Developer of proposed Melville extended-stay hotel wins $2.5 million more in tax breaks

The developer of a luxury extended-stay hotel in Melville has been awarded $2.5 million more in tax breaks because the project’s cost has soared nearly 35% since last year. 

The unanimous decision by the Suffolk County Industrial Development Agency came 15 months after The Ferncliff Hotel won $10.6 million in tax incentives from the agency’s board of directors. The hotel will be located at 125 Spagnoli Rd., across from the Huntington Hilton.

The new aid affects only the sales tax exemption that developer Beechwood Organization will receive on the purchase of construction materials, equipment and furnishings, plus a larger reduction in the mortgage recording tax.

There is no change in the property tax savings of $5 million over 15 years, or 29%, IDA officials said Thursday.

Jericho-based Beechwood requested the additional assistance after the hotel’s price tag increased by almost $50 million in the past year, from $137.5 million to $184.5 million. The cost of construction climbed by $36 million and financing charges are up $12.2 million, said Beechwood president Steven Dubb.

“We may have had a low budget estimate for the project, and costs have gone up in the past year and a half” while Beechwood waited to gain access to the property, he said, adding that tariffs and interest rates also played a role. 

Tariffs have raised the price of steel, lumber, electrical equipment and supplies, Dubb said.

“The IDA assistance is crucial to us moving forward,” he told Newsday after Thursday's vote by the IDA board.

Kelly Murphy, the IDA’s CEO and executive director, said the sales tax exemption also is larger because Suffolk raised the tax rate to 8.75% in March to help fund water quality projects. The rate had been 8.625%.

The plan for The Ferncliff Hotel hasn’t changed since last year. It will still be four stories with 299 rooms and amenities  including a restaurant and bar, fitness center, swimming pool, bocce courts, dog parks and a rooftop patio.

Murphy said the hotel will cater to a different clientele from those of the Hilton and nearby Extended Stay America-Melville.

The Ferncliff will serve empty nesters, snowbirds and corporate executives who want to stay anywhere from a couple of weeks to several months. The hotel also would put people up while they look for permanent housing or have suffered a house fire, flooding and other natural disasters, she said.

The Ferncliff is now expected to open in June 2028, about one year later than originally planned. The hotel was proposed five years ago.

In return for the tax breaks, Beechwood has promised to create at least 22 jobs in two years. Most of the jobs would pay $37,440 per year, on average, according to the application for IDA assistance.

The hotel will offer studios, one-bedroom, two-bedroom and three-bedroom suites with hardwood floors and full-size appliances.

The room rate would be $194 per night, on average, or $5,820 per month with an occupancy rate of 83%, based on an analysis by the research firm Grow America in Manhattan, which was hired by the IDA.

Beechwood already offers extended-stay suites at its apartment buildings in Westbury: the Selby and the Vanderbilt. Both were awarded tax breaks by the Hempstead Town IDA. 

The Ferncliff will be built on land used by Poly-Pak Industries Inc. since the 1970s to manufacture plastic bags. Beechwood will pay $21 million for the property, the IDA application states.

Poly-Pak planned to lay off 146 production employees on May 1, according to a Worker Adjustment and Retraining Notification, or WARN, filed with the state in February. The layoffs left the company with about 30 people locally.

Daniel P. Deegan, Beechwood’s real estate attorney, said Thursday that Poly-Pak had left the Melville property.

“The building is empty, and we’re ready to begin construction,” he said.

By James T. Madore

james.madore@newsday.comJamesTMadore

James T. Madore writes about Long Island business news including the economy, development, and the relationship between government and business. He previously served as Albany bureau chief.