Hotel shops knock Hendrickson licensing plan
Avia Collinder, Business Reporter
Kevin Hendrickson has laid down new terms for shops at his newly acquired hotel in New Kingston, which are now required to operate under licence to his newly created company, 77 Hotel Holdings Limited.
Under the proposed terms of the agreement, which the shops say has added uncertainty to their operations, the licence is renewable monthly.
And, 77 Hotel reserves the right to evict licensees with just one month's notice, and it requires licensees to indemnify the hotel company against any "loss or damage" or other costs arising from a forceful eviction.
It's understood that consultations are ongoing between 77 Hotel and tenants, at least one of which, Gymkhana fitness centre, has said it was not among the operators approached with the new licensing agreement, up to last week.
Hendrickson acquired the 303-room hotel at 77 Knutsford Boulevard in New Kingston, reportedly with a bid of about US$17.6 million. There are signs that renovation of the property is underway.
77 Hotel Holdings, for which Hendrickson is the sole director, was incorporated just over a month ago on September 26, 2014 with a single share held by Octagon Hotels Group Limited, which is registered offshore in the British Virgin Islands, according to Companies Office records.
While the hotel has not been taking guests since a fire early in 2013, five shops on the exterior and all eight on the interior are still operating, Sunday Business was advised on a visit to the property.
The businesses include lawyers, dental services, a jewellery store, shoemaker, locksmith, beauty supplies, a travel agency, the Jamaica Venture Fund, The Vault Gaming Lounge, a flower shop and Gymkhana gym. There is also a police post in the complex.
The new agreement gives licensees access to the property on a month-by-month basis, a stipulation that some shop operators say is unacceptable and has led to a search for alternative space.
"The licensee's permission to occupy the licensed premises shall be on a short-term basis only and shall be automatically renewed from month to month on the first day of each month," the draft licence reads. The licence fee is also payable monthly.
The new contract also requires occupants to use the shops only during "designated hours". Owners have interpreted this to mean that they are not to be found on the property after business hours.
"Suppose you need to clean your shop," one person commented, saying the condition was unreasonable.
Although the licence stipulates an effective date of November 1, 2014, one shop representative said the document was a draft distributed to shop managers at the end of October, and should be replaced by a new draft soon, as discussed in a meeting with representatives of 77 Hotel.
"We were told that it's a draft document, but if that is the last word nobody in their right mind will sign," said the shop representative. "You are running a business, not a stall or a hand cart which you can push away."
Another protested: "The new licensing agreement has given us a month to month lease - no business can operate on a month to month lease. It is also saying we are not allowed on the property after business hours. So what if we want to clean up?" the person said.
"We are not stupid; we are now looking for a place to go."
Some shop operators have been weighing whether to turn to the Rent Assessment Board for its intervention. But even if they did, the board would have been unable to assist.
Rent Assessment Officer Leyton Baker told Sunday Business, following a search of the agency's records, that 77 Knutsford Boulevard was exempted from the provisions of the Rent Restriction Act back in August 1997.
"The Rent Assessment Board has no legal grounds to intervene in the operation of this property," he said.
Baker also indicated that as a general rule, hotels are "automatically exempt" from rent restriction under the Hotels Incentive Act, but that 77 Knutsford Boulevard also sought and received an exemption under Section 3(e)(ii) of the Rent Restriction Act.
"In keeping with this exemption, the owners have the right to set whatever terms they deem suitable for the operation of their property. This does not however, preclude the right of the tenants to seek to negotiate the terms of the agreement," he said.
"Their other option would be the courts," Baker added.
Sunday Business was advised by some shop owners that they have been asked to pay to the owner a sum comprised of a deposit and one month's rent. The draft licence did not specify the size of the monthly licensing fee.
Current rental costs are said to range from $60,000 monthly, upwards.
None of the operators to whom Sunday Business spoke could say if there was a deadline for signing the agreement nor what the consequences would be if they refused to sign.
Not all the tenants are sticking around to find out. One manager said alternative space had been found for the shop elsewhere in New Kingston and would be relocating.
Several calls and emails to Hendrickson for comment were unanswered.