While lack of financing has slowed and scaled back developer Louis R. Cappelli”™s plans for a $1 billion Concord resort hotel and gambling center in the Catskills, a lawsuit by a former Concord project architect against Cappelli”™s Valhalla company is slowly making its way through a state court in Manhattan.
Claiming Cappelli Enterprises Inc. breached its contract for architectural design and engineering services last year, Brennan Beer Gorman Architects L.L.P. (BBG) is seeking payment of about $890,000 and interest and legal fees in state Supreme Court. The suit also names Concord Associates L.P, the project partnership headed by Cappelli, and Concord Associates”™ joint-venture partner, Concord Empire Raceway Corp.
The New York City architects in court papers claimed the Cappelli company agreed to pay approximately $1,157,500 for professional services and expenses over a four-month period in 2008, but actually paid only about $267,800. But Cappelli Enterprises claimed no contract ever was signed and BBG grossly overcharged for what Cappelli”™s attorneys described as “limited and largely useless work product” that required “a complete redesign” by other architectural firms also working on the project.
Both parties referred to a May 23, 2008, letter from an official at New Concord Development, a Valhalla affiliate acting on behalf of Cappelli Enterprises, in response to BBG”™s project proposal. The letter authorizes the Madison Avenue architectural firm to proceed with “full services” for schematic design of the Concord Casino, Hotel and Convention Center, the second of five phases in the redevelopment of the historic Concord Resort property at Kiamesha Lake. Cappelli Enterprises already had paid BBG $200,000 for a first-phase project master plan and concept design.
The letter ends: “Please note that your proposal and associated pricing is still under review and is subject to a formal agreement. We look forward to working with you and your firm on this exciting project.”
That working relationship apparently soured last summer as the architects”™ bills came in. Refusing BBG”™s demand for the additional payment, development officials noted the firm would have had to average 37.4 man hours daily on the project to reach its claimed hourly total, a workload more common to “a forced labor camp” than an architectural firm.
BBG contended the long work hours and performance of services associated with later phases of the project were due to the developer”™s desire to fast-track the project and begin site work and building foundations before the overall project design was complete. Cappelli Enterprises was billed for percentages of the later-phase work, according to a pricing scheme detailed by BBG in its project proposal. BBG last fall filed a mechanic”™s lien on the Concord property in Sullivan County.
State Supreme Court Justice Richard B. Loew III heard oral arguments in the case in February. A pre-trial conference is scheduled in June.
“It was an agreement to agree,” Richard Bemporad, Cappelli”™s lead attorney in the case at DelBello Donnellan Weingarten Wise & Wiederkehr L.L.P. in White Plains, said last week. “There was no contract. The work they did was useless.”
Samuel M. Vulcano, BBG”™s attorney at Sugarman Law Firm L.L.P. in Syracuse, could not be reached for comment.
Among its international portfolio of projects, BBG has done architectural design and planning work for Turning Stone Casino and Resort, the Oneida Indian Nation”™s gaming and entertainment center in central New York; St. Regis Hotel and Residences in Bangkok, Thailand; Mandarin Oriental Hotel in Washington, D.C., and Sofitel New York, a midtown Manhattan hotel.
A spokesperson for Cappelli Enterprises said the current Concord project architect is Marnell Corrao Associates. The Las Vegas firm”™s portfolio includes the Mirage Hotel and Casino, Caesars Palace and the Bellagio, among several Las Vegas gaming centers, and the Sandio Hotel Conference Center and Golf Course in Albuquerque.
Since the lawsuit was filed in November and as the recession has deepened, Cappelli and partners have changed their site plan to break up the approximately 1.6-million-square-foot development into construction phases. The first phase, for which the developer hopes to obtain construction financing this spring, would include a 500-room resort hotel, casino, spa and harness race track. Ballrooms, a 1,000-seat theater, 7,500-seat multi-purpose entertainment center and two parking garages would be built in later phases. The amended plan was approved in February by the town of Thompson Planning Board.
In late March, Cappelli”™s joint venture partner in the Catskills, the financially struggling Empire Resorts Inc., announced a new 40-year agreement with Concord Associates that would remove the Monticello Raceway operator from direct operations at the Concord. In exchange, Empire will receive at least $4 million a year from the Concord in fees and gaming revenues.
Rather than move the Empire harness track and video lottery operations from Monticello to the Concord, as state officials agreed to last year, racing and video gaming will be at both locations. The Concord”™s racing and video gambling license still must be approved by the state Racing and Wagering Board and New York State Lottery.
The new agreement with Empire will not close until Cappelli has construction financing in place for the Concord.
With the recent agreement, Cappelli was appointed to the Empire Resorts board of directors. The board”™s chairman and three other Empire directors resigned to make way for a company restructuring and cost-cutting effort.
“My primary focus is job creation,” Cappelli said in a prepared statement announcing the agreement. “New York cannot afford to lose any more jobs. The continuation of harness racing and gaming operations at Monticello Raceway will keep hundreds of jobs in place and protect the tax base of the village of Monticello.”
Cappelli”™s attorney in White Plains seemed not worried about the pending lawsuit brought by the former Concord architects.
“In the greater scheme of all things going on in the real estate world, if I had to put this on a scale of 10, and 10 is cataclysmic, this would not even register a tremor,” Bemporad said. “It may be a 1 or 2 at most.”
