Heatherwood seeks $160M from town in new federal lawsuit | Long Island Business News

After earning favorable rulings in State Supreme Court lawsuits it filed against the Town of Hempstead for killing its planned Inwood project, Heatherwood Communities is doubling down with a new federal lawsuit seeking more than $160 million in damages. 

The new lawsuit is the latest salvo in the years-long battle between the developer and the town over Hempstead’s now-you-see-it, now-you-don’t zoning district that would have allowed Heatherwood to build its planned mixed-use, transit-oriented five-story building on a 5.3-acre site less than 100 feet from the Lawrence Long Island Rail Road station. 

The Commack-based developer’s $154 million project would have brought 309 rental apartments over about 20,900 square feet of ground floor commercial space to the site on Lawrence Avenue between Wanser Avenue and Bayview Avenue that fit with the Transit-Oriented Development District zoning that Hempstead Town enacted in May 2019 for about 11.7 acres near the Lawrence LIRR station and about 9 acres near the Inwood LIRR station, allowing for the redevelopment of light industrial uses in the area to encourage a “mix of housing and commercial uses” that will “sustain vibrant flourishing hamlet centers,” according to the town’s zoning. The TOD District also required that 20 percent of the housing be priced as affordable, to which the Heatherwood plan conformed. 

But instead of advancing Heatherwood’s application, the town enacted a building moratorium for the new Inwood and North Lawrence zoning areas in Sept. 2022 and extended it twice, with the town board citing concerns that the requisite environmental review to establish the new zoning districts, and previously accepted by the town, failed to take a “hard look” at potential negative impacts on infrastructure, transportation, public safety and special districts. 

With its project stalled during the 20-month-long moratorium, Heatherwood took the town to court in Sept. 2024 seeking approval of the plan. Two months later, the town completely rescinded the TOD District zoning, citing a faulty public notification process when the zoning was being changed as the reason for scrapping it, prompting Heatherwood to file a subsequent lawsuit seeking to reverse the repeal of the zoning.   

In June, State Supreme Court Judge Conrad Singer agreed with Heatherwood, ruling that the town’s repeal of the TOD District zoning is null and void, but while the judge denied the developer’s request to force the town to immediately greenlight the project, it also ordered the town to start processing the project application. 

In July, the town filed its intent to appeal Singer’s decision that reversed its repeal of the TOD zoning but has yet to actually file that appeal.  

Last week, Heatherwood filed a federal lawsuit against the Town of Hempstead and the town board seeking damages of more than $160 million in lost revenue from blocking the project. The lawsuit also added 10 unnamed individuals “presently unknown to the plaintiffs,” who “undertook actions and enacted policies to deprive plaintiffs of their constitutional rights.” 

“The Town of Hempstead, which had passed the original rezoning on its own motion, offered no options and actively blocked any form of our project’s development,” said attorney Daniel Shapiro, partner at Uniondale-based Ruskin Moscou Faltischek, who represents Heatherwood. “We filed this legal action to recover the substantial damages incurred by relying on the town’s approved zoning.” 

In regard to the new federal lawsuit, a Hempstead spokesman said, “the town cannot comment on pending litigation.” 

Heatherwood has received strong support from various builders’ groups and others in the real estate development community in its fight with the town. 

Mike Florio, CEO of the Long Island Builders Institute, said revoking the 2019 transit-oriented development zoning without protecting existing applications undermines trust in local government and discourages responsible investment.  

“This case has serious implications far beyond a single project,” Florio told LIBN. “And if this precedent is allowed to stand could jeopardize the ability to finance home building not only on Long Island, but across the country.” 

Mike Fazio, executive director of the New York State Builders Association, agreed that the town’s actions have ramifications well beyond Hempstead. 

“Land development and building is already a high-risk business because it’s very cyclical,” Fazio said. “You have risks that are out of your control, like interest rates, supply chains, rising costs and tariffs. And then you have a municipality who gives you a green light and then pulls the rug out from under you. That creates uncertainty that will disincentivize investments from lenders and private equity who will be much more hesitant in lending to these types of projects.” 

Aaron Appel, senior managing director at Walker & Dunlop, who co-leads the publicly traded firm’s institutional advisory practice, confirmed that real estate investment decisions are based on whether zoning and entitlements for a development project are in place. 

“When a town can then go and change those entitlements or remove those, that creates a very, very dangerous situation,” Appel said. “And not only does it affect the ability for one to make an investment but also can put at risk our financial institutions who provide credit to those types of investments.” 

Meanwhile, Heatherwood believes there’s still a great need for housing in the area and wants to continue to pursue the Inwood development, while fighting for its right to do so. 

“As stewards of our industry, we need to stand up and protect the rights that have been taken from us,” Douglas Partrick, Heatherwood principal, told LIBN. “We’ve heard from many of our peers both locally and nationally how important it is that this precedent not stand. As a 75-year-old organization that has been a pioneer in the real estate industry we will be resolute in our focus to get this right for our industry.”