Foreclosure looms at Village at Jamesport land

04/12/2012 5:06 PM |

BARBARAELLEN KOCH PHOTO | The proposed Village at Jamesport project is proposed for this Main Road land just west of the hamlet's existing business district.

The land involved in a controversial Jamesport development project is in foreclosure, and court records show that the group behind the project is involved in a lawsuit because two of its three partners want to dissolve the company for lack of profitability.

Riverhead Town Board members interviewed this week said that although they were not aware of the foreclosure status last week, it would not have changed their vote on the company’s special permit applications, which they unanimously approved last Tuesday.

“I have the town attorney looking into it, but I don’t know that it’s relevant who owns the property,” said Councilwoman Jodi Giglio, who was absent during last week’s controversial vote. “If we’re saying that a bistro is permitted, does it matter what developer builds the bistro?”

“Zoning runs with the land,” Councilman Jim Wooten said. “It doesn’t matter who the owner is.”

Jamesport Development LLC has proposed a 42,000-square-foot shopping center, called the Village at Jamesport, for 9.7 acres north of Route 25 and west of Manor Lane in Jamesport. The application for the special use permits was filed in the name of Jul-Bet Enterprises.

The Town Board recently approved two special use permits for the project. One allows professional offices totaling 17,000 square feet and the other allows up to 8,000 square feet for two bistros.

Jamesport Development LLC is partnership among Dollar Storage owner Julius Klein, who owns 50 percent of the company as Jul-Bet Enterprises, and RBR Equities LLC and SW Consulting Co. Inc, which own 25 percent each. RBR Equities and SW Consulting are now suing to dissolve Jamesport Development, according to their attorney, John Ciarelli, claiming the corporation has failed to live up to the financial arrangement among its partners.

Mr. Ciarelli declined to identify his clients beyond their corporate names.

Jamesport Development LLC was formed in 2007 “for the express and limited purpose of developing a 43-acre vacant parcel of property on Main Road, Jamesport,” the lawsuit states. Prior to 2007, Mr. Klein, as Jul-Bet, was the property’s sole owner.

But Jamesport Development is currently in foreclosure on the entire property, including the 9.7 acres targeted for the Village at Jamesport. United International Bank argued in foreclosure proceedings that Jamesport Development has failed to pay back a $3.25 million loan the bank made to the group in 2007. The courts issued a judgment in the bank’s favor, but that decision is being contested.

RBR Equities and SW Consultant allege in the lawsuit that Jul-Bet “mismanaged” the development by not seeking to develop the property with uses allowed “as of right” under zoning, as the partners originally agreed, instead of seeking special permit uses.

Jul-Bet contends in court papers that changes in the plans were the result of Riverhead Town’s rejection of original plans, and that the partners agreed to the changes.

Mr. Ciarelli says Jul-Bet owes his clients about $3 million. Jul-Bet argues in court papers that it has made all the required financial contributions to the LLC for the past two years.

Ownership of the 43 acres was solely under Mr. Klein’s Jul-Bet Enterprises’ name until 2007, when it was transferred to Jamesport Development.

Neither Mr. Klein nor Charles Cuddy, the attorney on Jamesport Development’s application, returned calls for comment.

“I would have loved to have known that it was in foreclosure, but everything we voted on, they have the right to get,” Councilman John Dunleavy said. “I just don’t want it sold to someone who will do sand mining.”

The environmental impact study for the project says that 88,000 cubic yards of sand will need to be excavated for the project.

But Mr. Dunleavy added, “I talked to Mr. Klein and he said he has the money to do this project and that he’s not going to sand mine. I take him for his word.”

Like all land on Long Island, sand from the site could be removed and sold for a hefty profit.

Mr. Wooten and Councilman George Gabrielsen said the ownership issues and the foreclose would not have affected their votes because they feel the professional offices and bistros are better uses for the land than all retail — no matter who builds.

“I was trying to create something that would be a little more sustainable and have less impact and, frankly, be  nicer looking,” said Mr. Wooten.

“I think what we got with that mixed use is absolutely a win-win for Jamesport, because if it doesn’t happen, the alternative is all retail,” Mr. Gabrielsen said. “Jamesport is on life support and this is the one window of opportunity that’s opened.”

Larry Simms, a part-time Jamesport resident and opponent of the project, has collected about 250 signatures on a petition opposing the special permits. He feels the foreclosure and the dissolution lawsuit should have an impact on board members’ votes.

“Without question it should affect the vote,” Mr. Simms said. He also said some Town Board members publicly stated that increasing the tax base was one of the reasons they voted for the special permit.

“If their reason for voting to approve the special permit is to build the tax base, don’t they have a responsibility as fiduciaries to vet the applicant to determine whether or not the applicant controls the parcel on which they are awarding these rights?” Mr. Simms asked. He also said the town assessor has already stated that the tax impact of the project would be about the same with or without the special permits.

“I think the Town Board members’ own comments make clear that they don’t know the facts,” Mr. Simms continued. “We had two and a half hours’ worth of testimony, and 100 percent were in opposition, including the business owners that were there. I don’t know who these [Town Board members] are talking to. I simply did not encounter people that were in favor of these permits when I collected the petitions.”

The site plan application for the Village at Jamesport would come under the jurisdiction of the town Planning Board, not the Town Board. The Planning Board has yet to discuss a site plan application for the project.

The 33.89 acres not included in the Village at Jamesport is expected to be the subject of a future development application.

Supervisor Sean Walter could not be reached for comment.

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