“We intend to be there with a check,” said Mitch Pally, the attorney for Riverhead Resorts, when asked if the company plans to pay $3.9 million in contract extension fees it owes Riverhead Town by Nov. 3, the deadline given by the town.
But there’s more to it than just handing over a check.
According to Mr. Pally, Riverhead Resorts has negotiated an arrangement with Frank Isler, the town’s outside counsel, in which the Town Board also would vote on a resolution at its Nov. 3 meeting to set a Nov. 23 public hearing needed to reduce the price of the Resorts deal from $155 million to $108 million. In exchange, the town would receive the non-refundable payment of $3.9 million, which represents two contract extension payments.
Mr. Pally said Resorts has backed off an earlier request to have the $3.9 million put in an escrow account until the Town Board agrees to lower the sales price to $108 million.
Resorts has thus far missed three $1.9 million extension payments, but the resolution up for vote on Wednesday sets a Jan. 31, 2011 deadline by which to pay that and another extension payment due on Dec. 15.
Council members George Gabrielsen and Jodi Giglio have already said they won’t support another extension for Riverhead Resorts. They both walked out of a public meeting where Resorts principal John Niven spoke recently, and Ms. Giglio on Thursday walked out of an executive session in which the Town Board discussed the proposed Nov. 3 resolution. Councilmen Jim Wooten and John Dunleavy supported the last two extensions for Resorts.
Supervisor Sean Walter, who was the swing vote in the last extension vote on Oct. 5, said Thursday, “If they have the $3.9 million, there’ll be three votes in favor of this.”
Town officials and Riverhead Resorts have said in the past that this lower $108 million sales price was informally agreed to, but it has never been made official.
The proposed Nov. 23 hearing, known as a qualified and eligible sponsor hearing, is meant to allow an applicant to demonstrate that it has the experience and financial wherewithal to carry out whatever plan it is proposing on the land it hopes to buy from the town.
In this case, Riverhead Resorts is seeking to buy 755 acres at the Calverton Enterprise Park in order to build eight theme resorts, one of which would have an indoor ski mountain, although they have acknowledged in the past that the ski mountain might not happen.
Resorts was previously designated as qualified and eligible by the Town Board in 2008, but the new sales price and the introduction of new investors in the plan require that another hearing be held.
Mr. Pally would not say who the new investors are, but he said Riverhead Resorts is in the process of eliminating Bayrock Group as one of its owners.
In the first qualified and eligible sponsor hearing, officials from Bayrock did most of the talking, highlighting some of the high profile projects they’ve done with companies like the Trump Organization. Mr. Pally says Bayrock hasn’t been involved in the management of Riverhead Resorts for about two years and only owns about 10 percent of the company, with Scottish developer John Niven controlling the majority of the company.
Other provisions in the agreement up for vote on Wednesday include changing the date by which the sale must be finalized to either 30 days after the subdivision of the land is finalized or Aug. 31, 2011, whichever is earlier. If the deal is not closed by Aug. 31, 2011, the contract is terminated, although the agreement does allow Resorts to pay another $1.9 million to extend the contract to Jan. 1, 2012.
In addition, until the subdivision is approved, Resorts agrees to make monthly payments of $13 million each month in 2011, which will be held in escrow and would count against the sale price. The two exceptions are Jan. 31, 2011, where the payment would be $6 million, and Aug. 31, 2011, where it would be $8.75 million.
Also, an additional $25,000 payment due on Nov. 3 is the first payment in the next $100,000 which goes toward the town’s outside counsel bills, for which Riverhead Resorts will pay.
Wednesday’s board meeting starts at 2 p.m. in Town Hall.
This post was originally published Oct. 27, 2010