Orangetown 02-21-2023

Town of Orangetown Takes First Steps To Take Title To HNA Palisades Training Center

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Town Is Hoping To Force A Sale Between HNA & Reveil; Would Prefer To Avoid Eminent Domain But Is Prepared To Move Forward

By Tina Traster

Town of Orangetown officials on Tuesday said they were reluctantly moving forward with the process of eminent domain to take title to the former HNA Palisades Premier Training Center on Route 9W in Palisades but were clearly hoping the threat of doing so would motivate HNA to wrap up a long-pending deal to sell the 106-acre property.

“This would be a first for the town board; and we hope it will be a last,” said Town Supervisor Teresa Kenny, who conveyed that the town was out of options if it wanted to accelerate the process of redeveloping the dilapidated and blighted former hotel and conference facility at 334 Route 9W.

Over the past two years, the former IBM property has been in flux while Reveil, a team of California developers has attempted to purchase the site. Reveil was tapped by the town nearly two years ago to re-imagine the large parcel, which is now zoned for hotels/conference centers, office, professional uses, and research labs. The town’s involvement in steering a new future began after a pending sale for the property for $40 million fell through.

In 16 months, Reveil, which envisions an updated hotel and conference center, glamping, event spaces, a working farm, test kitchens, co-working, and 20 to 30 townhouses, and HNA have yet to reach terms for a sale. Sources have told RCBJ that Reveil has offered HNA $33 million for the site.

“We’re still hoping for a purchase,” said Kenny, making it clear the town’s appetite for eminent domain is tepid at best. “We’re hoping we don’t need to get to the final step.”

That said, Kenny also said the issue was “coming to a head” because the property, which the town has been deemed “unsafe and dangerous” has become a public safety hazard. The town’s outside counsel David Cooper of Zarin & Steinmetz said the deteriorating property has been slapped with a series of violations for lack of maintenance. There has been a petroleum spill, sinkholes, impassable roads making it difficult for emergency vehicles to access the property, leaking fire hydrants, burst pipes and a dumping ground for illegal fill. He also said the property has become a target for vandals and trespassers, necessitating several police calls.

“The conditions there are becoming worse and worse,” said Cooper. “The hazards are increasing. The site is becoming a public safety issue.”

Eminent domain or condemnation is the right of the government to take private property for a public purpose. Upon the taking of private property under eminent domain the government must pay “just compensation.”

While eminent domain has been used to foster commercial redevelopment for the public good, such a tool is not without its challenges. The process of eminent domain is costly and time consuming.  According to the New York State Attorney General’s Office, the acquisition of property occurs only after an extensive engineering process that includes a series of planning and design phases to determination that the property is “necessary for public improvement.” Prior to acquisition, the condemnor, in this case the town, must conduct a public hearing to review the public use to be served by proposed acquisition and the environmental impact. At the end of the process, the government must pay fair market value for the condemned property, which could be millions of taxpayer dollars. HNA would have a right to contest the fair market value in court.

Tuesday’s public hearing kicked off the process. Less than a handful of residents spoke, and most had questions about the process rather than opinions on eminent domain.

The town has 90 days to adopt its findings. Orangetown must make a decision within 90 days after the public hearing. On Tuesday, Cooper said he had notified HNA’s counsel about the public hearing. If and when Orangetown announces plans to move forward with eminent domain, HNA can file a lawsuit in the appellate division of the Rockland County Supreme Court within 30 days if it opposes the action.

If the town condemns the property, REVEIL would not be bound by the contract it negotiated with HNA, but the developer would have the option to participate in the project going forward.

“Under the MOU (memorandum of understanding), Reveil has committed to covering the town’s costs incurred in the exercise of its eminent domain authority, including the preparation of an appraisal should the process continue to move forward,” Cooper said.

HNA has been at the center of ongoing litigation and financial woes, which is likely to complicate an eminent domain endeavor.

A federal judge in New York has said that HNA Group, at least temporarily, cannot transfer the proceeds of any assets (or an interest in an asset) that HNA owns including any from the sale of the Palisades Conference Center. SL Green charges that HNA’s “indirect” ownership could still result in HNA Group receiving the proceeds of the sale, even if it is not the record owner of the real property.

The case arose from effort of an affiliate of SL Green, the Manhattan-based REIT, to confirm an arbitration award it secured for $185 million against HNA Group (International) Company Ltd.

The town originally inserted itself into the process of bringing a buyer to the table after a $40 million deal between HNA and a Brooklyn buyer fell through three years ago. The previous buyer left an $8 million down payment behind after unsuccessful litigation. However, ZVG @ Palisades LLC, which took an assignment from the failed buyer, filed a lawsuit in Rockland County Supreme Court to force HNA to close on the $40 million contract that HNA says ZVG defaulted on in 2020. ZVG’s lawsuit was dismissed last month by Justice Thomas Zugibe based on the lack of an enforceable contract.

The next public hearing is March 21.