Open Letter to the Town of New Castle and on Chappaqua Crossing

Tuesday, May 14, 2013
by Steve Coyle

I am writing this letter as a follow-up to a previous letter that I sent to the New Castle Town Board.

In my previous letter to the Town Board, I argued against retail development at Chappaqua Crossing and also urged the Board to consider whether “Summit Greenfield has the means to complete this proposed project,” (that is, retail development at Chappaqua Crossing).

On your website there have been a number of comments that were made to my letter.  One of these commentators, “Real Estate Finance 101,” discussed the financial viability of the project.  It would appear that this author is well-versed in commercial real estate finance, for they have done significant homework on the history of the Chappaqua Crossing/Reader’s Digest site.  I find their analysis to be on point and interesting.  Further, I believe that there is additional information that indicates that Summit Greenfield likely lacks the capital to fund future development at the site.

Summit Greenfield purchased the Reader’s Digest Headquarters in 2005 for $59 million, which consisted of $28 million of equity and $31 million of debt that was originated by Bank of America.  Summit Greenfield is a joint venture between Summit Development and Greenfield Partners.  Greenfield is the (largest) capital partner and Summit is the local development partner who runs the property day to day and oversees any development.  Greenfield’s primary source of equity for the transaction was, I believe, Greenfield Acquisition Partners Fund IV.  This was a $675MM fund that is now fully deployed.  Hence, this fund has no capital available for future investment, and its investors are unlikely to fund future capital calls for existing investments.

In conjunction with Summit Greenfield acquiring the Reader’s Digest property, Summit Greenfield agreed that Reader’s Digest would downsize to 198,284 square feet (less than 1/3rd of the campus) upon the sale of the property.  This occurred upon the sale of the property.  Shortly thereafter, Summit Greenfield stated that they were pursuing a large potential lease with Pepsico and began to appeal the site’s zoning.  Summit Greenfield sought, (and eventually received), a zoning change that allowed up to four office tenants; however, Pepsico never executed a lease at the property, nor did they occupy any space at the property.  Since that time, Summit Greenfield has sought many other zoning changes (some of which have been successful, some of which have not, and some of which are pending).  Today the site allows for an unlimited number of office tenants, 111 units of multi-unit residential and there is a zoned, but unentitled, section for single family residential.

Subsequent to the purchase of Reader’s Digest/Chappaqua Crossing, Bank of America syndicated the loan for the property.  This loan was contributed to a commercial mortgage backed security, (CMBS), offering.  The $31 million original loan was split up into three pieces: a $16 million senior note (the “A” class), a $2.9 million secondary note (the “B” class), and a $12.1 million junior note (the “C” class).

With the property underperforming, Reader’s Digest subsequently filing for bankruptcy, and Summit Greenfield unable to significantly lease the asset, the loan was “watchlisted” by the servicer by September of 2009.  As the property continued to bleed cash from reserves that were established to fund the interest payments on the loan, the loan’s special servicer continued to mark down the value of the loan.  This not only indicated that the initial equity was “wiped-out,” but also that the loan itself was underwater.  As the value of the loan continued to fall, Summit Greenfield began purchasing portions of the loan, (specifically the “B” note at (likely steep) discounts to the original value of the loan.)  This allowed Summit Greenfield to remain in the deal and to be able to negotiate with the loan’s special servicer.

Eventually, the special servicer for the loan, (C-III), decided to sell the loan at a discount to Summit Greenfield.  This sale occurred on January 20, 2012.  Summit Greenfield reportedly paid $17.2 million for the loan and control of the property.  This indicates that the value of the property had fallen from $59 million upon the sale to Summit Greenfield to $17.2 million +/- in January 2012.  Thus, the property lost approximately $41.8 million of value from its acquisition through that period of time, (that is, $28 million of equity plus $13.8 million of debt losses).  The debt losses included a complete loss of the C-note and a substantial loss to the B-note.

Given (1) that the major equity source of the deal was a fund that is now closed to making new investments, (2) that the property has lost approximately $41.8 million in value since acquisition, and (3) that there have been no identifiable letters of intent by retail tenants, I sincerely doubt that Summit Greenfield has the financial means to execute retail development on the site.

As stated in my previous letter to the New Castle Town Board, I believe that there are numerous reasons why retail zoning should not be approved at Chappaqua Crossing.  Since the development team does not likely have the financial resources needed to execute the propose plan, this further complicates an already dubious plan. 

I believe that if Summit Greenfield were to receive the necessary zoning changes to allow for a 120,000 square foot shopping center on a portion of the property, one of three outcomes is likely: (1) that Summit Greenfield would sell the zoned, but undeveloped site to a new owner, (2) Summit Greenfield would seek an additional capital partner to join with them so that they could finance the development costs, or (3) Summit Greenfield would begin development without the financial resources needed to complete the development. 

I believe that each of these scenarios is potentially risky from the Town’s standpoint.  First, national retail tenants are generally reticent to sign new leases or letters of intent on sites that lack both zoning and an owner entity with financial resources in-place necessary to complete development.  Second, if the site were to be sold, the next owner could seek further zoning and site-layout changes.  Third, as I previously mentioned in my earlier letter, I believe that the site is ill-equipped to attract and maintain national retailers as it is currently designed.  All of these issues, I believe, put the Town of New Castle at risk of facing further zoning changes and/or developing a shopping center that may prove to be less successful than is currently envisioned.

I hope that the Town Board considers these issues, in addition to the others that have been raised with respect to Chappaqua Crossing.


Steve Coyle

We encourage civil, civic discourse. All comments are reviewed before publication to assure that this standard is met.

Mr Coyle, excellent and thoughtful analysis on your part as per your previous letter. What is your opinion as to what the property will be worth if in fact the board approves the new zoning? Also, what is your opinion as to whether Summit Greenfield’s goal in these proposals is simply to just to have the property be worth more so they can sell it at a higher figure? Which of the scenarios that you outlined do you think is the most likely based on current market conditions and Summit Greenfield’s finances ?

By M.Harris on 05/14/2013 at 8:17 am

It is not our business to dive into the financial concerns of the applicant for the purpose of either granting or denying town pursued approvals by the applicant! If members of the community feel that they can now use the method of high finance investigation to stop a private sector entity, meaning an entity having no government or socialistic government backed investments made into a project of this kind; then I hope that SG Partners files not only a lawsuit against the town for thrashing around on this matter, but also goes after Mr. Coyle, for being just a little too smart at exposing a private sector American risk taker. It’s people like you that are destroying the American spirit to go out and try, rather then find a solution that works for this project, owner, town hall, and community!

By Watchlisted on 05/15/2013 at 9:24 am

It turns out that the source of funds for the DPO transaction (sale of the $31 million note to SG for $17.2 million) noted in my prior comments was NRFC WA Holdings LLC, and affiliate of North Star Realty Finance, which took assignment of the loan on 1/20/12.  It would appear that SG brought North Star to the table as a capital partner to do the DPO.  SG and NRFC must have prenegotiated a restructuring of the loan, as on the same day NRFC WA Holdings took assignment, North Star put the loan into a CDO (Collateralized Debt Obligation), so the loan had to be performing in order to put into the CDO (N-Star Real CDO VII Grantor Trust).  The full $31 million loan was kept alive, though the purchase price was $17.2 million (plus most likely a number of escrows and reserves to keep the loan performing for some period of time).  It would be very interesting to see the terms of the loan modification, which would outline the time frames and conditions that SG is operating under.  So there is another party to this whole deal, really would make sense for the Town Board to peel back the onion and dig into the true financial picture of the deal.

By Real Estate Finance 101 on 05/15/2013 at 9:20 pm


You cannot be serious.  Ignoring our Master Plan and writing an historic zoning change at CC to satisfy any developer’s wishes as Susan Carpenter has done is bad enough.  For her to have done so without due diligence as to the financial viability of the developer Summit Greenfield, let alone without any studies as to its impact to the entire town is what should be investigated.  What do you have against transparency ?

By Bob on 05/16/2013 at 11:28 am

I am very serious. I think I know who “Bob” is by the way you write your blogs. If SG starts the project, and they run out of money, well that is their problem. The American way of doing things in this Country, would provide for another developer to find value in the improvements that they leave behind for most likely .08 to .22 cents on the dollar. It may be in their interest to go broke based on the history of the approval process, and all the claims being made out in the public, about matters that are not our business. Our business is just attending to the application in a fair way, using fair thinking and practices as recognized by everyone, and either accepting or rejecting the desires of the applicant. How dare that some in the community would suggest that we wait this applicant out until he collapses - how un-American, where do you people come from? Don’t like the approval, STOP THE PROCESS NOW, don’t bring this applicant down the path to financially die; our troops were subjected to this treatment in Vietnam - called the Hochiman trail. You people want to put this developer on the financial Hochiman trail - NOT RIGHT ! Tell him to go home now, if this is what the power brokers want. Get the AG’s Office on the phone, we need to start an investigation!

By Very serious on 05/16/2013 at 1:48 pm


There are rules for a reason in many aspects of life.  Zoning = rules.  Were I to use your logic, if I had substantially overpaid for a house on 50 acres, 48 of which are wetlands, and I am now teetering on the edge of foreclosure and financial ruin because my real estate investment is not working out, I should petition the Town Board to allow me to fill in the wetlands and build a mini Random Farms.  That way I can keep my house and bail myself out of my bad real estate investment.  I knew all along that I would not be able to build homes on this property due to zoning, but the guy who sold it to me had a nice colorful book that talked a good game (fully disclaimed of course) and he leased back the 48 acres to grow celery and cranberries long term, so I paid him an inflated price.  I wish I knew more about the celery and cranberry business going in… I wish I had run a credit report on that guy…

By Zoning Exists For A Reason on 05/16/2013 at 9:05 pm

I think this was poorly handled from the beginning.  I would have told them to go home when they sued us.  I am serious.

By Bob on 05/16/2013 at 10:33 pm

to: Very Serious,
Not sure what Viet Nam or the “Ho Chi Minh Trail” has to do with SG,our community,and Chappaqua Crossing; but the least you could do is spell the name correctly. By your convoluted logic, is it Un-American to not get your way in the zoning approval process and then sue the Town of New Castle (and it’s board members) as SG did?
So far as contacting the NY State Attorney General’s office, none of the business conducted either by our town (or for that matter SG) warrants a criminal or civil investigation. It’s pretty simple.
Our Town Board, rightly or wrongly, agreed to a compromise on housing units at the site. Where the board erred was in throwing out to SG the possibility of developing a 120,000 Sq Ft shopping center in the middle of a residential community; all because we lost a grocery store… D’Agostinos. And, this idea for a shopping center was floated prior to the board addressing the community, to find out if this is what our town needs or wants.Mr Coyle letter did a very thoughtful analysis of the facts.

By M.Harris on 05/17/2013 at 9:35 am

AG’s Office, we need to go after everyones personal phone records, personal emails, third party associates or introductions, and all other phone records and emails as needed, in order to see the overall relationship of all individuals and their motivations to either stop or promote CC. This project needs oversight that goes beyond the normal process.

By Ridge Hill Yonkers on 05/17/2013 at 11:22 am

On a strictly practical level, imagine this town two or three years in the future.  Drive off the SMP and imagine the families crammed onto that lot and then imagine the scene one exit north where we’ll have a retail complex the size of Mt. Kisco A&P/Target.  I am still finding people are surprised when I mention that it will be that size.   
Despite the best efforts of NCNow and other local media, there are still many, many people in the dark about both of these projects.  Please town board—don’t push this through without having a true idea of who is for and against.  It’s just not the right thing to do.

By Dawn Greenberg on 05/19/2013 at 5:48 pm

Post a comment:

Display Name*:

Your Display Name will be associated with this comment on We encourage commentators to use their real name or initials.

We encourage civil, civic discourse. In other words, be pithy and polite. All comments will be reviewed before publication to assure that this standard is met.