Roanoke Rapids City Council is seeking revised terms on a proposed theater lease agreement submitted by an attorney on behalf of Weldon Mills Properties.
It is not expected that negotiations of the lease terms will interfere with an auction on the Roanoke Rapids Theatre through the website GovDeals. That auction will begin May 25 at 9 a.m. and end on June 26 at the same time.
Roanoke Rapids attorney Bill White said in a letter to City Attorney Geoffrey Davis that it appears a lease for 10 years, as stated in the proposal, must be advertised for 30 days before the council could approve the transaction. “If this action is taken on the May 16 (Tuesday night) meeting then the June 20 meeting would be the first opportunity to approve this transaction,” he said in the May 2 letter. “It would be in the best interest of all parties if this could be advertised now and acted on at the first meeting in June which should be June 6.”
Discussions by the council at their Tuesday meeting, however, indicated the panel wants amendments to the lease proposal and it was requested that Davis and City Manager Kelly Traynham discuss the matter further.
The proposal as submitted to the city calls for a 10-year lease for a total of $500,000 which would be paid in advance.
Weldon Mills Properties, in addition to the $500,000 figure, would pay the city additional rent equal to $2 per ticket for any event held at the venue and that payment would be made quarterly.
The proposal would allow Weldon Mills Properties to assign — or sublease — the proposal to a newly formed limited liability company of which the Weldon Mills Properties would be a member.
The lessee would be responsible for all expenses, insurance, utilities, and maintenance.
A non-refundable deposit of $5,000 would be delivered to the city and credited against the rent.
The proposal also carries a purchase clause which states Weldon Mill Properties, if it becomes advantageous to do so, would buy the property from the city at a price of $1.5 million. The rent of $500,000 would be a credit against the purchase price if the purchase closes in the first five years of the term.
The proposal also states that credit toward the purchase price will be reduced by $100,000 per year for each year after year five.
The city, however, is expected to renegotiate for what it considers to be the better following terms than what is contained in the original proposal:
A lease of eight years at $600,000 rather $500,000 over 10 years
$4 per ticket instead of $2
No sublease allowed
A $75,000 security deposit to cover wear and tear
Remove the option to purchase
Clarification on how the proposal would affect the current loan
The actual lease document has not been delivered to the city, Traynham said.
Davis said one of his concerns centered on the ticket sales proposal. “There’s no metrics on how many tickets they will sell or how many shows they plan to have.”
Davis said the loan aspects come in with seller financing. “It may be impacted too with this option to purchase. For a lot of reasons that’s probably going to be difficult to actually work out in practice.”
Davis said if the option to purchase remains in the proposal Bank of America would lose the interest-free aspect of their loan. “That would actually get back-dated for the whole life of the loan. Our payments wouldn’t just balloon because of the future interest that would come with that new interest rate, we would have to pay back payments for the old interest rate. It’s just a huge amount of cost.”
Traynham said if the proposal should result in any drafted lease agreement the city would want its bond counsel to review it “to make sure we wouldn’t have any consequences and have council be able to make an informed decision.”
Davis said by the proposal including a purchase price it triggers the competitive bidding process. “At least with this proposal right here, if council were to accept this with this condition in it we would have to advertise it, it would go through the competitive bidding process and upset bid process. By putting a future purchase price in there, even though it’s an option and even though it’s in the future, basically turns this into the purchase of real estate.”
