New objections, questions from town supervisor and community raised about town’s chosen ‘path forward’ on $40 million Calverton land deal

Supervisor Yvette Aguiar raised concerns last week about when the town would receive the balance of its $40 million for land at the Calverton Enterprise Park, if the Riverhead Industrial Development Agency moves the town’s deal with Calverton Aviation and Technology forward.

An irate Aguiar, who entered the meeting room and cut off Calverton Aviation and Technology lawyer Peter Curry as he was answering questions from an IDA board member, said she was watching the meeting on the town website in her office and needed to respond to something Curry had said.

IDA board member Lee Mendelson was questioning Curry about how soon CAT would be prepared to close with the town “should the IDA find that CAT is financially capable.”

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“As soon as the site plan process is finished,” Curry responded.

“The site plan process could take 18 months,” Mendelson noted.

Curry said the IDA is working to determine whether CAT is financially qualified. 

“That process — in order for the agency to determine whether providing economic assistance, is a whole separate process. That process requires SEQRA findings, requires that the Town Board proceed with what it has to do,” Curry said.

“So in terms of closing, we can’t close on a project that neither you nor [the Town Board] has given final authority to,” Curry said. “So the next process after we financially qualify is to move on to develop the property.”

That rankled the town supervisor, who interpreted Curry’s statements to mean CAT would not pay the town the balance of the $40 million purchase price until the town actually conveys title to the buyer.

“It’s very disturbing to me to know, and to hear, that they’re waiting to get a site plan approval. That is totally not acceptable. That is not the deal,” Aguiar said. 

Aguiar was right. That was not the deal. 

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When the Town Board agreed in early 2022 to file a joint application with CAT for IDA financial assistance, CAT and the town agreed that CAT would pay the town the balance of the $40 million purchase price once the IDA adopted an “authorizing resolution” for CAT’s application. 

As it was presented to the public at the time, the IDA would adopt an “authorizing resolution” if it determined that CAT has the financial wherewithal to buy and develop the site pursuant to its November 2018 purchase agreement with the town.

The IDA would at that point enter into a lease and project agreement with CAT for the 1,644 acres of land to be conveyed to the company pursuant to its November 2018 contract of sale with the Town of Riverhead. CAT would then move forward with the eight-lot land subdivision called for in the contract of sale. Once the subdivision receives final approval, the town would convey title to the 1,644 acres to CAT. 

The IDA would also enter into a lease and project agreement with the town covering the land in the enterprise park that’s not being conveyed to CAT — about 450 acres that are already in municipal use.

This would allow the town to receive the balance of the purchase price — $39 million — and would shift to CAT the burden and expense of obtaining final approval of the subdivision map. 

If the IDA decides not to approve an “authorizing resolution,” the decision on what happens next with the property rests with the Town Board. The 2022 agreement, which modified the 2018 contract of sale, gives the town the right to declare the contract “null and void” should the IDA decide not to approve an authorizing resolution. 

At last week’s information session, convened by the IDA to discuss CAT’s “financial structure,”  Aguiar was not happy to hear CAT’s lawyer talking about a closing after CAT obtains site plan approvals. 

“This property is being tied up. We are not going to wait any longer,” said Aguiar, who was clearly exasperated. 

“I am asking the IDA, I know that we’re in — you’re in the financial review. But you have forensic individuals. That’s their expertise. It shouldn’t take three weeks, a month, another hearing for the experts to tell us if those documents are valid and the money is there,” Aguiar said.  

“And again, we will not — I’m sure my fellow Town Board members would agree with me — we are not going to wait until site plan approval. That was not the indication. This is not what we agreed to… It’s not acceptable. And we’re not changing the game anymore,” she said. 

“People do not want a cargo. People don’t want this here. We need to have a public hearing. It’s unusual to have these public sessions. To me, it’s just going back and forth. Let’s see who can say what. Let’s see what plan. I heard a lot of pretty words in the last hour,” Aguiar said, her voice getting drowned out by applause from the audience. “Let’s stop this here.”

She thanked the IDA for its work.  “I beg you. Move this forward. Let’s make a determination. And there will not be consideration of a site plan.”

Another CAT attorney, Chris Kent, responded to the supervisor at the meeting. 

Kent said there was no discrepancy between the supervisor’s understanding and what his law partner was saying. 

“The key is what we’re closing on,” Kent said. “We believe really that there would be two closings on this transaction. The first closing would be on the ground lease. At that time, we would be paying the $40 million to secure an interest in the property.”

“As far as closing on the project, which will require an additional IDA action, we don’t believe that we could close on the project until we go to the Town Board for site plan approval to complete the appropriate SEQRA determination on the project,” Kent said. 

“At that point, we would close on the IDA project. That’s the point we would be seeking economic incentives, inducements… [after] we have an approval on the site plan from the Town Board,” Kent said. 

“We’re prepared to close on the lease of the property at the time they can determine us to be financially capable,” Kent assured Aguiar.

During a public question-and-answer session with town officials on March 8, 2022 — convened to explain to residents the details of the CAT contract amendment and the process the town and CAT had devised to move the deal forward before a final subdivision approval — Northville resident Kathy McGraw asked what would happen if there is a long delay in obtaining the subdivision approval.

“Then they’re in a long-term lease,” Deputy Town Attorney Annmarie Prudenti replied. 

“They remain in a long term lease?” McGraw, an attorney, asked. 

“Yes,” Community Development Director and former Riverhead Town Attorney Dawn Thomas answered.

“That will continue, such that they can develop the property, even without the subdivision?” McGraw asked.

Thomas said yes. “But those same obligations for permitting will not change,” she said. “So it’s a different mechanism, but it’s the same legal obligations in terms of permitting that they’ll have to go through and SEQRA and all of those other things. So it doesn’t change any of that.”

Frank Isler, of the Riverhead law firm Smith Finkelstein Lindberg Isler and Yakaboski, the town’s outside legal counsel, who negotiated both the 2018 contract of sale and the 2022 amendment, added, “They will have a very long-term lease if the subdivision isn’t granted. And they will have constructed out their development plan as required under the contract.”

In an interview after last week’s meeting, McGraw said the structure of this arrangement — closing on a long-term ground lease that allows CAT to build out its project even without a subdivision and transfer of title — raises a whole new set of questions. 

“What if they never get a subdivision? Is it even possible to obtain permits from the DEC and the county health department without a subdivision? And what about financing?” McGraw asked.

The joint application to the IDA states that CAT will obtain a construction loan to cover 70% of the $245 million cost of phase-one construction. 

“Loans typically must be secured with a mortgage on the property,” McGraw said. “That’s a lien, an encumbrance on the land. If there’s no subdivision, will the entire parcel be encumbered by a mortgage?”

Under the terms of the contract amendment approved by the town and CAT in 2022, the IDA is supposed to lease, and then, after the subdivision is finalized, transfer back to the town the roughly 450 acres that are already used for municipal purposes — including Veterans Memorial Park, the Calverton Sewer District wastewater treatment plant, Grumman Memorial Park and the Henry Pfeiffer Community Center. 

“This arrangement seems it would allow CAT’s lender to encumber property beyond what CAT is supposed to be buying. How does that work for the town?” McGraw asked.

McGraw said she also questions the statements made by CAT’s attorneys last week about the timing of when CAT will actually be seeking IDA benefits. 

CAT’s attorneys said last week they will seek an IDA “inducement” resolution when CAT has a project to approve with site plan and all necessary approvals in hand.

McGraw takes issue with that. “CAT and the town have an application pending before the IDA right now that describes in detail what CAT’s project is,” she said. “That’s what the IDA is supposed to be acting on. If the IDA finds the project worthwhile for the town and determines that CAT is capable of building and operating it, it should be approving an inducement resolution for that, not for something else that may be proposed at some point in the future.” McGraw said the Sept. 21, 2022 IDA resolution accepting the joint application “makes that clear.”

“If the IDA is not acting on the application before it,” she said, “then the IDA is acting in an advisory capacity, pronouncing CAT ‘financially qualified’ and granting a long-term lease without acting on a project application. What business does it have doing that?” McGraw asked.

The IDA accepted the joint application of CAT and the town by resolution at its Sept. 21, 2022 meeting. The application, signed by CAT CEO Justin Ghermezian on Sept. 7 and Riverhead Community Development Director Dawn Thomas on Sept. 9, seeks IDA financial assistance for the first phase of a multi-phase project.

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Phase I, described in detail in the application documents [view the application here] will consist of two 300,000-square-foot, single-story logistics buildings adjacent to the eastern, 10,000-foot active runway and three two-story “flex” buildings (two will be 100,000 square feet and one will be 200,000 square feet) east of the logistics buildings. The total cost of phase I, according to the application, is estimated to be $245 million, including land acquisition, new construction, utilities site work, legal/architectural/engineering fees and financial charges.

The application states that, for acquisition and Phase I development, CAT is seeking a $1.5 million mortgage recording tax exemption, an $8.8 million sales and use tax exemption, and an “enhanced” real property tax abatement for a term of “20 years for each building comprising the project.”

The amount of the real property tax exemption CAT is seeking — expressed as a percentage reduction of the assessed value of newly improved land — was not disclosed in the application.

The amount of the real property tax exemptions that could be granted by the IDA, calculated after the IDA completes a cost-benefit analysis, has not yet been disclosed.

The developer will pay full taxes on the full value of the land itself, according to Riverhead IDA policy.

Subsequent development phases will include: a 400,000-square-foot “rail depot” logistics building adjacent to the existing rail spur on the site, which CAT proposes to extend; three multi-level distribution buildings of 1.44 million square feet each along the southern end of the eastern runway; a 4.32 million-square-foot, two-level parking structure east of the three multi-level distribution buildings; three multi-level distribution buildings of 1.44 million square feet each along the 7,000-foot western runway; and a 4.32 square million-square-foot, two-level parking structure west of those distribution buildings.

During CAT’s presentation of the joint application to the IDA on Sept. 21, [watch video of presentation here] its representatives displayed site drawings and renderings depicting airport uses at the site and its consultants described an air cargo and logistics hub.

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The joint application was accepted by the IDA at the conclusion of the presentation. The resolution accepting the application, unanimously approved in a 4-0 vote by the IDA board of directors, also describes the project as set forth in the application documents.

The resolution also states that it does not commit the IDA “to consider the inducement of the Project” — inducement being the term used by the agency for the formal act of approving financial assistance, which is considered essential to the project and therefore an inducement for the developer to act.

The resolution also states no action will be taken on the application until the IDA has completed its due diligence analysis and review of the application and “the Company has provided the Agency with evidence that all necessary site plan approvals, architectural review, zoning approvals, and permits with respect to the Facility have been approved.”

Public opposition to the presentation and the application was swift and loud. CAT representatives almost immediately denied the company was planning to use the site for air cargo.

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After Council Member Tim Hubbard, who is the Republican candidate for town supervisor, came out in opposition to air cargo use at the site in July, (“Hubbard says he won’t let EPCAL become a cargo jetport, believes purchaser will soon unveil modified plans, and casts doubt on IDA approval,” July 5), Ghermezian, in a guest column published by RiverheadLOCAL, said the company would “work with the town to create a plan for a project that is consistent with the town’s vision for EPCAL and in compliance with the adopted studies and regulations that govern its use.” He concluded, “Rest assured, these development plans will not include a cargo jetport.” (“Triple Five executive: ‘No cargo jetport for Calverton’,” July 11.)

At an IDA public information session Aug. 8, CAT representatives told the IDA and the public that there was a misunderstanding about CAT’s plans caused by erroneous or imprecise statements made by their consultants Ghermezian apologized “for the confusion that was created” when “a professional consultant” referenced air cargo uses “as a hypothetical concept of full buildout” at the site. “We should have immediately flagged it for what it was, and more importantly, what it is not. Those concepts are not included in any plan we are placing before the IDA or the Town Board,” Ghermezian said.

CAT attorney Kent told the IDA on Aug. 8 “Sometimes when working with consultants, engineers, architects, they prepare something and that’s what gets stuck in their head,” he said. “And I was very angry that day,” he said, referring to the Sept. 21, 2022 presentation, “because we had not — that was not what we had decided we were going forward with.”

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Neither Kent nor Curry at any time during the Sept. 21, 2022 presentation attempted to correct the statements of the consultants — the project engineer and the project architect — or said anything to contradict any portion of their presentations. Hard copies of the architects’ drawings and renderings, showing the logistics buildings and planes on new aprons to be constructed, were available in booklet form at the Sept. 21 meeting. See plans below.

Drawings attached to the application itself show the Phase 1 buildings that are described and priced out in the application. One drawing depicts three views of a logistics building, labeled, “LOGISTICS BUILDING – TRUCK SIDE,” “LOGISTICS BUILDING – AIRCRAFT SIDE” and “LOGISTICS BUILDING – ENTRY SIDE.” The entry side drawing shows an airplane parked outside the building.

CAT’s “Market Report & Economic Analysis,” prepared by CAT consultant JLP+D (James Lima Planning and Development), and submitted to the Riverhead IDA with CAT’s application, analyzes the site for air cargo uses. [View report here] The report states that the 10,000-foot runway is “sufficiently long enough to handle almost all cargo aircraft,” noting that all Boeing 747 models, with one exception,” with the exception of the Antonov An-225 (10,334 ft) and the Boeing 747 LCF (10,039 ft). It should be noted that all other Boeing 747 models “require only a 9,743 ft runway.”

The Lima report also discusses the growing demand for cargo and air freight, partly a result of the COVID-19 pandemic and also because of the growth in e-commerce. It analyzes “aviation revenue streams” for the site, including potential cargo uses.