Town may use escrow money to hire accounting firm to inspect CAT’s finances
Riverhead Town Board members are considering using a portion of the $500,000 in escrow money that Calverton Aviation & Technology offered to release to the town a week ago to hire an accounting firm to inspect CAT’s finances and determine if they are capable of paying $40 million as outlined in their current agreement.
The town’s proposed sale to CAT cannot move forward unless the town can get an 8-lot subdivision approved by the state and county.
The subdivision separates the three lots CAT seeks to buy from the five lots the town will retain.
The contract between the town and CAT stated that if the subdivision is not approved by May 20, either side can walk away from the deal. CAT has said it doesn’t want to walk away.
Members of the EPCAL Watch Coalition have urged the town to end the deal.
“We believe the town must make use of its legal opportunity to immediately terminate its contract with CAT because CAT has failed to define its proposed development as required under the Urban Renewal Law,” said Rex Farr, the chair of EPCAL Watch, in a letter to the town on Tuesday, June 2.
He said that “multiple press reports state that Triple Five (the majority owner of CAT) is delinquent under a $14 billion mortgage for its Mall of America property in Minnesota and has sought state and federal financial assistance.”
Christopher Kent, an attorney representing CAT, said in a May 26 letter to the town: “The COVID-19 pandemic has had a negative impact upon the retail assets held by completely separate Tripe Five entities. Triple Five is a diverse family-owned company that is not solely dependent upon its retail assets or any other asset which are held independently of the other.”
Mr. Kent also wrote:
“In reliance upon the town diligently pursuing its obligations under the agreement, CAT has authorized me to release the second deposit of $500,000 being held in escrow to the town,” provided the town “agrees in good faith, to diligently pursue approval of the subdivision.”
The $500,000 is money that will be part of the $40 million should the deal be finalized. Councilwomen Catherine Kent and Jodi Giglio both suggested using that money to hire an accounting firm to vet CAT.
The town last month asked CAT to update its financial information to show it has the ability to buy the land and develop it in accordance with a development plan that conforms to town zoning. The request came in response to economic concerns caused by COVID-19 and economic difficulties CAT has had with other projects.
On May 18, CAT submitted a “letter of interest” from a company called Midnight Capital, which said it would take $120 million to buy the land and develop 1 million square feet; and a letter from a US Holding Company called Arielli Capital LLC, which said it has experience and prior success in developing these types of synergistic technology hubs.”
Ms. Kent (who is divorced from Chris Kent) said she has never been satisfied with the financial information CAT has submitted to the town. She said she wants an accountant to do a full investigation of its finances.
Two years ago, CAT refused to publicly disclose its finances, but said it would show them to the town in private. At the time, town officials said the cost of hiring an accounting firm to vet CAT’s finances was too much.
Councilman Tim Hubbard said he was satisfied with the financial information CAT provided the town in 2018, but the economy is different now.
“I’m looking for better and more accurate financial information,” he said. He said that if they can’t prove they have the finances for the project at closing time, “it may not happen.”
“CAT will be fully vetted,” Supervisor Yvette Aguiar said.
