Revised 205 Osborn filing teed up for IDA vote, as Hanover Bank branch is proposed

The 205 Osborn Avenue mixed-use project took a procedural but important step forward last week when the Riverhead Industrial Development Agency accepted an amended benefits application from the project’s new developer and accepted a tenancy application for Hanover Bank to locate on the ground floor.

The amended benefits application is intended to “reset the PILOT agreement” and preserve previously granted tax benefits as the project moves closer to completion, RIDA Chairman James Farley said at the agency’s Jan. 13 meeting. It does not increase the project’s IDA benefits, he said.

Farley described the purpose of the amended application as recalibrating the payment-in-lieu-of-taxes agreement to reflect a revised timeline for when the building will be completed and placed into service — which he said he hoped would be in April or May — and to ensure the project’s new developer can use the remaining sales tax exemption “to the full extent” originally granted.

Farley told the board he had toured the building with the contractor and the apartments were “coming along very well” and “look quite nice,” with remaining work largely focused on kitchens and bathrooms.

At the same time, he said, the developer and town inspectors were still “a little bit at odds” on certain issues. He said he’d been told by Community Development Planning and Building Administrator Dawn Thomas that those issues were expected to be resolved “this week,” allowing the project to move toward completion “as quickly as possible.”

Developer John Paci III told RiverheadLOCAL in an email Friday that all issues have now been resolved. The issues were administrative in nature, involving the timing of the renewal of the project’s building permit, he said. “We are back in action,” Paci wrote. “Building permit renewed.”

The board unanimously approved a resolution accepting the amended application.

Farley introduced the second resolution, to accept a tenancy application for Hanover Bank. He said the IDA had reviewed the proposed lease and that recalibrating the PILOT would help allow the parties to finalize that agreement.

Before the vote, board member Lori Pipczynski raised a disclosure “point of order,” noting that the IDA has an account with Hanover Bank. Farley acknowledged the relationship and said the IDA had no direct involvement with bank representatives in connection with the tenancy application. The board then voted to approve acceptance of the tenancy application.

The IDA will act on the applications at a later date.

The amended submission returned to the IDA Jan. 13 after the board declined to accept the application for review at its Dec. 16 meeting, saying it needed to assemble and review the updated filing and confirm the request did not increase overall benefits. Farley told the applicant last month that the board’s review was complicated by the November retirement of longtime executive director Tracy Stark.  

The actions taken Jan. 13  were the latest procedural steps in a project that has been delayed for months amid financial and legal turmoil surrounding its original developer, Gregory DeRosa, and his company, G2D. DeRosa had been a member of 205 Osborn LLC, the limited liability company that owns the property being developed by Paci.

The company gained town approvals for the project and the approval of the Riverhead IDA of a financial benefits package in July 2022. The benefits packaged included a 10-year declining property tax exemption, pursuant to a PILOT agreement, along with mortgage recording tax exemptions and state and local sales tax exemptions.

Construction of the unfinished five-story building at the corner of Osborn Avenue and Court Street appeared to stop in late spring 2024. In September 2024, RiverheadLOCAL reported that G2D Construction Corp. owed contractors $1.87 million tied to the 205 Osborn project, according to mechanics liens filed against the property, while DeRosa faced multiple lawsuits in state Supreme Court over alleged defaults and other claims.

See: Developer of Riverhead apartment buildings mired in debt, records of lawsuits and liens show

Those conditions triggered scrutiny from the IDA because the project received IDA assistance and related agreements included requirements tied to satisfying or bonding mechanic’s liens, RiverheadLOCAL previously reported.

By fall 2024, investors in the project said they were moving forward without DeRosa. An attorney for investors John Paci III and Jerry Wood said the investors took full control of the ownership entities in September 2024 and that DeRosa’s ownership interest was reduced to nothing after he failed to make capital contributions required by the ownership agreement. The investors also hired a new general contractor — MacX — and said they were working to resolve liens either by paying contractors or bonding the liens.

Paci, who has described himself as an investor-turned-developer, has since been the public face of the effort to complete the building. In December, Paci told RiverheadLOCAL he hoped to begin leasing apartments at 205 Osborn this spring and that Hanover Bank was lined up as an anchor tenant for about 2,200 square feet on the ground floor. See: Osborn Avenue apartment building could begin leasing this spring, developer says

Paci said in December that he and the project team spent a lot of time sorting out what work had been completed by G2D and what was left unfinished, and he described “harsh surprises” encountered during the restart.

After the votes last week, Paci’s attorney, Peter Curry, thanked the IDA board for its “perseverance” with the application, said the project team looked forward to a ribbon cutting “over the next couple of months,” and invited board members to come see the apartments.