Town Board Kills Riverhead Resorts Deal

RIVERHEAD, NY-The other shoe has dropped in this Long Island town’s plans to redevelop more than 1,000 acres formerly occupied by Grumman Aerospace manufacturing facilities. Two weeks after Rechler Equity Partners said it would not extend its contract to develop a 300-acre industrial complex inside the Enterprise Park at Calverton, the other EPCAL project, a $2.2-billion resort, has been canceled by the Town Board.

At a special meeting called by Town Supervisor Sean Walter on Friday, the board voted 4-1 to terminate the contract with the development team behind Riverhead Resorts. In a statement, Walter says it’s clear that the Riverhead Resorts group, which was given several extensions on a deadline to make an overdue $3.9-million payment toward acquiring the 755 acres of land, is unable to close the $108-million deal. “Months of excuses, platitudes, apologies, justifications and explanations have only left Riverhead holding the bag at EPCAL and this cannot continue,” Walter says in his statement.

“Resorts has been in arrears under the terms of its contract for some time now,” says Walter. He adds that the group has offered “excuses and rationalizations, but what hasn’t happened is that the money hasn’t crossed the finish line.”

Walter notes that the contract had actually expired several weeks ago but hadn’t been formally terminated until Friday’s vote. At a Nov. 3 press event, representatives from the group presented the town a handwritten $3.9-million check made out in British pounds, which was canceled by the issuing bank after the Riverhead News-Review ran a close-up photo of the check on its website.

Three years ago, Walter says, Riverhead Resorts “came into the process making grand claims and looking to take on a rather large project. Some felt they lacked a track record and most felt they would have trouble gaining financing.” The group’s plan called for an eight-resort complex, including an indoor ski mountain that “would be the highest point in Suffolk County,” and sought to create “a complex larger than Disney World,” he says. “I think most all of us found this ambitious dream a bit much to fathom.”

Walter says that the previous town board, “hearing the first footsteps of the coming recession,” decided to contract with Resorts in January 2008 “as a sort of ‘no-lose’ proposition. After all, Resorts would continue making payments to hold their contract before they closed and those payments were non-refundable. Then the music stopped."

Published reports say the Resorts group, led by John Niven, chairman of Scottish-based Baldragon Homes Ltd., has already made $7.5 million in non-refundable payments to the Town of Riverhead. Niven told the Long Island Business News on Friday that he’s invested more than $18 million in the project, and blamed the economic downturn for delays in securing financing, which he said would be fully in place by January 2011.

Walter says in his statement that the next step is to subdivide the EPCAL land so it can be used for other purposes. He told the LIBN that the $7.5 million in non-refundable payments from Resorts will be used to help reduce the town’s $100-million debt load. Even while the Resorts deal was technically still on this past summer, local groups were pushing for a motorsports racetrack or a casino to be built on the land, according to the North Shore Sun.

For their part, the Resorts group is holding out hope that the project can be gotten back on track. Mitch Pally, an attorney for Resorts, tells GlobeSt, “Our plan is to make the necessary payment to the town” in the hope that the contract will be reinstated. The team intends to do this soon, he adds.