Trumpets Lease Highlights by David Berman
Based strictly on my own notes taken during the slide presentation, discussion and Q&A at the May 28 Board of Directors meeting, here are just some of the many highlights of the Trumpets lease, which contains 35 numbered sections. My personal comments appear in red bold and brackets [ ]:
The initial term of the lease is 36 months, with two options for additional 60-month periods by mutual written agreement.
Tenant is required to be open a minimum of 11 hours a day and a maximum of 14 1/2 hours a day. He has the right to close on Thanksgiving, Christmas and New Year’s Day. [Hernandez may in fact find it profitable to offer holiday meals/brunches on those days.]
The base rent will be $7,000 per month, plus utilities, which are separately metered and the responsibility of the tenant. In the first extended term, the base rent will rise to $7,500 per month, and in the second extended term it will rise to $8,000 per month. [This is a better deal than we had with the prior Trumpets operators, whose required rent of $10,000 per month did not include utilities, which were paid by the Association.]
ADDITIONAL RENT WILL BE PAID AS FOLLOWS:
For any month in which gross sales (including catering revenue) are at least $100,000 – 4.0%.
For any month in which sales are at least $125,000 – 5.0%
For any month in which sales are at least $150,000 – 6.0%
For any month in which sales are at least $175,000 – 7.0%
For any month in which sales are $200,000 or greater – 8%
[It was pointed out that this Additional Rent schedule is NOT graduated. For example, for any month in which gross sales are at least $200,000, 8% would be due on the full amount of sales that month, not just the amount of $200,000 or above. So for sales of exactly $200,000, SCA would receive an additional $16,000 in addition to the monthly initial-term rent payment of $7,000 stated in the lease.]
Rent is due and payable on the first day of the month for which rent is owed.
Additional rent based on total sales is due and payable by the 25th day of the following month. By the 25th day, the Tenant will provide a monthly financial statement and a copy of the current Nevada Combined Sales and Use Tax Return.
An advance security deposit equal to two months’ rent ($14,000) is required. During 60-month term extensions, this deposit will be reduced by 50% based on good performance to date.
Hernandez will have exclusive catering rights for third-party (i.e., non-resident) events on our premises. He will make catering services available to the Landlord, SCA Clubs and members, but Tenant retains exclusive use of the kitchen facilities. [This means that a resident group can conduct an event with its own properly licensed caterer, but the group and its caterer would not have access to the Trumpets kitchen facilities.]
Coffee/refreshment service at the Anthem Center Coffee Bar and Fitness Centers is protected and not affected by this lease.
The Tenant may, if he wishes, serve food and beverages at the Anthem Center outdoor pool. [I do not believe alcoholic beverages at the pool will be permitted, but this must be confirmed.]
The Board of Directors will authorize creation of a Landlord Advisory Group to meet with the Tenant monthly to review financial records and menus, and to facilitate resident feedback. But the Tenant will not be obligated to make menu changes it does not believe are in his best interests.
ROOM RENTALS:
For catered events, the Tenant will pay the rate then in effect as stated in the SCA Facilities Usage Manual. The lease allows for the rates to possibly increase annually by a modest amount.
Room-rental fees will be payable at least two weeks in advance.
The Landlord will provide set-up and break-down services and charge the Tenant accordingly.
Scheduling will be controlled by the SCA Activities Department to minimize conflicts with resident room usage. If dates are available, the Tenant may book rooms up to one year in advance.
Once an authorized area is scheduled for Tenant Use, only the Tenant can release it. Any conflicts that arise will be resolved by the Community Manager.
DINING BENEFITS:
Residents will be entitled to an ongoing 10% discount on all food purchases (alcohol excluded). Must be members in good standing and present SCA Membership Card, but the Tenant is not obligated to verify the standing of members.
Employees of our management company, upon presentation of identification, will be entitled to the same discount.
ADVERTISING
Except as follows, the Tenant is entitled to advertise at its own expense in all Landlord media.
The Landlord will provide a free monthly ad in the Spirit magazine. To help the Tenant get started, he can have a full-page ad for the first two months of operation, after which it will be a half-page ad.
COMMON AREAS
The Tenant may use specified common areas of Anthem Center, and customers will be required to park in the West Lot. [It was specifically noted during the presentation that use of the Anthem Center Gallery is prohibited, although I could imagine a scenario similar to what the prior tenant did when dining was permitted in part of the Gallery on popular days such as Easter and Mother’s Day. This type of exception was not mentioned at the meeting, however.]
INSURANCE
The Association’s insurance broker specified the types and scope of insurance coverages that must be provided by the Tenant in order to protect SCA’s interests. These include:
DEFAULT CLAUSES
In addressing the conditions of default contained in the lease, Negotiator Robert Murphy noted that the default clauses in the S&D Cafe lease were too few and too weak. This has been corrected with a series of “events of default” that run for more than three pages in the new lease. He did not list them in detail, but one he did reference was that a condition of default exists if the restaurant is closed for three or more consecutive days due to circumstances within the Tenant’s control.
[This completes my summary of the lease terms that I believe most interest our residents based on the notes I took. The lease itself is, we are told, very detailed and comprehensive, as it should be. I’m sure many will be awaiting their opportunity to review the entire lease when it becomes available.]