Council terminates lease deal for Civic Centre floor
The New Plymouth District Council has been left tens of thousands of dollars out of pocket after a six figure multi-year tenancy agreement collapsed just months after it was signed.
In May last year it was announced council had reached an agreement with local businessman Adnan Belushi to move his co-working business, Johnson Corner, into the second floor of the Civic Centre, where it began operating in October.
However, the deal turned sour with council chief executive Gareth Green confirming it was terminated after Belushi failed to pay anything for the months his business had occupied the floor.
“We received no rent payments over that time and we are a creditor, as are a number of other businesses,” he said.
While Belushi admitted he owed money to council, he blamed the council for the business failing and claimed it did not meet agreements that were in place for it to succeed.
A council spokesperson said it was withholding information on how much Belushi owed as it was “likely to prejudice the commercial position” of the person who is subject to the information.
Belushi signed a five-year lease deal, with a right of renewal for up to 15 years, following the decision by council’s longterm tenant Powerco to move out after quarter of a century.
Council voted in March 2023 to find a new tenant before it went into a public excluded meeting to discuss a potential deal with Belushi.
This came just two months after one of his companies, Johnson Corner Ngāmotu Ltd, which operated a co-working area on Devon St West, was placed into liquidation in January owing creditors almost $90,000.
This was not disclosed to councillors during the March meeting.
The creditors report showed Belushi, as sole shareholder of the company, had an overdrawn account of $72,172.
Under the terms of the tenancy agreement, Belushi was to pay $110,00 plus GST in his first year in the building, as well as 6.5% of his gross annual revenue.
The base rent was to increase year on year to reach $210,000 plus GST by year five. The percentage share of revenue requirement would decrease to 3.5% once his annual revenue amounted to $650,000 or more.
Councillor Max Brough said they were encouraged to support management who were working on the deal.
Under the agreement council and Belushi were to also share renovation costs for the 911m2 space.
It was the cost of the renovations, coupled with details of the lease agreement, that council and Belushi remain in conflict over.
Belushi claims council had given him an undertaking that they would use the shared office space, which did not eventuate, while it did not disclose the building’s true seismic rating, issues Green disputed.
“It’s fair to say he did not get the number of people he expected and the number of tenants he expected in that space,” Green said.
“Adnan believes that we gave an indication of paying $5000 a month that we were going to sub lease his space for.
“I was not around at the time, and was not part of those conversations, but those who were tell me that was certainly never an indication and what I can guarantee is it wasn’t written into any of the lease documents which you think it would have been if it was pivotal to the agreement.
“And why would we pay for space we already own?”
Green also confirmed council was working with a number of tenants who were previously paying Belushi to use the office space.
Meanwhile, Belushi maintained the fault lay with council, which had not met its side of the agreement to bring customers in because it had gone through
a major restructure. “They are reducing the head count so they’re not using the space that we’ve created,” he said.
Council began that restructure last year with an aim to reduce staff numbers and eventually save tens of millions of dollars.
Belushi also said “central government cutbacks” and continued inflationary pressure had eroded business confidence and reduced the number of people who would have used the site. “We asked them (council) to restructure the deal, and they wouldn’t do it. We asked them to put some money in for advanced purchase of services and they didn’t want to do that, so it came down to a point when we exited.”
Belushi said he was also in dispute with council over the outstanding cost of the renovation work which he claimed it should help pay for. “We’ve lost about $100,000 from this and the only person who gains from this is the council who now has a floor it can lease for stand-alone offices.
“In the next 20 years they are going to be making revenue out of that floor.”
Belushi said he did not know what the final outcome would be for paying creditors but he had “shut down” the New Plymouth sector of his business and would leave it up to liquidators to sort out.