Breathing room for Riverhead Resorts

09/09/2010 12:00 AM |

Riverhead Resorts’ contract to buy 755 acres in Calverton from Riverhead Town will not be terminated just yet, because it appears a majority of the Town Board supports granting the company more time to come up with money it owes the town.

Michael Sears, a managing partner of Global Capital Markets Advisors LLC, wrote town officials Tuesday saying that GCMA is “preparing to lend Riverhead Resorts the sum of $25 million for an initial round of project financing, from which we understand $3,975,000 will be immediately paid to the Town of Riverhead in connection with Riverhead’s land purchase agreement.”

The $3.9 million is the amount owed to the town by Riverhead Resorts for two three-month extensions the town granted the company on its contract, which was supposed to have been finalized by May 15.

Riverhead Resorts and the town have informally agreed on a lower, $108 million purchase price for the land, down from the original $155 million agreement made before the real estate market collapsed.

The company is seeking to build eight theme resorts, including one with an indoor ski mountain. It has argued that declining real estate values warrant the lower price.

The Town Board had given Riverhead Resorts until Wednesday to come up with the $3.9 million it owed or face having the contract terminated.

Mitch Pally, the attorney for Riverhead Resorts, said in an interview Wednesday that a transaction with the town “was not able to be finished yesterday because of technical details.”

But he added, “The material we supplied clearly indicates that the transaction will be completed.”

That material includes the letter from Mr. Sears, which town officials were free to make public, and other financial material not publicly available, according to Mr. Pally.

“The loan documents have now been substantially completed, and, subject to the conditions therein, including delivery of a standby letter of credit issued by a U.S. banking subsidy of the Royal Bank of Scotland, we expect to close on the loan to Riverhead Resorts within 20 days thereof,” Mr. Sears’ letter states.

Mr. Pally said Riverhead Resorts will probably need an extension of 20 to 30 days, since that would give the town two additional Town Board meetings for necessary votes.

Councilmen Jim Wooten, John Dunleavy and George Gabrielsen all said in interviews that they would support the additional extension, while Councilwoman Jodi Giglio was dead-set against it.

“I was in favor of terminating the contract on May 15,” Ms. Giglio said. “How many extensions can we give them? When is a contract a contract?”

Town officials pointed out that even if they terminated the contract with Riverhead Resorts, they can’t sell the land until it is subdivided, a process the town is still working on.

Supervisor Sean Walter, who reminded that there was no resolution to terminate the contract Wednesday, said the town would continue to work on the subdivision, and if Riverhead Resorts came up with the money in the next two weeks, “so be it.”

Mr. Wooton echoed those words.

“We have to subdivide the property anyway, so killing Riverhead Resorts at this point in the game serves no purpose,” said Mr. Wooten, who also reiterated that he did not support the Town Board’s decision to negotiate with Riverhead Resorts in 2008.

“We don’t have anybody waiting to go in there, and we have to keep them until we at least get it subdivided,” Mr. Dunleavy said, adding that he feels the previous Town Board, which he was on, should have initiated the subdivision process earlier.

“At this point, we have a warm body,” said Mr. Gabrielsen, who has been critical of Riverhead Resorts in the past. “I think at this point, I would go along with a 20-day extension, but I’d give them a final 20 days and then that’s it.”

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