Real estate investors Michael Longo and Mark Fonte stood outside their boarded-up, four-story brick building at 5 Anderson St. in downtown New Rochelle. They and partners in Anderson Development Group L.L.C. own it, but developer Louis Cappelli controls the building, they said, after exercising a purchase option two years ago.
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The owners want to take it back and begin renting to residents and retailers again if Cappelli continues to ignore their requests for the payments they claim are owed them.
Cappelli Enterprises Inc. planned to raze the 38-unit apartment building with its six retail stores and adjoining properties to clear the way for LeCount Square, a mixed-use development along four city blocks near Cappelli”™s New Roc City retail and entertainment complex. But in the radically changed economic climate and with the developer unable to reach a sale agreement with the U.S. Postal Service on a post office site also needed for the project, the LeCount Square development has indefinitely stalled. Cappelli in the last 14 months has been delinquent on approximately $785,000 in contractual payments, the building owners and their lawyer claim.
Longo and Fonte were in New Rochelle on the same day ”“ Dec. 1 ”“ the City Council was presented a resolution granting Cappelli”™s local development arm, New Rochelle Revitalization L.L.C., the 13th extension since 2005 of the company”™s exclusive development agreement. At a public hearing that night, Longo asked the city to delay approving the extension until the owners at 5 Anderson St. were “made whole” by the developer.
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The council wants more information from Cappelli on maintenance of the optioned or purchased properties before its vote, said New Rochelle City Manager Charles B. Strome.
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Strome said the dispute over the building contract has no impact on the city”™s agreement with the developer. “The issue with Longo is a personal matter between Cappelli and Longo,” he said.
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“We”™re in limbo,” Fonte said. “We worked with him,” he said of Cappelli. “Financially, it”™s a lot of money.”
Their Pleasantville attorney, Joseph Stargiotti, said Cappelli”™s New Rochelle company owes the owners more than $785,000 for rent, taxes, mortgage payment, utility and maintenance costs. He said the developer has not made those payments since September 2008, except for a $20,000 payment last July.
When a purchase price and default payments included in the contract are figured in, the total due his client is more than $11.5 million, he said. Stargiotti said he will seek that amount in court.
Longo said the owners signed an option contract with Cappelli for the building in July 2005 after six months of tough negotiations. Cappelli exercised his option at the end of 2007. “Since then it”™s been a constant struggle to get payments from him. He signed the option and we were happy; we thought he was out of his financial trouble.”
Longo said he turned down Cappelli”™s $7 million purchase offer because the $650,000 the owner collected in monthly rentals made the property worth more. Instead the owners struck a partnership deal with the developer for 22,000 square feet of retail space in LeCount Square, for which Longo said they were guaranteed $550,000 a year in income on a triple net lease.
At the developer”™s request, Longo said he cleared out the building”™s retail and apartment tenants. Joseph Apicella, executive vice president at Cappelli Enterprises who has led the New Rochelle project, said the developer paid $500,000 to $600,000 to relocate residents and retail tenants.
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“This didn”™t have to be vacated until he got his plans approved,” Longo said outside a vacant storefront in the building. “But he was willing to pay for it and this is what he wanted.” With the premature vacancies, the city has lost sales taxes and nearby downtown merchants have lost the business of his apartment tenants, Longo said.
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“We wanted to see the project go through because we would have benefited from it,” he said. “Everything we did made sense according to the times. The interesting factor is that he (Cappelli) put no money up for it. As long as he was paying the expenses” ”“ Cappelli agreed to an expense payment of $45,000 a month, he said ”“ “it made sense. He needed us.”
Longo said he is losing nearly $2,000 a day on the empty building, whose interior shows damage from its use as a fire department and police academy training site since it was vacated and will need renovations before it can be occupied again. “I can”™t bleed at $ 2,000 a day while he”™s going off to the Bahamas,” he said, citing what he said was Cappelli”™s recent trip to his vacation home there.
Apicella said Longo and his partners have received more than $2 million in payments from the developer. “There isn”™t a commercial property owner in this county that wouldn”™t take $2 million and still own the building,” he said. “It”™s just plain old greed.”
“If you want to be a partner in the project, you have to deal with some of the risk factors that go with it, like an economy that has gone in the trash bin” and the post office”™s spurning the developer”™s purchase offer, Apicella said.
He said of the owners at 5 Anderson St.: “These people frankly are renegades. These are people who have been working with us and negotiating with us for a year and a half on how to restructure their deal in a changing climate.”
