A Flurry of Activity Over EPCAL Sale
Pictured Above: Nader Ghermezian and Stuart Bienenstock of CAT at a 2018 public hearing on the proposed sale.
Calverton Aviation and Technology, which plans to purchase more than 1,600 acres of the Enterprise Park at Calverton, has brought on two partners to invest in its plan to build a tech hub at the former Grumman jet plane manufacturing site.
CAT has been in contract to purchase the land at EPCAL from Riverhead Town’s Community Development Agency for $40 million since 2018. The land was given to Riverhead’s CDA for economic development by the U.S. Navy in 1996 as compensation for the loss of thousands of Grumman jobs.
“Today, CAT provided Midnight Capital’s “Letter of Interest for an Industrial Construction Loan” citing the purpose of loan for construction of 1,000,000 square feet of industrial development, together with a letter from Arieli Capital expressing interest in joining Triple Five and lending its financial strength and investment expertise to CAT’s planning and construction and development at EPCAL,” said Riverhead Town in a May 19 press release. “The town appreciates CAT’s timely and voluntary submission of these documents and the town board will immediately begin a thorough review of these records.”
The EPCAL Watch Coalition, a community group opposed to the sale, urged the town on Wednesday, May 20, to cancel the sale, saying the due diligence period in the contract between the town and CAT ended that date, after which the contract allows either party to back out.
“The immediate question is whether the supervisor and board acknowledge that as of this Thursday they have an indisputable legal opportunity to end the deal and will fulfill their responsibility by exercising it,” said the group’s coordinator, Rex Farr, in a May 20 press release May. “The last minute introduction of Arieli Capital and Midnight Capital, unvetted partners with an unclear relationship to the purchasers, requires serious attention that goes beyond the spin.”
CAT is a limited liability company controlled by the Ghermezian family’s Triple Five World Wide, the developers of the Mall of America in Minnesota and the American Dream mall in New Jersey, which was nearly completed with construction and had partially opened when the pandemic hit.
Midnight Capital, of New York City, provided a letter offering up to $120 million for the CAT project, which developers say will be an industrial space designed to lure aerospace, transportation, alternative energy and composite materials manufacturers to set up shop.
According to its website, “Midnight Capital is a private bridge lender that provides short term bridge loans sized from $2 million to $50 million on transitional real estate opportunities.”
The other investor, Arieli Capital, is an Israeli firm with offices in New York that has developed an “innovation ecosystem” to attract tech startups to an “old city airport terminal” in Eilat, Israel, has been involved in leading the food tech accelerator for the Israeli ministry of economy, and worked with the regional counsel of Ramat Negev “to build and manage Israel’s most robust agro research and food tech platform,” according to a May 18 letter from Arieli Capital CEO Evan J. Renov to Riverhead Town.
“Our review of the existing infrastructure and development at EPCAL, the town’s adopted Reuse & Revitalization Plan and zoning for EPCAL and CAT’s Economic Benefits Analysis and their plans to improve the runways, reactivate the GPS approach system and extend and enhance the existing rail system at EPCAL creates a tremendous opportunity for the development of a diverse next generation technology hub that we believe will generate a waterfall of investment and positive impacts for the Riverhead community, the economy of Long Island and the entire region,” he added. “Arieli Capital has experience and prior success in developing these types of synergistic technology hubs.”
Riverhead is in the process of a subdivision of the EPCAL site, which is currently under review by the New York State Department of Environmental Conservation, which must be completed before the land is sold to CAT.
The town announced April 20 that it had submitted additional information for its permit regarding birds, mapping “and other ancillary environmental inclusions” and the DEC has “received the application and will commence its thorough review.”
“Given the state of affairs concerning Covid-19, we thank the DEC for responding to our supplemental submission and we look forward to a positive, productive and ongoing dialogue to ensure the preservation of 1,050 acres of land at EPCAL,” according to the town.
The pandemic hasn’t been kind to Triple Five’s shopping mall holdings. CNBC reported May 21 that the Mall of America had missed the April and May payments on its $1.4 billion mortgage, according to commercial mortgage-backed securities research firm Trepp.
The Mall of America closed due to the pandemic on March 17 and is slated to reopen June 1.
In an early April interview, Mall of America co-CEO Don Ghermezian told CNBC that many tenants in the mall were not paying rent due to the closure.
“If tenants don’t want to pay rent, my response is: ‘I have got to pay a mortgage. I borrowed money. I have got to pay back my lenders,’” he said, adding that, without more assistance from the federal government “many malls will be headed into default because they won’t be able to make mortgage payments going forward.”
A Nickelodeon Universe theme park and an ice skating rink had opened at the American Dream Mall in New Jersey in October of 2019, and retail shops there had been expected to open in March, just as the northeast began shuttering its economy.
“The Ghermezians’ consistent failure to provide real financial data and a serious development plan during the 2018 Qualified and Eligible hearings is compounded by the impact of the COVID-19 pandemic on their entertainment mall and gambling businesses as well as on prospects for finding aerospace and high tech tenants,” said Mr. Farr, of the EPCAL Watch group, in its May 20 statement. “Triple Five, a company owned privately by the Ghermezian family, has pledged 49 percent interest in the Mall of America and the Canadian West Edmonton mall as collateral for a $1.67 billion construction loan for their endangered American Dream project in New Jersey. Their flagship Mall of America is pressuring the State of Minnesota for access to public funds to offset a huge financial problem due to unpaid rent, against the wishes of previously compliant local officials.”
There is one thing still going on at the American Dream mall. The New Jersey State Policemen’s Benevolent Association is operating a drive-through Covid-19 testing site for first responders there.