Original agreement in principle, final lease deal at NTRC
don't match
Posted September
17, 2012
The deal in principle agreed to back in September 2007 between New
Tecumseth - approved by council - and Richard Norcross for the
provision of his operating food and beverage services at the New
Tecumseth Recreation Centre (NTRC), does not correspond with the final
lease agreement inked nine months later in June 2008 - also passed by
council. By then, Mr. Norcross had already started operating the
concessions, and designing his new restaurant.
Two key provisions which were altered and or removed from the final
draft - seemingly without explanation - are having a direct impact on
the Town's ability today to amend the operating terms that includes an
expressed desire to take back the alcohol exclusivity clause, and
reclaim the space currently used for the Hornet's Nest bar and grill on
the second floor.
In her Sept. 17, 2007 report to council's committee of the whole, and
ratified the following week, then Manager of Parks and Recreation Joyce
Epstein, spelled out that the contract would be for an initial five (5)
year term and "may" be renewed for an additional two (2) five (5) year
terms; and That the terms of the contract "are to be re-negotiated
after each five (5) year term." In the same report, Mr. Norcross's
brief "business plan" spells out the same terms that he was agreeable
too.
The lease now in play notes that the tenant "will have the right to
renew" for an additional two five year terms. However, the provision
that "the terms of the contract are to be re-negotiated after each five
year term," was removed.
As a result, New Tecumseth's only option is to buy-out the contract,
but only if Mr. Norcross agrees to it. Last week, councillors were
presented with a draft lease revision that would cost the Town $50,000
payable to Mr. Norcross over a five year period starting in June 2013.
In exchange, he would give up the alcohol, and operation of the
Hornets Nest. But he would retain the rights to concessions and
vending under the same terms - 10 per cent of gross sales in rent.
The arrangement led to further questions from councillors that were to
be answered during tonight's council meeting.
Additional information included on tonight's agenda, makes it clear
that the lease - as amended from Sept 2007 - leaves the Town few
options. Below is an excerpt of CAO Terri Caron's additional
information memorandum councillors will deal with this evening:
Can the Town buy out the entire Lease, including the
concession and vending rights and tender the concession? No -
The Lease provides the Tenant with the right to renew for an additional
two terms provided the terms of the Lease have been complied with. The
Tenant is in compliance. The options that the Tenant has been willing
to consider are that the Lease continues in its current form which
includes the restaurant or the option that is recommended in the staff
report. The Tenant is not agreeable to the Town buying out the entire
Lease.
Can the Lease be cancelled due to the changes in the
facility and a new lease prepared rather than amending the current one
or the operation be retendered? No- There is no basis upon
which the Town can cancel the Lease and re-tender unless the Tenant is
in default or fails to renew. We are operating within the context of an
existing contractual framework.
Can the Town buy the restaurant and vending rights and
allow the Lease to continue with the concession? No- The only
options agreeable to the Tenant are that the lease continue in its
current form or it is amended as proposed in staff's recommendation.
What happens if Council does not agree with the proposed
amendment to the Lease? The Lease will then be renewed in its
current form. It should be noted that in the event the Lease is renewed
on its current terms the Tenant continues to have the right to assign
or sublet provided that the proposed purchaser of the Lease or proposed
sublettor is qualified to operate the facility to the Town's standards.
This would mean that if the current Tenant no longer wished to operate
the restaurant themselves then they could sell those rights to another
qualified restaurant operator.
Why does the Town have to pay $50,000 since we are not
taking over the restaurant but rather changing the use of the space? The
current Tenant has rights to occupy the space and operate the food and
beverage services in the facility. The only way the Town can take those
rights away is through an agreement to purchase them.
Asked this morning about the discrepancies between the Sept. 2007
agreement, and the final lease, Mayor Mike MacEachern told Free Press
Online via email that it was being investigated.
Other changes that were made following the September 2007 deal included
the leasehold improvements, whereby the original intention was to spend
upto $250,000 which was in the capital budget. The additional
information on tonight's agenda puts the final cost at approximately
$750,000.
"All of the information that gave rise to the agreement is being
closely looked at as we are at a point 5 years into the contract where
we had committed to review the terms to ensure that they are meeting
the needs of the community," he wrote. "The specific recommendations
passed are also a part of that review."
