(Correction appended.) The Riverhead Industrial Development Agency has warned the developer of a stalled downtown construction project, hailed by town officials as key to revitalizing the Riverhead train station area, risks losing tax benefits if it fails to resolve the more than $1.8 million in liens against the property.
The liens against the property and several lawsuits filed this summer against the developer Gregory DeRosa and/or limited liability companies he owns or operates, totaling more than $16 million, were first reported by RiverheadLOCAL on Sept. 10.
RIDA Executive Director Tracy Stark-James said in a Sept. 6 email responding to questions about the liens and the developer’s compliance with its RIDA financial benefits only that the developer was “in compliance.” She did not respond to a follow-up email asking for clarification.
MORE COVERAGE: Developer of Riverhead apartment buildings mired in debt, records of lawsuits and liens show
The developer of the project, a five-story apartment building at the corner of Osborn Avenue and Court Street, received financial assistance from the Riverhead IDA in September 2022, including sales and mortgage tax exemptions and a 10-year real property tax abatement, to incentivize the redevelopment of the long-blighted site.
The agency on Sept. 19 sent a letter to G2D Development/205 Osborn Avenue seeking “details” about numerous mechanics liens filed against the property and inform the agency of their “intentions to rectify the situation,” RIDA Vice Chairperson Lori Pipczynski said at the agency’s October monthly meeting. The letter demanded a response within 10 days, Pipczynski said, and noted that “the failure to respond would result in a default of their obligations to the agency,” she said.
The agency got no response to the letter.
The 205 Osborn project has not yet received significant real property tax abatements yet, Pipczynski noted, and the project has “no outstanding financial obligations to the agency.” Most benefits to the project to date were related to sales tax, Pipcyznski said.
According to the 2023 year-end annual report filed by RIDA with New York State’s Authorities Budget Office, 205 Osborn LLC had received a mortgage recording tax exemption of $95,625, as well as state and local sales exemptions of $186,978.53. It had not yet received any real property tax exemptions, according to the RIDA 2023 annual report.
On Oct. 2, the RIDA’s governance committee, which Pipczynski chairs, met again with Stark-James and the agency’s attorney and discussed next steps, Pipczynski told the full board at its Oct. 7 monthly meeting.
“After extensive discussion, committee members decided, as a show of good faith and in a desire to have the project succeed in its original goal of providing market-rate apartments in the TOD area of downtown, to send one more letter demanding response within seven days before having the agency begin termination proceedings,” Pipcyznski said, reading from a governance committee report.
Stark-James told the board during the Oct. 7 meeting that the follow-up letter was “in the outbox” and would be mailed the following day.
Stark did not immediately respond to a phone message or email asking whether the second letter elicited a reply from DeRosa or G2D.
Meanwhile, the developer’s legal woes continue to mount.
Besides at least the 11 mechanics liens filed against G2D’s Riverhead properties by contractors — 10 of which encumber the property at 205 Osborn Avenue, where construction has been visibly stalled since May — G2D and/or its principal Gregory DeRosa are facing numerous lawsuits filed in both Suffolk and Nassau counties, claiming defaults in financial obligations totaling tens of millions of dollars.
Among them, as reported by Newsday on Sept. 19, is a lawsuit filed on Sept. 17 by former Huntington school board member John P. Paci III, an investor with DeRosa in a Huntington office building, alleging DeRosa defrauded him out of a $4.6 million investment in the building.
Paci is listed in the July 2020 RIDA application for benefits by 331 East Main LLC, as a 40% owner of property at 331 East Main Street in Riverhead, a RIDA project that was completed and is occupied by tenants.
Financial assistance granted to 331 East Main LLC in October 2020 included sales and mortgage tax exemptions and a 10-year real property tax abatement.
The stalled construction site at 205 Osborn Avenue is owned by a separate limited liability company, 205 Osborn Ave LLC; 331 East Main LLC owns 99.5% of the 205 Osborn Ave entity, according to the RIDA application seeking benefits for the Osborn Avenue project, which was completed by the applicant in November 2021.
Paci’s lawsuit alleges that DeRosa and his wife “spent millions of dollars loaned to and invested with G2D Development Corp. on personal residences, luxury goods, vehicles, yachts, and other self-serving investments, which plaintiff was not aware of and held no interest in.”
On Wednesday, Paci petitioned the court for an order to prevent DeRosa and G2D Development from selling, transferring or further encumbering all real and personal property, including bank accounts and other assets held by DeRosa or the corporation acquired by misappropriation of the $4.6 million Paci invested in the Huntington project in 2022 and 2023. Paci is also seeking orders of attachments against “various assets” owned by DeRosa and/or G2D Development and/or entities wholly owned and controlled by them.
The judge in the Paci lawsuit signed an order to show cause yesterday directing DeRosa and G2D Development to appear in court on Nov. 1 to answer Paci’s petition and demonstrate why such an order should not be issued.
Separately, Jerome Wood, a 34% owner of 331 East Main LLC filed suit in Suffolk Supreme Court on Wednesday in connection with the alleged breach of the terms of a Dec. 4, 2023 promissory note from DeRosa to Wood.
According to the summons filed in court, Wood is seeking to rescind the note “based upon material misrepresentations made by Gregory DeRosa about, among other things, his financial condition, ability to repay amounts borrowed (or lack thereof), and ability to pledge the cashflows of certain entities as collateral to repay the amounts loaned (since that same collateral and cashflows had been pledged to other lenders several times over).”
The 205 Osborn Avenue project, dubbed “Station One” by the developer, is the first project going up in a special development district enacted by the town to incentivize “transit-oriented” development in the area of the train station. The district provides increased density and additional uses to projects in the hope of attracting investment to properties in the struggling area, which is adjacent to the Suffolk County Supreme Court as well as Polish Town.
Alek Lewis contributed reporting.
Correction: The original headline and first paragraph of this story misstated the total amount of liens against the property at 205 Osborn Avenue. The amount of liens recorded against the property was $1.87 million. The $16 million number previously used in the headline referred to the total amount of liens and lawsuits filed against the developer of the site at the time of our first report last month, a number that has since grown with the filing of new legal actions seeking to collect millions more in alleged debt.
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