Exclusive: Higher Than Expected Development Costs Prompt Rockland Firm to Scrap Warwick Plant Project

John Jordan | January 2017

An aerial view of the Warwick Valley Office & Technology Park.

WARWICK—A family-owned fine flavor manufacturing firm that dates back to 1890—Star Kay White Inc. of Congers—has decided not to move forward on a planned multi-million dollar expansion at the Warwick Valley Office & Technology Park, Real Estate In-Depth has learned, due to higher than expected construction costs.

Benjamin Katzenstein, president of Star Kay White, informed state and municipal officials on Dec. 27th that original project estimates of $20-million to build a 100,000-square-foot manufacturing facility at the former Mid-Orange Correctional Facility in Warwick were grossly understated. In fact, an engineering firm hired by Star Kay White calculated the project to be built at the property owned by Warwick Valley Local Development Corp (LDC). would cost $40 million to construct. Star Kay White entered into a contract to acquire the parcel at the Warwick Valley Office & Technology Park last July and was in the due diligence phase when it decided not to move forward with the land purchase and the development project. The due diligence period on the purchase agreement ended in early January 2017.

“We came in 100% above expectations,” he noted. Katzenstein notified Empire State Development on Dec. 27 that it would not accept the $2.6 million it was recently awarded by Empire State Development in the annual Consolidated Funding Application process for the Warwick project. The firm had applied for $4.1 million for the project.

“The bottom line and I am not afraid to admit it is that I couldn’t afford it,” Katzenstein told the newspaper. “I am not going to put the company at risk of going bankrupt.”

In his letter to Empire State Development officials and Town of Warwick Supervisor Michael Sweeton, Katzenstein said that “after the most thorough and exhaustive business analysis of my entire career, we cannot afford to move forward on this project.” He noted that the company considered a project totaling 56,000 square feet that would have satisfied the bare minimum of its requirements, but even that development would have come in $10 million over its original estimate at $30 million.

While expressing his appreciation to Gov. Andrew Cuomo and others for the CFA award, he related that the state’s contribution to the project would have only covered a small portion of the overall cost. “Rather than moving forward with what evolved into a very high risk gamble on the company’s future, with the potential for personal and business bankruptcy, I have decided to explore alternative tacks with a more conservative approach to our future.”

Katzenstein, a resident of Warwick, told Real Estate In-Depth that his firm spent approximately $250,000 on engineering studies on the Warwick expansion project.

He stressed in his letter as well as in a phone interview that his firm has operated in New York State for 126 years, originally at the site of one of the World Trade Center towers, and plans on staying in the Empire State. Katzenstein noted that part of the company’s history was hard financial times during the Great Depression that fostered a conservative approach to business ever since.

He concluded his letter to the state and Town of Warwick by saying that while the company was disappointed by its decision not to move forward with the expansion, Katzenstein added he was “sure it is the correct one.”

Warwick Town Supervisor Michael Sweeton in a statement released to Real Estate In-Depth stated, “I was informed on the Friday before Christmas by the owner of SKW that after meetings with the national design firm he hired that to do what he wanted to do in Warwick would require more investment dollars than he felt his company could afford at this time.  I asked that other firms be given an opportunity to quote proposals that I felt could deliver what he needed but he was convinced that the firm he hired was correct and that he would have to withdraw the project. Needless to say I am extremely disappointed, however we continue to aggressively market the property through Rand Commercial.”

He added that the Warwick Valley Office & Technology Park is best suited to small to medium sized-businesses that can appreciate its unique setting and Warwick’s quality of life. While noting that Star Kay White was a “perfect fit” he recognized that “unfortunately the owner made the decision that to do it right … he would have to spend more than his company could in good financial conscience spend.”

Maureen Halahan, president and CEO of the Orange County Partnership, said, “Star Kay White has been a New York company for 126 years and while we are very disappointed that they will not be expanding in Orange County, we are happy that they will not be leaving New York.  The New York State Mid-Hudson Regional Council had so much confidence in their project that we deemed them as a priority project. We hope that if they decide to expand in the future that Orange County will be their first choice.” The Orange County Partnership worked with Empire State Development and others on Star Kay White’s proposed project in Warwick.

Star Kay White employs approximately 125 workers and operates out of approximately 90,000 square feet of space in Congers. The company built a state-of-the art dairy facility and complex in the Bronx in 1928. The firm then relocated operations to Congers in 1984 and has undergone considerable expansion since then at its Rockland County complex. In 1998 the firm employed 40 workers.

According to its website its main offices are located at 151 Wells Ave. and maintains a production facility at 85 Brenner Drive and 110 Brenner Drive, also in Congers.

 

John Jordan
Editor, Real Estate In-Depth