Town keeps Riverhead Resorts deal alive

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10/25/2010 4:14 PM |

Supervisor Sean Walter cast the deciding vote Tuesday, tabling a resolution to terminate the town’s contract with Riverhead Resorts. The development group is looking to buy 755 acres of town land in Calverton for $155 million to build a themed resorts complex bigger than Disneyland.

“In my heart of hearts, I don’t believe they have the financial wherewithal, but I don’t want to be the guy that closes the door,” Mr. Walter said.

The supervisor said he changed his mind after receiving a call from Kenneth Auerbach, a friend who is also co-chairman of the Brookhaven Town Conservative Party, asking him not to vote to terminate the agreement.

Council members George Gabrielsen and Jodi Giglio favored terminating the contract, while Jim Wooten and John Dunleavy did not, saying no one else is ready to step in and buy the land.

Mr. Walter said the purpose of the resolution was to show the state Department of Environmental Conservation that the deal doesn’t exist anymore, so that the DEC would not require the town to examine the impacts of Riverhead Resorts’ massive proposal as the town proceeds in subdividing the land.

Mr. Walter said that, technically, the agreement had ended June 15, when Riverhead Resorts failed to make a $1.98 million payment for a three-month extension of the contract. Two more deadlines have been missed since then, and Riverhead Resorts now owes the town almost $6 million.

This is the second time the Town Board has postponed a resolution terminating the agreement with Riverhead Resorts.

“There comes a time when enough is enough,” Councilman George Gabrielsen said at the meeting.

Mr. Walter said the Town Board has asked Riverhead Resorts to discuss its plans in public at a Town Board work session next Wednesday morning.

Mitch Pally, an attorney for Riverhead Resorts, discussed extending the agreement with Town Board members individually Friday and said Resorts now has a signed contract from a financing entity, but just needs more time to work out details like the timing of the closing.

The signed contract is with a London-based company called Solutio Finance, which will provide an initial funding package of $25 million, Mr. Pally said. The $5.9 million owed the town will come from this package, he said.

A second funding package of $222 million will come at a later date from another financing entity, which Mr. Pally said he cannot name because the details of that agreement are still being worked out.

Under the terms of the Resorts contract with the town, the full payment will not be made until after the project receives approvals, and that can’t happen until the land is subdivided, a process that might not be completed until next year.

But under the terms of the contract, the $5.9 million in extension payments would go to the town immediately and would be non-refundable, regardless of whether the sale ever occurs. If, however, the town terminates the contract before the payment is made, the $5.9 million would not still be owed to the town, Mr. Walter noted.

The Town Board on Sept. 7 also had planned to vote on a resolution to terminate Riverhead Resorts’ contract, but backed off. At that time, Mr. Pally had presented the town with a letter from a funding entity called Global Capital Markets Advisors LLC, indicating that it was “preparing to lend Riverhead Resorts the sum of $25 million for an initial round of project financing.”

Mr. Pally said Friday that the deal with GCMA fell through, but that they had an alternate backing from Solutio Finance.

While the contract calls for the land to be sold for $155 million, both sides have since said they agreed informally to make the deal for $108 million.

“Your commitment to the project is contingent upon my fulfilling my financial obligations to you and your constituents and my inability to do so over the past year has been greatly upsetting to me and all involved,” Riverhead Resorts president John Niven wrote in a letter to Town Board members Monday.

“However, I now fully believe that the financial arrangement I have entered into with Solutio Finance will allow for the Town of Riverhead to receive all of the funds owed to them and allow for the project to move forward without any additional financial barriers.”

Mr. Walter said Mr. Niven has a month to prove it.

tgannon@timesreview.com

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