Developer Louis R. Cappelli”™s legal and financial troubles tied to his Valhalla company”™s stalled redevelopment projects in Westchester and the Catskills continue to mount.
In New Rochelle, owners of a vacant downtown apartment building on which Cappelli exercised a purchase option about two years ago recently took their claim against the developer and his local development arm, New Rochelle Revitalization L.L.C., to state Supreme Court. Saying the developer is in default, Anderson Development Group L.L.C., owner of 5 Anderson St., seeks more than $11 million from Cappelli under terms of a purchase agreement for the four-story building.
The building is needed by the developer to make way for the LeCount Square mixed-use redevelopment project on a three-acre downtown block bounded by Anderson Street, North Avenue, Huguenot Street and LeCount Place. A Cappelli Enterprises Inc. executive recently said the company paid $500,000 to $600,000 to relocate tenants in the building”™s 36 apartments and six retail stores while the developer assembled surrounding parcels for the project.
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The lawsuit claims Cappelli since October 2008 has failed to keep his personal guarantee to cover the owner”™s mortgage payments, real estate taxes, maintenance and upkeep and utilities and to pay $25,000 a month to offset the owner”™s loss of positive cash flow from apartment and retail rentals. He is said to owe about $97,000 in real estate taxes on the property and about $334,000 in delinquent mortgage payments. The group also seeks $5 million in liquidated damages provided for in the contract and Cappelli”™s payoff of an approximately $2.2 million mortgage on the building.
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The building owner also filed a lien against the downtown New Rochelle property acquired by Cappelli for the LeCount Square project.
Michael Longo, an investor in Anderson Development Group, said the owners plan to take back the building from the developer”™s control and initially reopen it for retail tenants. But the vacant building, damaged in its brief use by city police and firefighters for training exercises, needs an estimated $2.5 million to $3 million in renovations before apartment residents can return, he said.
Longo said he wanted assurance from city officials that they will not use eminent domain to take the building for the LeCount Square project.
Longo disagreed with New Rochelle City Manager Charles B. Strome when he recently told the Business Journal the owner”™s dispute with Cappelli over the building contract had no impact on the city”™s agreement with the LeCount Square developer. Strome called it “a personal matter between Cappelli and Longo.”
“The project is dead as far as I”™m concerned,” said Longo, “because he (Cappelli) no longer has control of the site.”
Over eight months of negotiations, Cappelli put together what Longo called a “very creative” deal with the owners of 5 Anderson St. that, instead of an up-front purchase payment, effectively made them a partner in the LeCount Square development with 22,000 square feet of retail space.
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“We”™re still hoping that it will work out,” Longo said of the project. “The only thing that screwed this thing up is the economy. I don”™t even blame him (Cappelli).” Yet Cappelli should fulfill his contractual obligation, he added.
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At Kiamesha Lake in Sullivan County, Cappelli”™s halted Entertainment City gaming and resort project on the former Concord Hotel property has some 19 contractors filing liens against Cappelli-owned companies that total $18.3 million, according to the Times Herald-Record of Middletown. The paper reported the largest creditor, Cives Corp., of Roswell, Ga., claims $8.9 million for steel and labor at the development site, where work stopped about a year ago when Cappelli failed to close on a construction loan.
Cappelli told the Times Herald-Record that contractors will be paid eventually.
In a Dec. 11 interview on “White Plains Week,” a citizen media webcast, Cappelli said he expects to close Dec. 23 on a construction loan that will revive his 10-year-old, $600 million Catskill project. He said his lenders, Union Labor Life and Insurance Co. and Canadian Imperial Bank of Commerce, will extend a total of $225 million to $230 million for the Catskills project at a time when other lending banks effectively “have shut down.”
Cappelli in the White Plains interview also said he has a prospective new partner for the Entertainment City harness race track and gaming center operation, Penn National Gaming Inc.
Concord Associates L.L.C., the resort development company headed by Cappelli, in 2008 reached an agreement with its financially ailing race track and casino partner, Empire Resorts Inc., that gave Empire a significant financial stake in future race track and video gambling operations at the redeveloped Concord while removing the company as operator there. The agreement allowed Empire to continue to operate the nearby Monticello Raceway rather than relocate it to the Concord site.
Cappelli in the interview said his company has lost $100 million on its several development projects in Westchester County. Still, “I”™ve had a great run,” he said.
