Restaurant is seeking damages in court
Fernandina Beach City Commissioners will hold a shade (closed to the public) meeting Tuesday to consider possible settlement with the leaseholders for Brett's Waterway Cafe for lost revenue the restaurant blames on the city.
As the commissioners meet, they will consider Brett's total earnings that includes $5.4 million in gross revenue over two years that netted the city no money for rent of the city owned building.
After nearly 18 months of negotiations with the city, leaseholders for Brett's Waterway Cafe filed legal action in Nassau County Circuit Court to have a panel of arbitrators determine how much, if any, damages and lost revenue should be paid by Fernandina Beach.
But as the city records show, the restaurant did not experience a dramatic drop in food and beverage sales.
Center Street Restaurant Group, which holds the lease of the Brett's Waterway Cafe building with the city that expires Dec. 31, filed a 546-page complaint with the court seeking to compel arbitration with the city under terms outlined in the lease.
Center Street Restaurant Group has been seeking damages and lost revenue from the city to the tune of $655,000 or more it claims were a result of the city's failure to maintain the substructure supporting the restaurant over the Amelia River. Center Street also cites loss of revenues from negative publicity generated by the city after City Engineer Charlie George declared the building was not safe and should be closed.
According to financial records provided to the city, Brett's earned $2,629,015.17 from June 2022 to May 2023. The records show the restaurant pulling in $2,780,594.25 from June 2023 to May 2024. The city received nothing in rent payments from that $5.4 million in gross sales.
The no rent outcome is a result of Center Street Restaurant Group taking advantage of a loophole in the lease agreement with the city. As originally written, the city was poised to receive 5% of gross revenues generated by the restaurant and gift shop. But Center Street soon found a workaround in the lease where they were able to sublet the lease to outside business interests. That diluted the original 5% gross into 5% of whatever the sublease holder paid to Center Street Restaurant group.
The sublease is held by Amelia’s Restaurant Group and since May 2023, they have paid no money to Center Street Restaurant, effectively cutting the city out of any lease revenue on the building for the past 32 months.
"Obviously this wasn't the original intent of the lease with the city and it's really not fair to the city," said former City Attorney Tammi Bach at a commission meeting last May. "But that's how the lease is written."
Also unusual in the lease is that if Centre Street Restaurant receives no rent from its sublease, it is not required to pay the city without any penalty of being in violation of the lease agreement, Bach disclosed.
Bach told commissioners currently there are two businesses on the sublease. First is Amelia's Restaurant Inc., who in turn is subletting the building to Brett's Waterway Cafe Inc.
"If they're (Centre Street) not receiving rents, they don't have to pay us," Bach said.
There's now a new cast of commissioners and legal expertise for Tuesday's shade meeting to consider the Brett's claim for damages.
Newly elected commissioners Genece Minshew, Tim Poynter and Joyce Tuten will weigh in for the first time on whether the city should bow to Brett's demands for lost revenue. Center Street is also seeking its attorney costs in the arbitration case.
Interim City Attorney Harrison Poole has replaced Bach as the legal expert advising the commission on the pros and cons of making a settlement with Center Street. The city has also retained the law firm Carr Allison to assist with the Center Street Restaurant case.
The assertions in the Center Street filing include the statement that "the City's public accusations that the substructure was unsafe, coupled with the public litigation resulting therefrom, had succeeded in accomplishing the City's intent to discourage and stop the public from dining at Brett's."
The filing goes on to state that the restaurant was greatly impaired in hiring employees because of the cloud of uncertainty that the restaurant would remain open.
The case has been assigned to Circuit Court Judge Marianne Lloyd Aho. The city has 60 days from the Dec. 20, 2024, filing date to respond according to the case management document.
However, gross revenue reports contradict those assertions.
Over the past decade, Brett's best revenue year was 2016 with $3.6 million according to calculations based on state sales tax records.
For the five-year period when Center Street paid the city rent on the building from 2018 to 2022, Brett's earned $13 million and paid the city about $35,000 in rent using the 5% formula from the sublease total of $714,602 in gross sales.
The previous commission, led by Mayor Bradley Bean and Vice Mayor David Sturges, took a 'hands off' approach to the Brett's situation.
In June 2023, Sturges called the city's concerns about the building's safety "a witch hunt" following a Kimley-Horn and Associates inspection of Brett's substructure over the river. The engineering firm said “We recommend that the building structure, pedestrian access adjacent to the structure, and the area beneath the structure be closed and cordoned off until repairs can be made to the substructure and structure"
Previously, City Attorney Bach had ruled that Sturges could not vote on any matters regarding Brett's Waterway Cafe because of a conflict of interest.
According to public records, Sturges and Todd Ericksen -- a bartender at Brett's - are co-owners of Pirates Booty, a building on Beech Street that houses Sturges’ building business and Ericksen’s real estate business, Amelia Sunrise Realty.
The city declared the Brett's building unsafe in July 2021 following an inspection of the supporting beams and structure that was followed by an order to vacate the building issued by City Engineer George.
That decision was later stopped by a judge who ruled that the city Board of Adjustment had not followed proper procedures during Brett's appeal of the order to vacate.
Following the 2022 city commission election, the newly seated commission voted 3-1 (Sturges could not vote) to take no further action regarding Brett's and letting the lease expire at the end of 2025.
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