Column: Announced EPCAL deal raises questions

Since plans were first announced nearly two years ago that Luminati Aerospace would come to the Enterprise Park at Calverton, news about the company has often led to hyperbole.

Perhaps the biggest example of this came in a supervisor candidate debate hosted by the News-Review in October 2015. Incumbent Supervisor Sean Walter, nearing the end of a bruising three-way race for re-election, beamed every time he mentioned Luminati that night.

“The single biggest thing to happen to Riverhead right now, Suffolk County and I’m gonna say New York State, is Luminati Aerospace,” the supervisor claimed. “We, my staff, brought aerospace manufacturing back to the town of Riverhead … to a parent company that eventually we will be able to disclose who it is, and it’s going to make your head shake.”

Nearly 18 months later, my head’s certainly shaking, but not because of anything I’ve learned about Luminati or EPCAL. Rather, it’s because those details that were sure to be the biggest disclosed in the Empire State — a 54,000-mile area with nearly 20 million residents; home to the Statue of Liberty, Niagara Falls and the New York Yankees — have never been released, including the name of the “parent company.”

Instead, much of what’s been said about EPCAL and Luminati since has been more of the same — grand announcements with scarce details and, yes, more hyperbole. This week, Mr. Walter called the aerospace company’s presence at EPCAL “divine providence.”

• Related story: Luminati seeks to buy town’s land at EPCAL for $40 million

Forgive me if I’m not as excited as the supervisor about last week’s announcement that the remaining developable acreage at EPCAL will be sold to Luminati for $40 million to expand its operations at the site, which was gifted to Riverhead in 1998 by the U.S. Navy and has long been considered a potential economic boon for the town.

Let’s start with how poorly this announcement was handled. A press release disclosing the deal last Thursday failed to include basic information, like the total acreage involved.

It was a very odd approach — by both the town and Luminati — to make a major announcement about a property that’s been covered at length for years by several news outlets without hosting a press conference. That would have given all media the chance to ask questions about the transaction and the company involved. It was a curious decision that stripped away an opportunity for maximum transparency about the process and the players.

Knowing that the remaining acreage at EPCAL might soon be in Luminati’s hands, I did a lot of reading about the company and its CEO this week, including re-reading some articles I’d seen in the past. I took particular interest in a 2012 Edible Brooklyn story about one of Mr. Preston’s past endeavors, which began: “Daniel Preston’s life sounds like a work of fiction.”

“He entered college by age 12 but didn’t bother to graduate, instead starting a specialty glass company at 18,” the next paragraph begins. “In his mid-20s, he sold the company ‘for mid-seven digits,’ and retired. He took up skydiving until he literally broke his neck, thanks to a parachute malfunction. Preston responded by engineering a better parachute — founding Atair Aerospace, a $22 million company that designed parachutes for the military. Eventually he sold that company, too.”

Much of Atair’s success came in the aftermath of the Sept. 11, 2001, terror attacks, Mr. Preston told the Chicago Tribune in 2008, when the company pivoted from a recreational parachute company to one with a focus on defense.

“It seemed like the right thing to do,” he told the Tribune. “I think to some degree it’s a game I didn’t create but you’ve got to play.”

Between 2002 and 2009, the year Mr. Preston sold the company, Atair secured about $10 million in government contracts, online records show.

Luminati was launched after a non-compete provision in the Atair deal expired, according to various media reports. When it was first announced, the new company was said to be bringing 40 new jobs to EPCAL. The expansion announced last week, Mr. Preston said, will add up to 2,000 more jobs — nearly as many as Brookhaven National Laboratory, which has its own ZIP code. Mr. Preston called that a conservative estimate. Is it really in an era of industrial automation?

A page on the Luminati website listing its current staff was removed last Thursday, though it’s archived online. It shows 20 employees, several of whom appear to now be employed elsewhere — including its chief scientist, whose online résumé says he left Luminati in September, though he was still listed as an employee the evening the sale was first reported. A company spokesperson said this week that Luminati employs 15 people.

A March 20 Newsday article reported that Luminati signed an agreement to work with DuPont to “develop technology to make body armor fabrics that are a fraction of the weight of current products.” The article states that the research agreement “carries no financial terms.”

Mr. Preston told a News-Review reporter that another agreement with Hexcel, a major carbon fiber manufacturer, included a $10 million investment in Luminati in exchange for learning Preston’s method.

Hexcel’s 2016 annual report, which is available online, describes the deal with Luminati in some detail.

“We issued an 8 percent convertible secured promissory note to Luminati Aerospace LLC, in the amount of $10 million. Luminati is an aerospace technology company focusing on research, development, testing, and manufacturing of next generation solar-electric unmanned aerial vehicles, or UAVs. The note matures in 2023 and the principal and interest are convertible into Luminati stock. The note will convert upon Luminati achieving certain milestones or at Hexcel’s discretion.”

One of the only other glimpses offered into Luminati’s finances was the announcement last December of a $1 million economic development grant from the State of New York to “expand the development and manufacturing of unmanned aerial vehicles” at EPCAL.

The new Luminati deal is one of several to be announced at the site over the years and comes without any prior notice from the town that a $45 million deal announced last year with Suffolk County Industrial, LLC had collapsed. In his annual State of the Town address six weeks ago, Mr. Walter said that deal would close this year.

“This one closing will add an estimated $43 million to the general fund,” he said. “We must use this money wisely.”

He now says that deal stalled 12 weeks ago, but hasn’t disclosed what exactly went wrong.

One key difference between the two deals is that the announced Luminati sale is for $5 million less and also includes an additional 1,700 acres of undevelopable land. That’s 2,300 total acres at $40 million. Is that even market value? If not, is it legal for a municipality to sell public land below market rate? These are questions that need to be answered.

It appears the town is putting all of its eggs in one basket that we don’t know much about.

This is public land. It would be nice if the Town of Riverhead and Luminati would hold a public event, outside of a traditional Town Board meeting, where residents can ask questions about the company and the proposed sale. An opportunity for the public and the media to tour the facility also might help improve transparency.

We understand why the supervisor and other town officials are excited that something very real appears to be brewing at EPCAL. But the procedure has only just begun. Let’s be sure to include the public in that process.

Top file photo: A Luminati pilot flies one of the company’s planes at a demonstration last June. (Credit: Katharine Schroeder)

Grant Parpan is the executive editor of Times Review Media Group. He can be reached at [email protected]