Riverhead Resorts wants to delay paying town $1.9M

05/20/2010 12:00 AM |

The Riverhead Resorts development group is asking for 30 more days to pay the $1.9 million it would otherwise have owed Riverhead Town on Saturday. The group is blaming the U.S. Patriot Act for holding up its financing efforts.

The $1.9 million payment came due as part Riverhead Resorts’ contract with the town, under which the group is required to pay up each time it needs an extension to the scheduled closing on its purchase of 755 acres of town-owned land in Calverton for $108 million.

Under the terms of the contract, Riverhead Resorts was required to close the deal by Saturday, May 15, but the deal also allows the group to buy five three-month extensions at $1.9 million each.

Mitch Pally, a Riverhead Resorts attorney, said his client is asking the town to extend the deadline by 30 days more. He’s hoping that at the end of that time, which would be June 14, Riverhead Resorts will have its entire financing for the project in place.

“Obviously, we can’t close by May 15,” Mr. Pally said, “so we want to work with the town to extend that period so that it more closely resembles what will actually happen.”

The $1.9 million extension fees are counted toward the final sale price, unless Riverhead Resorts terminates the deal, in which case the town keeps the money.

Riverhead Resorts, led by a Scottish builder, hopes to build an entertainment mega-project that would feature eight themed resorts and possibly an indoor ski mountain in Calverton. As proposed, the final project would be bigger than Disneyland.

The company was credited with one extension on Dec. 15, when the Town Board allowed it to use $1.5 million already in escrow to qualify as an extension fee, with the remaining $400,000 to be paid at closing. At that time, the town also allowed Riverhead Resorts to delay the second extension deadline from March 15 to May 15.

Mr. Pally reiterated that Riverhead Resorts is committed to finalizing the deal before the end of this year. He blamed a provision in the U.S. Patriot Act for stalling the company’s financing, some of which is coming from the United Kingdom.

The financing would be at the ready without the holdup, he said.

The Town Board will probably vote on the extension request at its June 1 meeting, Riverhead Supervisor Sean Walter said. The Resorts team appears to be making progress in obtaining its financing, he added.

The company filed a subdivision application for the proposed deal on Thursday, showing two lots of 740 acres and 15 acres, the latter of which it intends to give back to the town.

Mr. Walter has been pushing for the Resorts deal to close before the end of the year so the proceeds could help offset the town’s budget deficit, projected to reach $7 million next year.

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