The Riverhead town square master developer presented its vision and qualifications for building a new boutique hotel and managing the construction of new public spaces surrounding the hotel, during a hearing at a special Town Board meeting Tuesday.
The hearing is required for the Town Board to designate the master developer, an affiliate of the J. Petrocelli construction company based in Ronkonkoma, a “qualified and eligible sponsor” for purposes of the New York State Urban Renewal Law. That designation allows town officials to enter an agreement to sell 127 East Main Street to Petrocelli for the project without a competitive bidding process.
Under the proposed master developer agreement released by the town last week, Petrocelli’s company will pay the town $2.625 million for the parcels on which his company will develop the hotel project, with credits applied for contributions by the developer in support of three of the town’s grant applications ($660,000 total) and potentially for construction management fees and maintenance obligations in connection with the town square’s public spaces. A down payment of 5% is required.
MORE COVERAGE: Riverhead Town Board sets key hearing for advancement of town square project: July 1 meeting wrap-up
Developer lays out plans for hotel project
Petrocelli representatives presented renderings and floor plans for its proposed five-story mixed-use building. The project includes 76 hotel rooms with amenities,12 condominium units, three ground-floor retail spaces facing the town square, and a restaurant with terrace facing the Peconic River.
View/download Petrocelli Q&E presentation on town website
They also presented the company’s qualifications for managing the construction of public spaces surrounding the hotel, including an amphitheater, a playground and a plaza. The town would pay Petrocelli a construction management fee of 7% of the projects’ total construction costs.
The developer also presented financial information to the Town Board. The holding company for the project, J. Petrocelli Riverhead Town Square LLC, is a partnership between brothers Joseph and John Petrocelli, who both work in their family’s construction business, J. Petrocelli Contracting, according to the project’s attorney, Eric Russo of VanBrunt Juzwiak & Russo.
View/download Petrocelli Q&E documents on town website
Joseph Petrocelli developed the Long Island Aquarium, and has since constructed several other downtown projects, including the Hyatt Place East End, the East Lawn office building and the Preston House Hotel.
The hotel project is estimated to cost upward of $32.6 million; it will be financed by a $19.6 million construction loan, $12 million in equity from Joseph and John Petrocelli, and a $1 million state grant, according to documents filed by the developer.
Joseph Petrocelli called the hotel building a “risky investment.”
“But I think we know more about this town than most developers” and it should be “a very successful project,” he said.
“We’ve had discussions with some of the top hotel brands — very excited to come to our town,” Petrocelli added. “They know about Hyatt, they know about Preston. So they’re anxious to be part of it.”
The town square project is the centerpiece of Riverhead’s downtown revitalization. Town officials hope it will spur tourism activity and spending in a part of town that became blighted after the stores that anchored businesses there shuttered in the late 90s and early 2000s.
“The aquarium gave us an attraction, but it didn’t give us the destination,” Joseph Petrocelli said. “So the more attractions we create, the bigger the destination, and that’s going to fill the hotels, and that’s going to bring people to downtown.”
The project’s condominium units would be located on the fifth floor and sold, rather than rented. The plan calls for eight one-bedroom units, two studio units and two two-bedroom units. A parking area with 12 spaces would be built on-site for those residents.
“The town was looking for additional hospitality, unique local food and beverage, ancillary retail and expanded downtown living — which is a condo aspect in this hotel,” said Bryan DeLuca, the executive director of the Long Island Aquarium and a Petrocelli employee. “That proposed town square project brings all this together.”
Russo presented nine letters of support from local businesses and nonprofits, such as the Long Island Science Center and East End Arts, to underscore the community’s backing for the project. The members of the Petrocelli organization are heavily involved in the local business organizations and committees, with some having held leadership roles.
“We are really focused on supporting hospitality and our tourism industry,” DeLuca said. “In addition to this volunteer support by our staff, the aquarium is one of the largest contributors to both the [business improvement district] and parking district tax for downtown. So we are committed to this town as employees and supporting all the different committees that the town has.”
The hotel project is projected to have gross revenues of $5.2 million its first year, climbing to $6.2 million by its 10th year, according to an economic analysis filed with the town by the developer.
Russo also submitted letters from financial institutions that have worked with Petrocelli.
A July 17 letter from the aquarium and Hyatt’s longtime accountant, Stephen Giammarese, says “J. Petrocelli Contracting, Inc. has the financial resources to successfully undertake and complete the Riverhead Town Square project.”
A letter from Shawn Morgenroth, attorney-in-fact for surety bond agents Acrisure, states that J. Petrocelli Contracting Inc. is currently bonded with Liberty Mutual Insurance Company and is within good standing. Morgenroth said the company is “able to provide favorable consideration for” bonds.
TD Bank Vice President Dominic DaSilva said in a letter that two of Petrocelli’s Riverhead businesses have a credit of more than $11 million and are held “in high regard.”
Community members comment on plan
Roughly 20 speakers outside of the Petrocelli team came to either support or critique the project.
Angela DeVito of South Jamesport asked the town to hold the hearing open for at least 30 days to allow residents time to review and comment on the documents presented at the hearing, which were not made available to the public prior to or at the hearing. The documents were posted on the town’s website the day after the meeting.
View/download Petrocelli documents on town website
DeVito also questioned the standards the town uses to judge the financial capabilities of Petrocelli’s new limited liability company, J. Petrocelli Riverhead Town Square LLC, the affiliate entity replacing the entity previously designated as master developer.
“We are not entering into a contract with J Petrocelli Enterprises. It is this specific LLC, and we don’t have the information about that LLC’s finances and experience in development projects anywhere,” she said.
Richard Wines, the chairperson of Riverhead’s Landmarks Preservation Committee, said the town group is “delighted to see the town square and the hotel proposal, because we believe this has the capability of a big compliment and enhances the historic nature of downtown Riverhead.”
He said “slightly shifting” two historic buildings on the East End Arts Council property, which is part of the town square plan, will give them more air, get them up out of the floodplain and reconfigure them in a way that may be more useful.
The landmarks group has been working closely with the State Historic Preservation Office, Wines said, to make sure that this work “will not negatively impact” the buildings’ status as contributing historic buildings to the downtown historic district that is listed on the National Register. “So we see this as a very positive way to enhance the historic fabric of downtown Riverhead.”
Some residents used their time to criticize the project and raise concerns about its impacts to the area.
Cindy Clifford of Riverhead said she believes the town and Petrocelli “have all been doing their best to move our town ahead to its next incarnation, but I’m not certain this path reflects the wants and needs of the majority of our residents, or at least those who take the time to follow what goes on and form opinions.”
All the multi-story buildings built on Main Street were “promoted, at least in part, as a way to increase foot traffic that would support our local businesses and return our downtown to being a thriving, walkable community,” Clifford said. “That is not the outcome we’ve experienced.”
She questioned the benefit a hotel would bring to the community, especially because the project would require town officials to add more public parking spaces.
If built, the hotel would be located within the Riverhead Parking District, exempting it from providing on-site parking. Instead, the property would pay a tax towards public parking improvements.
Joseph Petrocelli said the hotel’s valet parking service would park cars in the public parking lot on the north side of Main Street, behind the Suffolk Theater. After the town erects a planned multi-story parking garage there, the hotel will park cars in the garage, he said.
Riverhead Parking District Advisory Committee chairperson Martin Sendlewski, a Riverhead architect, said the hotel’s operating budget should show rental fees for use of some reserved spaces in the parking garage currently planned for the First Street parking lot. “I know that they are looking to basically reserve or utilize specific parking within the district, which goes beyond what the parking district offers to its taxpayers,” Sendlewski said. “So there should be some type of a budgetary item within their annual operating budget that you must consider.”
Several residents also raised the issue of benefits the project could receive from the Riverhead Industrial Development Agency. The proposed master developer agreement says the developer is “anticipated” to make an application to the IDA to receive reduced taxes through a payment in lieu of taxes (PILOT) agreement. The contract says the PILOT is “a material requirement of this Agreement and failure to obtain such PILOT Agreement pursuant to PILOT Terms shall have a material adverse impact on the economics of the transactions contemplated in this Agreement.”
“I wonder why it is that you felt it necessary to put a provision in the agreement guaranteeing you IDA benefits,” said Claudette Bianco of Baiting Hollow. “Your project is going to use our town resources — fire, emergency, water, sewage, police. I don’t understand why you feel the need …[for] these tax abatements.”
Russo said later during the hearing that the “applicant has not addressed or made a decision, nor made an application for the IDA.” He noted that whether or not the project receives sales tax exemptions from the IDA may affect which materials the developer uses to construct it.
“No application has been made to date, and that’s not a subject of tonight’s hearing,” Russo said. “The hearing is qualified and eligible, through finances and experience.”
Phil Barbato of Jamesport asked the town to consider the cost that bringing the hotel downtown might incur to the town’s infrastructure. “We could end up with higher taxes for everybody in the town, rather than a wonderful downtown area that makes money for the town,” he said.
Gina Ristau of Aquebogue said the town square project should “have been open to other bidders and invite competing visions that might better serve our community.” She’s said she is strongly opposed to another five-story building on Main Street.
“What historic town has five-story buildings on its Main Street? That’s what I want to know,” she said.
Mark Woolley of Riverhead, a Democratic town council candidate, said the project is “another giveaway of our property, with our assets.” The deal “nets [Petrocelli] more public money for another of his private ventures” and “makes no fiscal sense,” he said.
Supervisor Tim Hubbard said the Town Board could act on a resolution declaring Petrocelli “qualified and eligible” as soon as next month. “My intention is to get this project going as fast as I possibly can,” he said.
The hearing was closed, but the record was left open for written comment until Aug. 1 at 4p.m.
According to a schedule presented at the meeting, the developer is hoping to receive planning approvals for the project this November, with the hope of starting construction in May 2026. The developer hopes to have the hotel running in June 2027.
The town purchased the property at 127 East Main Street along with two adjacent blighted buildings on the south side of East Main Street for town square in 2021. The town demolished the other two buildings and put in grass and a walkway.
The town designated Petrocelli master developer for the town square in April 2022. Since then, the town has worked on revising the designs and plans for the project and has negotiated the master development agreement with Petrocelli.
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