Riverhead close to selecting town square developer, but some criticize hotel part of plan

Riverhead is close to approving a developer for its proposed town square after the firm laid out a $32 million vision for the project on Tuesday, though some residents criticized the inclusion of a five-story hotel in the plans.

Residents packed a hearing at Town Hall Tuesday night to hear from Joe Petrocelli, who was named master developer of the project in 2022. The town board held the hearing to determine if Petrocelli’s firm is “qualified and eligible” to develop the Town Square project.

Petrocelli is no stranger to downtown Riverhead. He built the Long Island Aquarium, which opened in 2000, Treasure Cove Resort Marina, and two hotels — Hyatt Place East End and the Preston House. Riverhead also hired him in 2023 to renovate its Town Hall building.

Petrocelli said the concept of redeveloping the waterfront area started with the aquarium to try to draw more people to downtown Riverhead. “Now they’re coming here because there’s more things to do,” he said in an interview. “The square to me is going to be the missing piece that’s going to pull it together.”

The proposal calls for a new mixed-use building, playground, green space and amphitheater in downtown Riverhead to improve public access to the Peconic riverfront.

Under the terms of a proposed agreement, Petrocelli would pay Riverhead $2.6 million for town-owned property at 127 East Main St., replacing an existing bar with a five-story building with 76 hotel rooms, 12 penthouse condominiums, waterfront restaurant, retail space and underground parking.

The property is currently home to Craft’D, and the town is using eminent domain to acquire the remaining years on the lease.

Tensions over hotel 

Some residents took issue with plans for a five-story building on the south side of Main Street, which they said would block views of the river.

“I wish he would come in with a two-story project that maintained Craft’D,” said John McAuliff, of Riverhead.

Others supported the project, with Riverhead on the cusp of revitalization.

“I think we should give these gentlemen a chance to bring Riverhead back,” said resident Ron Myers. “It’s time that we stop being the laughingstock of Long Island.”

Documents submitted by Petrocelli show the estimated construction cost for the mixed-use building is $32.7 million and would be financed through a construction loan, developer equity and a $1 million state grant.

Petrocelli said it’s a “risky” investment. “But I think we know more about this town than most developers,” he said.

The hotel would anchor the east side of the planned town square. On the west side of the square, the Long Island Science Center is renovating a vacant former Swezey’s store for its new museum after it was spared from an eminent domain threat.

The town square also includes tiered levels with public gathering space, a playground and amphitheater. According to the proposed agreement, Petrocelli would build those portions and be paid 7% of the total construction costs to manage the project.

Two historic buildings on the adjacent East End Arts Council campus would also be repositioned and raised out of the flood plain to make way for the amphitheater.

Once constructed, Petrocelli’s firm would be paid $150,000 per year for 10 years to operate and manage the town square.

Tax breaks questioned

Some residents criticized the process and a section of the proposed agreement that notes the developer expects to seek tax abatements from the town's Industrial Development Agency.

“This Town Square project should be open to other bidders and invite competing visions that might better serve our community,” said resident Gina Ristau.

The long-awaited qualification and eligibility hearing is a required step in the project, which falls in a New York State urban renewal area. State law allows municipalities to convey properties in such zones to be sold without a bidding process as long as the buyer meets certain requirements under the town’s “qualified and eligible sponsor” rules.

Riverhead’s guidelines include analyzing a developer’s experience and financial capability.

Eric Russo, an attorney for Petrocelli, touted the company's experience developing similar projects across Long Island and submitted letters from accountants and financial institutions saying the firm has the resources to complete the project.

Supervisor Tim Hubbard said at the meeting he intends to “get this project going as fast as we possibly can.” The town board is accepting comments on the agreement until Aug. 1 and could vote on the measure as soon as Aug. 5.