Congress Theatre Lease Jammed

Ontario Management Group signed, but has yet to execute, a letter of intent with Carranza to lease the troubled venue for $50,000 a month for five years. Only after it signed the LOI, Ontario alleges, did it learn that Carranza and Jam Productions have a 2007 memorandum of understanding that gives Jam right of first refusal over any deal by Carranza to sell or enter any partnership without Jam’s “express written consent.”

Ontario asks a Cook County chancery court to decide if Jam’s MOU is enforceable and, if so, that it doesn’t preclude Carranza from leasing the venue.

Should the court agree, Ontario asks that the court also declare its own LOI enforceable and grant possession of the Congress Theatre.

Jam and One Stop Loans, the company that owns and operates the Congress Theatre, signed the MOU in July 2007 but allegedly did not file it with the Cook County court – a point Ontario claims makes it unenforceable.

The MOU includes terms of a proposed $600,000 loan by Jam Productions to One Stop that includes the contested right of first refusal effective through two years after the maturity of the loan, or when the loan is repaid in full, whichever comes first. Carranza has reportedly said he still owes $100,000 on the loan, according to WBEZ.org blogger Jim DeRogatis.

Ontario Management claims Carranza agreed on May 24 to terminate his lease at the Congress Theatre and enter a new lease agreement with Ontario. According to court documents, Carranza notified Ontario on or about Aug. 1 of the existence of the MOU with Jam and its right of first refusal clause. So off to court they went.

The Ontario lease with Carranza, if executed, would commence on the first day of the month following “certain contingencies” described in the LOI as “approval of all necessary licenses or entering into an interim management agreement, whichever occurs sooner.”

Carranza’s had issues with the city over building code violations and lost his liquor license, according to DeRogatis, who published his findings at WBEZ.org. At this point, Robert Sillerman’s new company, SFX Entertainment, enters the picture. The LOI is also subject to approval by SFX, which has an apparent $1.2 million interest in the lease. According to the LOI, among the terms of the proposed lease is a payment of $150,000 in “earnest money” to Carranza that “shall be credited against and applied in reduction of the $1.2 million payment by SFX to [Carranza]…”

In a section labeled “Festivals,” the LOI states “The entry by [Carranza] into the Lease or interim management agreement shall be contingent upon SFX paying to [Carranza] or affiliates $1.2 million for [Carranza] festival shares.”

However, the letter doesn’t define the “festival.” The LOI does specify, however, the money shall be held in escrow to pay for code upgrades and to buy out Ticketfly from its existing contract with Carranza.

The LOI, if enforced, frees Ontario from prior contracts entered into by Carranza and singles out a contract with Ticketfly, which “will be paid in full and terminated.” It adds that Ontario would continue to utilize Ticketfly “in the interim period of a license transfer if doing so reduces any penalties related to cancellation of Ticketfly contract.”

In addition to typical agreements about payments on upgrades and licenses, the LOI requires payment of money owed to promoter React Presents, which has presented shows at the Congress Theatre. For now, it’s up to a judge to decide if either Jam’s MOU, and its right of first refusal language, is enforceable and, if not, if Ontario’s LOI should be executed.

Ontario seeks the usual court and lawyers fees if it prevails. “The lawsuit is an unfortunate situation,” attorneys for Jam Productions said in a statement. “Jam has a contract giving it a right of first refusal and a right of approval over sale and lease transactions involving the Congress Theater.

“We do not know much about the Congress Theater’s negotiations with React or SFX, except that the letter attached to the complaint contains numerous conditions, many of which appear not to have been met. “Regardless, Jam has a preexisting right of first refusal and right of approval which we expect all of the parties to honor.”