Op-Ed: Isle Of Palms Marina Lease, Tenant Due Diligence Points Of Interest

By Bev Miller, Executive Director Of Board of Directors, Barrier Island Preservation Alliance for The Island Eye News

On Tuesday, Aug. 2, IOP City Council held a Special Meeting to discuss the ordinances for the reassignment of the Marina lease to Morgan Creek Marina, LLC, represented by Mike Shuler. 

Several things stood out from that meeting. 

The city, upon advice from outside Counsel, requested nine due diligence items from the potential tenant, as follows:

 1) Organizational chart showing direct and indirect beneficial ownership and managerial control of Morgan Creek Marina, LLC. 

2) Copies of the articles of organization, operating agreement and other organizational documents of Morgan Creek Marina, LLC, Coastal Marina Holdings, LLC, and all constituent entities owning a direct or indirect controlling interest and/or holding a direct or indirect managerial control over Morgan Creek Marina, LLC. 

3) Written resolutions authorizing the assumption of the Marina Joint Ventures lease and the Marina Outpost lease. 

4) Consolidated financial statements Coastal Marina Holdings, LLC and other reasonable evidence of the net worth for any and all entities, individuals and/or beneficial owners and guarantors of the proposed Assignee of the MJV and Marina Outpost Leases. 

5) Audited financial statement of Coastal Marina Holdings, LLC prepared by an independent certified public accountant, prepared in accordance with generally accepted accounting principles. 

6) Reasonable evidence of net worth of Coastal Marina Holdings, LLC and all other proposed guarantors of the Marina Joint Ventures lease or the Marina Outpost lease.

7) Draft of proposed instruments of assignment/ assumption of the Marina Joint Ventures lease and the Marina Outpost lease.

 8) Proof of adequate business experience and reputation in the ownership and operation of marinas and related-businesses. 

9) Business plan for Morgan Creek Marina’s proposed use of the leased premises, including, without limitation, food/alcohol sales and service and boat club operations. 

We understand that seven of those nine items are still incomplete and outstanding. City Council has a fiduciary responsibility to the resident voters of Isle of Palms to execute a contract that is in the best interest of the city. The marina is the city’s largest and most significant asset, and as residents we need to hold our City Council accountable for moving forward without benefit of the answers to all nine questions. At the meeting, there was discussion regarding the Private Parking Lot which has commonly been referred to as the employee lot. This lot was never designated as part of the original marina lease, and this amended lease now clearly states that it is part of the leased premises controlled by the Tenant. The motion on the table was to remove that sentence that clearly places it under the control of the tenant; the motion failed, so if Council adopts the ordinance on SecondRead, it will be part of the lease and controlled by the tenant. IOP will give it away. 

Councilmember Miars questioned why we would hand that over without consideration, which is exactly what happened when the motion failed by a 4-5 vote. Miars, Pierce, Bogosian, and Anderson voted for taking it out of this lease, and Popson, Ward, Hahn, Streetman, and Pounds voted to keep it in the lease, effectively giving up control without any consideration. At the root of all of this, by not requiring due diligence answers, by giving up valuable parking space to the tenant, is trust. It appears the City Council is passing this lease assignment to a tenant based on trust instead of clearly stated financial and operational parameters. It recently came to light that there is a lawsuit pending against our potential tenant and his ownership group for direct violation of assigned lease terms at Bohicket Marina. The lawsuit alleges that promises made were broken, in addition to violating the written word of the lease agreement. Trust should now be taken out of the discussion, given this new information. The Ordinance to adopt this lease assignment will be before Council shortly for a Second Reading. We ask that you please let your City Council know where you stand on the assignment of this lease. From our perspective, the ordinance up for Second Read on the lease assignment as it now reads should not be adopted. The prudent action for Council to take is to place a hold on assigning this lease, in light of the Bohicket lawsuit and the shadow that casts on our taking Mike Shuler and his ownership group on as our tenant. 

Council should take the time and perhaps hire an expert marina consultant to ensure that any agreement put forth is favorable for the city, lock down the parking situation, and insist on completion of due diligence. Assigning the existing lease “as is” is the simplest answer, especially if time is of the essence. Is it? If yes, Council needs to be transparent and explain the consequences if delayed. 

If Council insists on amending the lease assignment, they need to ensure any agreement is written with benefit to the residents and the city, not the tenant, for 23 more years. 

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