THE DOLANS AND CABLEVISION
In 2007, success was the Achilles heel of the Dolans, who control Cablevision. For two years, the Dolan family had been trying to snap up the huge cable company. But the financial success of the company led their failure in the takeover.
An independent committee formed by the company to evaluate the deal rejected the Dolans’ bids of $27 a share, and then $30 a share. Wall Street analysts and investors grumbled that the company was worth three times as much, or even more. The independent committee and the Dolans finally agreed on $36.26 a share in May.
But after years of watching the company spend money to invest in its infrastructure, shareholders recoiled at the notion of letting the Dolans steal the company, which boasts growing cash flow and shrinking expenses. At a meeting in the company’s Bethpage headquarters, shareholders rejected the deal in October.
Their reward: The stock is now trading at about $24 a share – a third less than the Dolans’ offer.
--Richard J. Dalton Jr.
COLISEUM REDEVELOPMENT PLAN
Toward year's end, with a great flourish the town of Hempstead was presented with the long-awaited application to redevelop the aging Nassau Coliseum into the heart of what County
Executive Tom Suozzi hopes will be the centerpiece of his New Suburbia.
The plans by Islanders owner Charles Wang and RexCorp Realty Chairman Scott Rechler promise to blend the best of the city and the suburbs with a five-star, 31-story hotel, conference center and entertainment complex, along with office buildings, a canal lined with shops, and walkable new neighborhoods -- most of it tucked into the windswept acres of cracked pavement where hockey fans now park.
Among other things, this development aims to start weaning Long Island from its addiction to the automobile, making it easier to travel among central Nassau attractions like Hofstra University and Eisenhower Park on foot, by bicycle or via the developers' trolley, which will eventually link to a new county transit system still on the drawing board.
But first, the town of Hempstead must decide whether area roads can possibly manage the new car traffic Wang and Rechler's 5.5 million square feet of development will certainly generate. So far, Supervisor Kate Murray sounds skeptical. Look for lively debate this winter at public hearings setting the framework for environmental reviews.
--Elizabeth Moore
ARROW ELECTRONICS, SALES MACHINE
Long Island has never had anything like it — a company with sales of $15 billion. No Long Island company has ever even come close.
But it’s going to happen in 2008, when Arrow Electronics Inc. of Melville posts fourth-quarter results early in the year.
Arrow, a distributor of electronic parts and computer components, posted sales of $13.6 billion last year, and may already have passed the $15 billion mark, but we won’t know it until the company issues its earnings report for the final quarter of ‘07.
Not even the giant aerospace companies of the past came anywhere close to Arrow’s sales level. At its peak, in the mid-1980s, Grumman Corp. was a $4 billion company, and Fairchild-Republic Co’s sales were about $1 billion.
Arrow’s closest rival in the sales race is Cablevision Systems Corp. of Bethpage, whose sales last year were $5.9 billion.
Arrow will tell us how they have done it in their earnings report, but we do know some of the company’s growth has come from acquisitions in the U.S. and abroad, some of it from becoming the supplier of choice to mostly small and mid-sized companies that are the most vibrant part of the U.S. electronics industry, and some from opening big operations in growing parts of the world like Asia.
--Jim Bernstein
RIVERHEAD'S OPEN SPACE AT CALVERTON AND THE INDOOR SKI MOUNTAIN
2007 was the year the Town of Riverhead finally kicked into high gear with its plans to sell off a Calverton site that once totaled 6,000 acres, making deals that could ultimately dispose of all the remaining land.
The Enterprise Park at Calverton, known as EPCAL, had been owned by the Navy and leased by Grumman until Congress passed and the president signed a 1994 law promising that the Navy would transfer it to the town. The transfer itself was delayed for years, in part because the National Transportation Safety Board was using a massive hangar there to reassemble TWA Flight 800, an airliner that crashed just off Long Island in 1996.
In the years since 1996, when the town took over the land, Riverhead officials entertained dozens of development proposals, including race tracks, movie studios and seniors-only housing developments. The first major sale, in 2001, was a 492-acre parcel with 1 million square feet of development on it. But it wasn't until last March that Burman received the subdivision approval he needed to sell off the undeveloped land, most of which had been spoken for for years.
This year, the town also selected Melville-based Rechler Equity Partners to develop a new, 300-acre industrial park at EPCAL -- on land that originally had been slated for recreational use. The town had split off 600 acres for industrial and office development in recognition of the rising value of open, developable land in the region. (When EPCAL was first planned, there was very little development east of Hauppauge.)
The remaining 755 acres provided a stage for one of the most fascinating dramas of the year: In February, a Scottish developer named Tom Stewart presented to the town a proposal for a $750-million destination resort featuring a 50-story indoor ski slope. After Newsday reporter Elizabeth Moore wrote an expose showing that Stewart had a history of unsuccessful projects and had misrepresented himself, his track record and his access to financial resources, Stewart withdrew. A reorganized team carried the proposal forward.
Just after that group presented a new proposal -- this one with a 35-story ski structure and a large, man-made lake -- another entity came forward with its own proposal: Long Island Destination Group, a partnership between RexCorp Realty, Jim Petrocelli and Peter Scalise. Scalise already had two unsuccessful attempts to develop a motor sports attraction at EPCAL under his belt. This proposal, dubbed EPCAL Centre, involved a 10,000-seat arena for racing events, a smaller track and a winding road course for motor sports enthusiasts to speed on.
The two groups engaged in a bidding war stoked by outbursts from a surprisingly vocal contingent of motor sports enthusiasts. In the end, Riverhead Resorts won the right to negotiate with the town. The Riverhead town board took up the draft contract in late December.
Much has happened at the site Grumman engineers once built jets and tested the lunar landing module. Part of it was subdivided, part of it was sold, and almost all of the remaining developable land could be in contract by as early as Jan. 2. Add to that the spectacle of of a mountain that fell and rose again, and you have a remarkable -- and remarkably active -- year for the largest remaining developable site on Long Island.
--Daniel Wagner
THE MORTAGE CRISIS
The earliest hints of what we now call "the subprime mess" arose in March, when Irvine, Calif.-based New Century Financial Corp. started its descent into bankruptcy. But it wasn't until July, when Melville-based American Home Mortgage Investment Corp. started laying off hundreds of workers and stopped funding loans, that the stock market plunged amid concerns about the extent of the problems related to overzelous home lending.
Even as Federal Reserve chief Ben Bernanke insisted that the mortgage problem was "contained," investors and Wall Street banks saw in American Home Mortgage's collapse a dismal vision of their future. American Home, after all, was not a subprime lender -- in fact, the company had released data in June showing that its borrowers had much higher credit scores than New Century's. But American Home's offerings, which included exotic products that required minimal downpayments or documentation of a borrower's income, turned out to be equally vulnerable to growing concerns in the secondary mortgage market.
Following American Home's bankruptcy in July, things only got worse. News emerged that top banks -- both on Wall Street and across Western Europe -- were heavily invested in securities backed by loans originated by companies like American Home, New Century, Countrywide and others. They had also sold the securities to institutional investors of all stripes. That meant that as home prices fell, monthly payment requirements adjusted upwards and more people started to default on their mortgages, virtually every financial institution was affected. Many lost hundreds of millions of dollars, and chief executive officers at several major banks lost their jobs.
The fear about risk associated with any mortgage-related debt grew so intense that investors stopped evaluating each offering on its merits, preferring to put their money elsewhere until the market stabilized.
That "freeze on the market" eventually took down Woodbury-based Delta Financial Corp., a subprime lender that stuck to safer, fixed-rate loans and was well-regarded in the industry for its reasonable lending standards. Even though Delta had fewer non-performing loans than most comparable companies, its business model required that investors purchase the loans it originated so that it could repay short-term debt and remain liquid enough to originate new loans.
Delta filed for bankruptcy on Dec. 17, after several months of layoffs that executives had hoped would allow the company to continue as a scaled-down operation until the market stabilized.
Most experts say they cannot predict when the fallout from the mortgage crisis will end. But they agree that homeowners, lending companies and the broader financial markets will continue to bear the burden of the bubble that burst this year at least until the middle of 2008.
--Daniel Wagner
LIPA'S BIG TRANSITION
With a pledge to make the region's utility more accountable and transparent, Kevin Law took the reins of the Long Island Power Authority in October.
Even before starting his tenure as CEO, Law as LIPA's chairman got to the bottom of the long-withheld costs for the controversial off-shore wind-farm project, and scuttled it. And he had called for a state review of the authority's charitable donations and employee bonuses. Attorney General Andrew Cuomo's recent ruling that donations outside LIPA's energy mission were unacceptable has since been applied to authorities across the state.
The transition of power at LIPA left a big question mark about the plans of long-time LIPA chairman and CEO Richard Kessel, who has been rumored to be considering a range of jobs--from Nassau's next county executive to a Kessel-coveted spot as CEO of Madison Square Garden. He's also considered a contender to run the advanced energy R&D center at Stony Brook. Kessel is expected to reveal his plans in coming weeks.
Despite the transition, the new accountability and a reduction in LIPA's expenses, the authority under Law approved a 2 percent rate hike for 2008--a fact likely to keep consumer and commercial utility bills among the highest in the nation for the foreseeable future.
--Mark Harrington
NATIONAL GRID TAKES OVER KEYSPAN
Meanwhile, those hoping the merger of KeySpan with U.K.-based National Grid would lead to "synergy savings" have some waiting to do as well.
Approval of the $11.8 billion deal came this August, even amid acknowledgement by the state Public Service Commission that PSC officials had met with company officials on both sides in the months leading up to their unanimous yes vote.
Four months after the deal was approved, the PSC in December granted National Grid/KeySpan approval to impose more than $80 million in new rates this year, while allowing it to collect new surcharges for efficiency programs and for future costs to clean up dozens of toxic utility gas-plant sites in the region. While National Grid and the PSC say cost increases would have been much greater had the buyout not been approved, the need to reach deeper into ratepayer pockets to foot rising gas and electric bills has representatives of customers up in arms.
"Long Island families simply cannot take it anymore," state Assemblyman Marc Alessi (D-Wading River) said after LIPA and KeySpan increases were approved in December. Suggesting the hikes were forcing locals to flee the state, he said, "Escalating energy costs are choking hardworking Long Islanders...Any increase or additional surcharge is a step in the wrong direction and we will not be able to turn the moving vans around until we reverse this trend."
--Mark Harrington
