Donnelly Group's efforts to decrease $13M debt hit snag with City of Vancouver
It appears that a well-known restaurant group has hit a roadblock in its efforts to start the sales of several businesses in Vancouver and make a dent in its $13 million debt, and it’s claiming that will lead to layoffs at one of its bars.
The Donnelly Group, now rebranded as Freehouse Collective, had found a buyer to take over the lease for the Cinema Public House in the Granville Entertainment District as part of its ongoing creditor arrangement proceedings.
However, the City of Vancouver, as the landlord of 901 Granville Street, argued that the potential new owners were not the ideal candidates and worried about their ability to pay the expensive long-term lease agreement they would take over, as well as the rent deferral amounts left unpaid.
That would be nearly $30,000 monthly for several years and then drop down to $25,000 until 2033.
Court documents from last week showed that a numbered holding company (referred to as 144 in the documents) had agreed to take it on, and the judge had suggested it would be allowed pending training from those at Freehouse Collective. Further details revealed the company was created by a couple in Edmonton who had some experience in the hospitality sector through their small Indian restaurant and at Subway.
Justice Fitzpatrick agreed that the sale of the business was fair but that the City had good reason against agreeing to let them take over the lease.
“I would emphasize that The Donnelly Group, who is an experienced operator in terms of running bars and restaurants in Vancouver, and particularly the Granville Entertainment District, was not able to make a go of it. There is simply nothing to suggest that 144, who does not have that same level of experience, will be more successful,” the decision posted to the BC Supreme Court’s website reads in part.
The restaurant was operating at a loss of $130,000-$140,000 in recent years.
The City expressed that public policy goals include “efforts to revitalize and refresh the Granville Entertainment Districts toward creating a vibrant area with viable businesses for day and nighttime.” The rules state that only a restaurant or bar with a specific liquor license can operate in the space, according to the documents.
But, the petitioner argued that they had looked exhaustively for months to find someone to buy it and that jobs hang in the balance if it doesn’t go ahead.
“Mr. Donnelly states that, if 144’s Offer is not approved, the petitioners will disclaim the Lease and wind up operations. I acknowledge that may result in a loss of the ten jobs for Cinema’s current staff,” it goes on to add.
Fitzpatrick was not satisfied.
“The sale and Lease Assignment would appear to generate a positive result for BMO, and the petitioners more generally. However, in my view, that benefit is not fair and reasonable when balanced against the interests of the City, in terms of imposing a new counterparty on the City in this long contractual relationship where there are significant credit risks.”
Fitzpatrick says if Freehouse Collective can provide answers to these questions and address the City’s concerns, it is welcome to renew its application.
The Three Brits Public House at 1780 Davie Street is among the businesses listed in the creditor documents. (freehouse.ca)
The company has expressed its willingness to sell off seven pubs and restaurants in Vancouver, and one in Toronto. No other businesses other than Cinema Public House have been approved for sale.
Daily Hive has reached out to Freehouse Collective’s legal team and the City of Vancouver for further comments on this matter.