eligible sponsor” determination for the sale or lease of property in an Urban Renewal Area. Representatives of the company, which is a privately owned family operation, cited privacy concerns. 

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