Investors taking over stalled Riverhead apartment project, without troubled original developer

Investors in a stalled downtown Riverhead apartment building are committed to taking the project over the finish line without its troubled original developer, a lawyer for the investors said in an interview Monday.

G2D Construction is no longer involved in the development of the five-story, mixed-use apartment building located at 205 Osborn Avenue, said attorney Paul O’Brien of Bay Shore, who represents investors John Paci III and Jerome Wood. Together, Paci and Wood own a majority stake in the two companies that own the 205 Osborn property and The Shipyard, a four-story, mixed-use apartment building previously developed at 331 East Main Street by G2D. 

G2D put the 205 Osborn project “in an economically unenvious position and created the host of issues that we’re dealing with now,” O’Brien said. 

Construction on the project appears to have been at a standstill since at least May, and there are 12 liens filed against the property totaling more than $2.1 million. There is also a lien filed against The Shipyard property worth $149,009. More liens have been filed against the property since RiverheadLOCAL first reported on the liens early last month. 

Additionally, G2D CEO Gregory DeRosa of Oyster Bay has been subject to more than a dozen civil lawsuits from investors and lenders who said he defaulted on payments. Both Paci and Wood have filed lawsuits against DeRosa. 

An agreement between 205 Osborn Avenue and the Riverhead Industrial Development Agency, which gave tax benefits to both projects, requires liens be discharged or bonded within 30 days of filings. IDA Executive Director Tracy Stark-James said in a press release late last month that the agency expects both of the projects to “make their full contribution to the town’s development,” despite the liens and lawsuits against DeRosa. She said the IDA was in contact with the investors of the project through O’Brien.

MORE COVERAGE: Riverhead Industrial Development Agency is optimistic troubled developer’s projects will ‘perform as intended’

O’Brien said his clients are working towards resolving the liens filed against the property by either paying contractors or bonding the liens. “Despite DeRosa taking draws from the” company, he “failed to make payments to the contractors” who had completed work on the buildings, O’Brien said. 

DeRosa misrepresented the status of the construction of 205 Osborn Avenue to the investors, according to O’Brien. 331 East Main Street was “stripped of what should have been its operating capital, we believe, by DeRosa,” O’Brien said. 

Paci and Wood took full control of the properties in September, O’Brien said; DeRosa’s minority ownership interest in the companies was reduced to nothing, because he did not make capital contributions to the company promised under its ownership agreement, O’Brien said.

“At the end of the day, John [Paci] and Jerry [Wood] are going to infuse the capital that’s necessary to A: continue to stabilize 331 East Main Street and B: complete the construction at 205 Osborn,” O’Brien said.

The investors have hired a new general contractor for the project, MacX Corp., and are pursuing the permits and approvals necessary to continue the construction at 205 Osborn Avenue, O’Brien said. That includes approval from the Riverhead IDA, O’Brien said. 

“There are certain things I think we can do in the interim to ensure the property is safe, secure, and aren’t any further setbacks,” O’Brien said. “But in terms of bringing in trades to complete work, things of that nature, it’s as soon as we get approval.”

The G2D company website is offline. Key top executives no longer work at G2D, according to their LinkedIn profiles. The company has closed its Huntington offices, according to The North Shore Leader newspaper, based in Locust Valley. One of DeRosa’s attorneys said in a court filing last week that DeRosa would be filing a Chapter 7 bankruptcy petition early this week.

“G2D is, I think it’s safe to say, out of business,” O’Brien said.

DeRosa did not return an email seeking comment for this story.

The development at 205 Osborn, which was dubbed by G2D as “Station One,” is being developed as a 37-unit market rate apartment building with ground-floor commercial space. Once the blighted site of a long-shuttered former medical office, it was the first project to get approval by the town in the Railroad Avenue Overlay District, which allowed increased density and a greater variety of uses — including five-story mixed-use apartment buildings — in the area surrounding the train station. The Shipyard, which is located on East Main Street, is currently operating as a 36-unit market-rate apartment building with ground-floor commercial space.