(Updated: Oct. 24, 2023 at 5 a.m.)
The Riverhead IDA Monday night denied Calverton Aviation & Technology’s application for financial assistance to develop the Calverton Enterprise Park site.
Now the fate of the $40 million land deal rests squarely with the Riverhead Town Board, which has the option to declare the contract null and void.
In a 14-minute statement read into the record by IDA vice-chairperson Lori Ann Pipczynski, the IDA spelled out detailed findings supporting its denial of the application for assistance to develop the $245 million, 1 million-square-foot phase-one of an eventual 10 million square foot project.
READ: Transcript of the IDA’s findings and conclusions (below)
The findings describe the difficulties encountered by the IDA in its efforts to obtain information from CAT, including the company’s failure to provide information and documents specifically requested by the agency. The findings also describe information provided by the company that did not satisfy the IDA’s standards for project approval, pursuant to the agency’s Uniform Project Evaluation Criteria.
“I therefore propose that the draft resolution include the following statement: The agency’s members have reviewed its uniform project evaluation criteria policy, and evaluated the proposed project based on such criteria, and hereby finds that on balance, the proposed project is not appropriate for receipt of financial assistance from the agency,” Pipczynski read.
“I propose that the resolution to be voted on contain the following alternative text in sections two, three and five, section two: Based on the foregoing findings of the agency, the agency is unable to confirm that the company has provided assurances satisfactory to the agency of the company’s financial ability to perform under the terms of section 13(a)4) of the agreement.
“Section three: Based on the foregoing findings of the agency, the agency hereby denies the application and declines to provide any financial assistance as such term as defined in the act for the project.
“Section five: the agency after consideration of all financial and project information submitted in connection with the application is not issuing an authorizing resolution as contemplated by the agreement,” Pipczynski read.
The three members of the IDA present at the meeting — Member Anthony Barressi was absent and Chairperson James Farley was present via Zoom but did not vote — voted to adopt the resolution denying the application.
The standing-room only crowd at the meeting Monday night broke out in cheers and applause.
Riverhead Supervisor Yvette Aguiar immediately went to the podium to thank the IDA board. “I just want to say thank you. You did your job well,” Aguiar said.
CAT and the Town of Riverhead Community Development Agency, a public benefit corporation directly governed by the Town Board, and owner of the town’s remaining lands at the Calverton Enterprise Park, entered into a $40 million purchase agreement in 2018 for the sale of 1,644 acres of town-owned vacant land, including the site’s two runways, at the enterprise park. The transfer required the completion of a land subdivision, because the 1,644 acres are part of 2,103 acres owned by the town.
Under the terms of an agreement amending the 2018 agreement, the town and CAT agreed that the town would jointly apply with CAT to the Riverhead IDA — an agency independently governed by a five-member board appointed by the Town Board — for financial assistance in the form of real property tax, sales tax and mortgage recording tax exemptions for phase one of the project. The agreement was signed in March 2022 and the joint application was filed in September 2022.
After CAT’s plans for air cargo uses at the site were presented to the IDA at its Sept. 21, 2022 meeting, community blowback was fast and fierce. Angry residents packed the Town Hall meeting room and IDA information sessions multiple times with signs reading “no cargo jetport” and repeatedly called on the IDA to reject the application and on the Town Board to cancel the deal.
Under the March 2022 agreement, a denial by the IDA gives the Town Board the right to declare the 2018 contract null and void.
After the meeting’s conclusion, Aguiar said in an interview she intended to act quickly to declare the contract null and void.
“I’m going to call for an immediate emergency executive session with the board and we’re going to work towards returning as soon as possible the land back to the residents for its appropriate use,” Aguiar said.
Asked if she intended to have the board declare the contract null and void, she said “Yes. But I need the support of my board. I try not to speculate on votes,” she said. “We’ll see.”
In a recent interview, Council Member Tim Hubbard, who is the Republican party’s candidate for supervisor this year — Aguiar decided against seeking a third term — said he would look to get the town out of the contract with CAT “as fast as I can.”
Hubbard, who was not present at the meeting held tonight inside the old Town Hall, did not return a call seeking comment this evening.
Aguiar said she was not aware of the IDA’s decision in advance of the meeting — or of the hurdles it had encountered in its evaluation of the application.
“The town was a co-applicant only because we own the land,” Aguiar said. “The town was not involved in the back and forth between CAT and the IDA.”
Aguiar recently wrote two emails to the IDA urgently requesting the agency to act on CAT’s application.
The supervisor issued a press release less than an hour after the meeting ended expressing “relief” and thanking the IDA for its determination.
“This determination enables the CDA to move forward with the next steps towards redeveloping in a manner benefitting the community, while protecting the environment and quality of life of Riverhead’s residents,” Aguiar said in the release. The release did not mention the steps necessary to attain that goal, i.e. exercising the town’s right, under the March 2022 agreement with CAT, to declare the contract null and void, which presumably requires an affirmative vote of a Town Board majority.
Aguiar said in the release she would order an immediate property appraisal for the site. “The residents of this Town deserve to know the value of the EPCAL property,” Aguiar said. “I am also going to call for an emergency executive session with the Town Board in the next day or so, in hope returning the land back to Riverhead residents.”
The supervisor’s press release said Council Member Tim Hubbard agrees with Aguiar. Hubbard, according to the release, stated that the Town Board will take immediate steps to ensure that the property is developed as soon as possible so “Riverhead and Long Island residents deserve to finally realize the economic development promise, including jobs, tax base growth and protection of quality of life, that only Calverton Enterprise Park offers the region.”
CAT attorney Chris Kent of Farrell Fritz did not return a voice mail message left on his cell phone after the meeting.
Residents who packed the meeting room inside the otherwise darkened and empty former Town Hall building were jubilant after the IDA vote. The vote came after the board recessed into an executive session for approximately 30 minutes session to confer with its attorney outside of the meeting room.
In an interview after the meeting, Democratic supervisor candidate Angela De Vito questioned the timing of the IDA’s decision and suggested it was held off until a special meeting in late October for political purposes, to benefit Hubbard and the Republican ticket.
“The Town Board’s next meeting is after Election Day,” De Vito said. “Tonight’s decision may make them look good, but we won’t know whether they will actually act to declare the contract null and void until after the election is over,” De Vito said. “Seems like that’s not a coincidence.”
De Vito said residents should remember that the town had the right to cancel the 2018 contract after it was unable to obtain the required final subdivision approval within one year of the end of a contractually obligated due diligence period — a period that allowed CAT time to complete an investigation of environmental conditions at the site. Board members, including Hubbard, have said the town’s attorneys advised the board against trying to exercise that right, because the purchaser would sue the town and the property would be tied up in court for years.
“What assurance do we have that won’t happen again and a majority of the board won’t vote to declare the contract null and void on Nov. 9?” De Vito asked. “As of right now, we have no such assurance.”
Transcript of Riverhead IDA’s findings and conclusions in the matter of the application of Calverton Aviation & Technology
Riverhead Industrial Development Vice Chairperson Lori Ann Pipczynski, presiding over the Oct. 23, 2023 meeting of the agency in the absence of Chairperson James Farley:
Please note that no action was taken in executive session.
At our direction counsel has prepared a resolution regarding the proposed CAT project at EPCAL with unspecified findings and alternative actions.
I note we received certain additional materials last night that we have reviewed and considered.
Having considered all the materials referenced in the resolution and having consulted with agency staff, counsel and third party experts, I propose the following findings be included in the draft resolution.
Number one. The company has not provided any evidence of eligible equity
to fund the project.
Number two. In lieu of eligible equity, the company has advised the agency that it intends to rely on a loan, the mezzanine loan from a third-party, the mezzanine lender.
Three. The financial statements provided by the company for the mezzanine lender revealed that the most significant asset of the mezzanine lender is the ownership of certain NASDAQ-traded securities, a portion of which are pledged to third-party lenders. The company has refused to provide copies of the loan documents between the mezzanine lender and its lenders. These securities are a technology company, and have been trading only since November 2021.
Number four. Representatives of the company have advised the agency that the mezzanine lender has opted to not transfer any of such securities to the company, pledge such securities to the company, or liquidate such securities.
Number five. Representatives of the company have advised the agency that the mezzanine lender has opted to not provide a letter of credit or other eligible collateral to secure its funding obligation.
Number six. Representatives of the company have advised the agency that the mezzanine lender has proposed to maintain a certain value of such securities but without any consideration of over-collateralization to accommodate potential volatility of the market value of such securities.
Number seven. The company has provided an executed conditional term sheet for its acquisition financing. However, such term sheet is a lending proposal only and is subject to a number of conditions, including lender management approval, appraisal, and other due diligence. Such term sheet misidentifies the borrower as a single member of a Delaware limited liability company. And such term sheet references a sponsor, Triple Five Real Estate I LLC and a guarantor, Triple Five Investment Limited to be approved by lender prior to closing, but no information regarding such entities has been provided to the agency.
Number eight. The company has not produced any commitments for construction financing, providing only letters of interest from lenders to provide a commitment at a later date.
Number nine. In various public and private communications, the company has referenced its relationship to the Triple Five organization, but has not produced any organizational chart explaining these relationships or financial statements of any such other entities or their principals, members or directors. The company has also attempted to distance itself from certain Triple Five entities and actions, for example when responding to questions regarding numerous lawsuits involving Triple Five entities.
Number 10. The company has failed to provide specific project definition, especially with regard to the uses of the facility, including the allowed and prohibited runway uses. The project income and expenses would vary significantly depending on such uses, and therefore the finance ability of the project cannot yet be adequately assessed. Further, without a specific project, the agency cannot adequately evaluate the application for financial assistance submitted by the company.
Number 11. The agency instructed its counsel to retain an Independent accounting firm to assist in its due diligence and Satty Levine and Ciacco CPAs (referred to as “Satty.”) Satty has been so retained. Satty has provided an opinion, called the Satty report, summarizing its review and analysis.
The Satty report includes the following conclusions: Based on the above-discussed analysis, the company has not established that they have the financial capacity to acquire and develop phase one of the EPCAL parcel. More specifically, the company did not provide data to demonstrate that they have the ability to fund the required equity. The company did not provide data to demonstrate that they have the ability to acquire the mezzanine financing; the lending term sheet is deficient and there is no commitment for securing the construction financing. Furthermore, Satty has been given no information to conclude whether the company has the financial ability to develop the rest of the EPCAL parcel beyond the first phase, or the project, and therefore cannot and do not render an opinion on the company’s ability to do so.
Number 12. The business plan submitted by the company was vague and not specific enough to provide a basis to determine the viability of a financially successful project.
Number 13. Despite our having held a public information meeting devoted to the topic, the proposed project remains largely undefined. The company has provided only general, broad categories of possible uses. The company has advised the agency that for its specific uses, “will follow what the market bears.” As the agency’s mission involves economic development, in order to approve a project for financial assistance, we must be able to analyze the costs and benefits. Doing so requires us to evaluate the employment effects, environmental impacts, and a host of other economic factors. Unless the agency is advised as to what specifically is being proposed, the agency is unable to further process, much less approve, the application.
Number 14. The use of the existing runways also remains undefined in its initial presentation to the agency on September 21, 2022, the company noted that historic uses were over 19,000 flights per year, and that the proposed project included a future taxiway and apron to accommodate airplane traffic. Specifically the company’s expert advised the agency and the public that “we’ll be using both runways eventually for cargo and also testing at the site.” However, after almost a year of contradictory statements, on August 7, 2023, Justin Ghermezian, the principal owner of the company, apologized for these statements and said, “What is not being designed, considered or proposed is a carbo jetport or a commercial aviation jetport. Yet a few minutes later, the company’s counsel stated that the eastern runway has been and continues to be an active runway and would be available for such in the future. And the western runway would also be available for its historic aviation uses and or other contemplated supportive uses. In fact, the applicant has advised the agency that it would not locate any office uses near the active runway. The historic and supportive uses have not been identified — or defined. I’m sorry.
The agency is unable to properly evaluate the project on an economic, environmental or societal level with the information provided.
We do not have the requested details needed to perform a cost-benefit analysis or to hold a public hearing. The company’s counsel seem to admit as much when on August 23 2023. He stated that until we have an approval on the site plan from the Town Board, we don’t believe that there’s a project that is suitable to be awarded certain types of economic incentives. The applicant has acknowledged that the Town Board site plan approval could take 18 to 24 months to obtain.
The applicant has often referenced its relationship to Triple Five. In her statements to the agency on August 23 2023, Margaret Blakely and Executive Vice President of Triple Five referenced several large Triple Five projects, the West Edmonton Mall, the Mall of America, and American Dream at the Meadowlands in New Jersey. Ms. Blakely repeatedly opined that Triple Five’s experience in these and other projects should be factored into the agency’s decision for this project. However, when asked about specific entities by agency treasurer Mendelson, the company’s counsel would only divulge that these entities were affiliates. Further, the company’s counsel acknowledged that the lender would be vetting those things. Mr. Mendelson then stated “Yes, while I appreciate your word for it, that’s insufficient for the IDA’s purpose, which is to vet it for ourselves. So I would like a response to that question regarding related entities, if not tonight then shortly thereafter, so that we can make our own analysis of whether the lender has vetted it or not.
Mr. Mendelson then asked two further follow up questions related to Triple Five entities with the company’s counsel promising answers. No organizational chart or financial statements for the other entities have been provided. The information provided last night only includes the organizational chart included with the original application.
Similarly at the public information meeting on August 23, 2023, the agency sought clarification and detail on a number of lawsuits, one involving alleged defaults on PILOT payments to a quasi-public entity, and no details were provided. The company’s counsel seem to dismiss the topic by saying that there is no litigation that the company is aware of at this time that has any merit or financial risks attached to it.
In some respects, the agency is asked to rely on Triple five experience and assets or to ignore Triple Five’s ongoing litigation. On August 23, 2023 in response to the question is, how soon would CAT be prepared to close and close with the town. The applicant’s answer was as soon as the site plan process was finished. The company’s co-counsel then contradicted that statement, opining that there would be two closings on this transaction, the first of which with the town would be imminent. The documentation submitted last night confirms the two-closings scenario.
The agency’s Uniform Project Evaluation Criteria Policy requires that the agency assess all the material information included in connection with the application for financial assistance, and that no one factor may be determinative.
The general criteria applicable to all projects include:
Other public benefits. We find that the project is not well enough defined in order to evaluate this criteria.
Likelihood of the applicant accomplishing the project in a timely fashion. We find that as the company has refused to initiate the site plan process with the town, which the company estimates will take 18 to 24 months and given the uncertainty regarding its financing, there is not a likelihood that the project would be accomplished in a timely fashion.
We consider impact to the environment and our surrounding area. And we find that the project is not well enough defined in order to evaluate this criterion. Typically, this information and several other criteria would be provided in connection with the site plan process.
We consider impact to infrastructure. We find that the project is not well enough defined to evaluate this criteria.
We consider community involvement and participation. Based on the comments received at the various public meetings and provided directly to the agency, we find that the community is strongly opposed to this project.
We consider developer credentials. We find, based on the statements made in the public meetings and material provided by the company that this developer was ambiguous as to the finite developer’s credentials as they apply to this project.
We consider land use factors. We find that the project is not well enough to find in order to evaluate this criteria.
And finally, we consider impediment to financing. We find that there are material impediments to the long- and short-term financing of this project.
For each of the above factors, this application for this project with this developer yields a negative conclusion.
I therefore propose that the draft resolution include the following statement, the agency’s members have reviewed its Uniform Project Evaluation Criteria Policy, and evaluated the proposed project based on such criteria, and hereby find that on balance, the proposed project is not appropriate for receipt of financial assistance from the agency.
I further propose that the resolution to be voted on contain the following alternative text in sections two, three and five.
Section two. Based on the foregoing findings of the agency, the agency is unable to confirm that the company has provided assurances satisfactory to the agency of the company’s financial ability to perform under the terms of section 13(a)(4) of the agreement.
Section three, based on the foregoing findings of the agency, the agency hereby denies the application and declines to provide any financial assistance as such term as defined in the Act for the project.
Section five, the agency after consideration of all financial and project information submitted in connection with the application is not issuing an authorizing resolution as contemplated by the agreement.
Can I have a motion to approve the resolution?
Member Lee Mendelson: Madam Chairwoman, I move to approve the resolution.
Vice Chairperson Pipczynski: Is there a second?
Member Douglas Williams: I’ll second motion.
Chairwoman Pipczynski: Is there any discussion? All those in favor?
Pipczynski, Mendelson and Williams, in unison: Aye.
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