WATERLOO — The city has threatened to terminate Leslie Hospitality’s right to manage the Five Sullivan Brothers Convention Center for failure to pay rent and parking commissions.
Documents obtained by The Courier under an Iowa Open Records request show the city has not been paid monthly commissions for events held in the downtown city-owned facility for 20 months.
The demand for back payments came just days before company president Edwin Leslie also threatened legal action, accusing some City Council members of interfering in his ability to gain financing to buy and renovate the convention center.
Relations have soured since the City Council voted in August 2017 to approve a development agreement calling for Leslie’s firm to undertake a $20 million upgrade at the convention center and adjacent Ramada Hotel.
Chris Wendland, an attorney representing the city, sent notice to Watermark Hotel Equities last week indicating the city would terminate its management agreement for the convention center unless the back rents were paid within three days.
The amount owed is not available because it is based on gross sales at the facility, which also have not been provided. Financial records show the city had received an average of $57,000 annually from the management agreement during the previous five years.
Leslie Hospitality has been managing the Ramada, now Hotel 4th, for Watermark as it worked to secure financing to buy it. Whoever owns the hotel manages the convention center on a contract with the city dating back nearly 40 years.
Edwin Leslie responded to Wendland on Sept. 21, to “acknowledge there are issues surrounding the payment of rent for the center which are in dispute” and request an Oct. 1 deadline to work those issues out with the city.
Wendland agreed to the extension but said, “If these requirements are not met, then (Watermark) should have no doubt that the city will promptly proceed to file an eviction action in district court.”
Leslie then sent a letter to the city Monday on behalf of LK Waterloo, the corporation set up to own the hotel and convention center, claiming actions of current and former City Council members breached the development agreement for the property.
“While it is our goal to reach an amicable agreement with the city of Waterloo related to these and other issues, if we have not done so on or before Oct. 5, 2018, we are fully prepared to file suit in the state of Iowa relative to this matter,” Leslie said.
Reached by email Wednesday about the situation, Leslie said he did not believe the city was owed rent payments under the convention center management agreement.
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“If in fact we did not have all the conflicts and issues, Watermark would not have still been in the lease agreement and the lease would have been closed out and no rent due,” he said.
Leslie also noted the city has failed to make repairs to the property as required under its responsibilities as landlord in the management agreement with Watermark.
“One need only walk through the convention center and see the damaged walls, floors and other items and see that repairs have not been made under the agreement,” he said.
Leslie said he hasn’t given up on the project, adding, “I am still very hopeful that we — the city and our group — will come to an amicable resolution.”
Mayor Quentin Hart said he also is optimistic the situation can be worked out and the convention center project will move forward.
“I’ve always been supportive for this to happen,” Hart said. “It’s something the citizens wanted to see happen as well.”
The management agreement in dispute was signed in March 1980 as part of a deal bringing Continental Investment Group of Peoria, Ill., to Waterloo and build what is now Hotel 4th. The lease allowed Continental to manage the Conway Civic Center but pay the city a commission on events.
The lease was amended in 1992 to reflect the name changing to the Five Sullivan Brothers Convention Center. It was amended again in 2005, when Watermark bought the hotel, refining each party’s maintenance responsibilities and extending the lease through December 2019.
Should LK Waterloo successfully secure financing for the hotel and convention center renovation project, the company would assume ownership of the convention center and there would be no need for a new lease agreement.
The city’s development agreement with LK Waterloo does not include a deadline by which LK Waterloo and the city must close on the sale of the property.
It has multiple deadlines and benchmarks that kick in after the sale, which LK Waterloo must meet to get any of the $1.05 million development grant or future tax rebates promised by the city. The contract also includes a clause allowing the city to reclaim title to the convention center if the designated improvements are not made after the sale.