Is The Tower FOREVER?

posted on listserv on February 24, 2013 

Does VTel have the right to buy the land at the end of the 60-year lease.  If so, then the Tower could be a landmark in Norwich FOREVER.  

There is some odd language at the end of section 3, that I think may give VTel the right "to purchase the Property at fair market value," at the end of 60 years.  Obviously that would be a disaster.  Town Manager Fulton should converse with the lawyer advising us on the LOI (please say we had a lawyer)  because the lawyer failed to advise the Town Manager on a vital term.  

My detailed analysis is after my signature.  I fear the Town is in over its head. 

Why give VTel a right of first refusal at all.  The company gets a rent-free lease for 60 years.  That is it ... done. 

[I am not a fan of the economics of the VTel deal.  We need a consultant with expertise in the industry. That is for another post.]

I'm hoping to be wrong about the right to buy and labelled an alarmist.  My advice: Sign no contract with this type of language in it. 

Thank you for reading.

Chris  

My detailed analysis is as follows.  Be forewarned, it is a snoozer.  If your kid wants to go to law school, this should help dispel the notion

Here is the pertinent text of section 3 of the LOI

"If at any time during the 60 year term the Town should seek to sell all or a portion of the Property, or should VTel exercise all renewal options for the full 60 years, VTel shall have the right of first refusal to purchase the Property at fair market value, as determined using an independent appraiser. The mechanics of the right of first refilsal will be set forth in greater detail in the Definitive Agreement."

A quick read of the provision suggests that VTel simply has a right of first refusal, if Norwich decides to sell.  But, there is an oddity.  In a typical right of first refusal, VTel has the right to buy the land on exact same terms as the proposed buyer. Here, the price VTel pays is set by an "independent appraiser".  Very strange, until looked at in the context of the clause "should VTel exercise all renewal options for the full 60 years." Stripped of non-essential terms, the right VTel has reads as follows:

"Should VTel exercise all renewal options for the full 60 years, VTel shall have the right to purchase the Property at fair market value, as determined using an independent appraiser."  The Tower is forever.