A September 2018 image of the Jamestown Brewing Company from Google Maps.

JAMESTOWN – The owner of a building that houses a new brewery in downtown Jamestown is trying to evict the business for failing to keep up with rent.

GPatti Enterprises – owned by local developer George Patti – owns the building that houses the Jamestown Brewing Company (JBC) at the southeast corner of Third and Washington Streets. According to a petition filed in State Supreme Court in Erie County on Tuesday, GPatti is claiming it’s received less than 20 percent of four months worth of rent, dating back to Sept. 30, 2019.

The complaint says that JBC owes a total of $85,000, but has only paid $15,000 so far. It also says that the brewing company – which is co-owned by John McLellan Sr. and John McLellan Jr. – has been unable to pay various debts it owes various lenders. Under its lease agreement with the business, GPatti argues it has the right to evict the operation if it fails to pay rent owed after 10 days of its due date.

A hearing for the case is scheduled for Thursday, March 5, in Buffalo.

Meanwhile, the lawsuit is not the first one that’s been filed between GPatti and JBC. In December 2018, JBC filed a lawsuit against GPatti, claiming a Breach of Contract, Fraudulent Inducement, Fraudulent Misrepresentation, and Negligent Misrepresentation when it entered into a lease agreement in 2017. At the time of signing its lease, JBC claims GPatti had said work on the building would be completed in time for an April 2018 opening. However, numerous delays in construction – including an environmental abatement mandated by the state – pushed that opening date back for more than a year. As a result JBC felt GPatti was misleading when it provided the timeline for when the operation could open. It is suing GPatti for compensatory and punitive damages.

In April 2019 the court dismissed three of the claims, while the issue of breach of contract is still playing out in the court.

That case is currently in the discovery phase, with a deadline of April 30 for both sides to present their evidence. The next scheduled court date in that matter is a discovery compliance meeting set for July 10.

According to the Post-Journal, the total project cost for renovating the property and preparing it specifically for JBC was estimated at $3.84 million. Financing for the project included a $475,000 state Main Street grant that was awarded through the Regional Economic Development Council program in December 2015 and $830,000 from the Downtown Revitalization Initiative in 2017. The Jamestown Local Development Corporation has a $180,000 loan attached to the project. The IDA also offered tax abatements for the property.

On Wednesday, April 17 Erie County Supreme Court Judge Timothy Walker ruled to dismiss a portion of a lawsuit filed in December by the owners of the Jamestown Brewing that claim their landlord and property developer – G. Patti Development – committed fraud when courting the business to enter into a lease agreement to rent out the former Lillian Ney Renaissance Center building (AKA Grant Building)  at the corner of W. Third and Washington Streets.

Jamestown Brewing owners John McLellan Sr. and John McLellan Jr. had filed a lawsuit against GPatti after continued delays prevented them from opening their operation as scheduled. While the business was initially slated to open in the spring of 2018, it saw numerous construction and development delays and has yet to open its doors.

The McClellan’s are suing GPatti, claiming it wasn’t fully transparent in regards to the work that was needed to prepare the site, nor regarding communicating some environmental work that was required before the site would be ready. As a result, Jamestown Brewing was asking for compensatory damages, punitive damages, interest, attorneys fees and costs based on the alleged misrepresentations.

At the request of GPatti Development, Judge Walker dismissed those claims.

But the judge also denied a motion request by G. Patti Inc to dismiss a breach of contract claim from Jamestown Brewing that dealt with the spending of $1 million in state money from the Downtown Revitalization Initiative (DRI) fund. Jamestown Brewing claims GPatti misappropriated that money, leading to the breach of contract.

Judge Walker said he first wants to see a breakdown of how state that DRI money was spent on the Jamestown Brewing project before ruling on that matter. That review won’t take place until the project is completed because state economic development money typically isn’t released until a project is finished.

According to the Post-Journal, the total project cost for renovating the property and preparing it specifically for the Jamestown Brewing business was estimated at $3.84 million. Financing for the project included a $475,000 state Main Street grant that was awarded through the Regional Economic Development Council program in December 2015. The Jamestown Local Development Corporation has a $180,000 loan attached to the project. The IDA also offered tax abatements for the property.

There still is no word on when the brewery will open.  Once open the business is expected to employ between 30 and 40 people. The restaurant will seat 280 guests in five different areas.

The day after WRFA reported the civil suit filed by the JBC against GPatti Enterprises, GPatti sent out a press release/statement from its legal counsel – Rupp Baase Pfalzgraf Cunningham LLC – to local media vehemently denying any wrongdoing in the multi-million dollar effort to prepare the building for the brewery operation.

GPatti, owned and operated by George Patti of Jamestown, is the owner of the former Lillian V. Ney Renaissance Center (and previously known as the Grant Building) on the corner of Washington and W. Third Streets in Jamestown. The operation is renovating and leasing the property to JBC, owned and operated by Jon McLellan Sr. and Jon McLellan Jr. from Buffalo.

In December JBC filed a civil complaint in New York State Supreme Court – Erie County claiming GPatti failed to live up to its end of its lease agreement to have the building prepared for a grand opening by April 2018. Instead, several environmental setbacks have resulted in the operation still not being open – with a new date set for mid March of this year.

“If JBC had been made aware of the environmental issues in a timely fashion, it would not have entered into the lease agreement with GPatti,” the lawsuit contends

In its response to the lawsuit, the statement from Rupp Baase Pfalzgraf Cunningham said GPatti was disappointed to learn of the legal action by its tenants and it would have preferred the brewery work with it to resolve any issues or concerns, rather than filing a lawsuit. The statement also said that JBC was aware of the potential for delays and took on that business risk as part of its lease, adding that the business was made aware of the progress of the work at all times.

And it said that if the lawsuit does move forward, GPatti will vigorously defend against the allegations, and it will assert claims of its own.

JBC is being represented by Ryan Cummings from the Buffalo law firm Hodgson Russ.

He told WRFA via email on Tuesday that the lawsuit was only filed after JBC tried unsuccessfully for months to resolve its issues with GPatti privately.

“The delays discussed in the complaint have presented challenges to Jamestown Brewing Co. and those challenges continue to mount,” Cummins said.

The brewery is seeking damages in excess of a million dollars as a result of the project being 11 months behind schedule.

Cummins also said despite the lawsuit, the brewery continues to work diligently to open the restaurant and brewery.

According to the Post-Journal, the total project cost for renovating the property and preparing it specifically for the JBC business was estimated at $3.84 million. Financing for the project included a $475,000 state Main Street grant that was awarded through the Regional Economic Development Council program in December 2015. The Jamestown Local Development Corporation has a $180,000 loan attached to the project. The IDA also offered tax abatements for the property.

Last week City Development Director Vince DeJoy said JBC was expecting to open in mid-March.  Once open the business is expected to employ between 30 and 40 people. The restaurant will seat 280 guests in five different areas.

BUFFALO, NY – The long-delayed opening of a new downtown brewery has led to the business suing the building owner and project developer.

According to a legal complaint filed in State Supreme Court in Erie County in late December 2018, Jamestown Brewing Co., Inc. (JBC) is the plaintiff in a case against GPatti Enterprises, LLC, (GPatti) the defendant.

JBC is suing for breach of contract, negligent misrepresentation, and fraud.

The complaint was filed by JBC legal counsel Hodgson Russ LLP, based out of Buffalo.

• READ FULL LEGAL COMPLAINT FILED BY JBC

JBC is based out of Buffalo and is being operated by the father-son duo John McLellan Sr. and John McLellan Jr. GPatti is owned and operated by Jamestown-area resident George Patti. Because the McLellan’s business is based out of Buffalo, the complaint was filed in State Supreme Court in Erie County rather than Chautauqua County.

As part of its complaint, JBC says it entered into a lease agreement with GPatti without being fully informed of environmental issues that could have delayed its opening. It also claims GPatti breached its contract by failing to meet the original construction schedule and performing work as required under the lease.

UNDISCLOSED ENVIRONMENTAL ISSUES FORCE RECURRING DELAYS IN OPENING

In August 2017 JBC entered into a lease contract with GPatti and moved forward with an initial plan of opening in April 2018.

GPatti purchased the former Lillian V. Ney Renaissance Center on the corner of W. Third and Washington Streets from the Gebbie Foundation in December 2017 for $330,000 as part of its plan to redevelop the property for JBC. The purchase took place after the brewery project was awarded $830,000 from the $10 million Downtown Revitalization Initiative (DRI) Grant (announced in the spring of 2017).

As part of its business plan and in coordination with the timeline provided by GPatti, JBC purchased and stored long lead items for the brewery and also hired employees in preparation for the installation of the brewing equipment and the pending grand opening. The JBC Grand Opening was intended to take place in advance of the opening of the National Comedy Center in August 2018. However, the April opening did not occur and in June, GPatti presented an updated timeline that said work would be completed by October 2018. Once October arrived, the completion date was pushed back another month and again another month until it eventually was pushed back to mid January 2019. At that time the lawsuit was filed.

The recurring delays in the development timeline were reportedly due to environmental remediation required by the state due to the property being located at a former dry cleaning facility, as well as asbestos abatement that had to take place.

According to the legal complaint filed by JBC, GPatti had attributed the delays to a Phase II environmental study from the Department of Environmental Conservation from the fall of 2017. Because a Phase II study only occurs after a Phase I study has been done and indicates that there is a potential problem, JBC says it appears that the Phase I strudy was done before the lease was signed, but they were not informed of the results of the Phase I study prior to signing the lease.

JBC also feels GPatti was aware of the environmental issues in advance of the 2017 Phase II or Phase I study because the Gebbie Foundation had a Phase II study done in 2007 when it owned the building. At that time the Jamestown Renaissance Corporation (JRC) was a tenant in the Lease Premises. JBC believes GPatti knew of the Gebbie Foundations’ 2007 Phase II study before the lease was signed because an executive who worked for JRC at the time of the 2007 study began working for GPatti prior to August 2017.

“If JBC had been made aware of the environmental issues in a timely fashion, it would not have entered into the lease agreement with GPatti,” the lawsuit contends.

JBC also states that its principles and employees quit their jobs in anticipation of the original April 2018 grand opening date and the principles contributed significant personal funds to bridge the period of time between the original grand opening date and the new anticipated opening dates, and the company has incurred carrying costs including bank loan repayments and insurance.

JBC received several loans and funding grants in order to get the operation off the ground. As a result of the delays in opening, all lending sources – both public and private –  made an effort to restructure their respective loans to accommodate the McLellans and ensure they have enough startup capital for the business once it finally opens.  But the delays in loan repayments have lead to additional interest being added until the loans can be fully repaid.

As part of its claim, JBC says it has suffered damages of at least $1,000,000 and is also seeking compensatory damages, interest, attorney’s fees, and costs as a result of the alleged breaches by GPatti.

Also, As part of its lawsuit, JBC claims that even though GPatti has received DRI funds that were earmarked for the brewery project and it is a joint beneficiary of those DRI funds, GPatti has not identified the DRI funds it has received, nor identified what those funds have been spent despite numerious requests. As a result, JBC is requesting GPatti be compelled to account for the DRI funds and their expenditure.

WRFA reached out to the parties involved on Tuesday. A representative for GPatti didn’t want to make an immediate comment.  However, the attorney for JBC – Ryan Cummings from Hodgson Russ, sent a statement late Tuesday afternoon.

“The lawsuit was only filed after Jamestown Brewing Co. Inc. tried unsuccessfully for months to resolve its issues with GPatti privately. The delays discussed in the complaint have presented challenges to Jamestown Brewing Co. and those challenges continue to mount as just [Monday] one of GPatti’s subcontractors filed a lien against the property, claiming that they have not been paid for work and materials provided to GPatti. Notwithstanding the lawsuit and delays occasioned by GPatti, Jamestown Brewing Co. continues to work diligently to open the restaurant and brewery,” Cummins wrote.

Cummings also said that the lawsuit is in its infancy, but a typical commercial case takes approximately 18 months to resolve.

WRFA also reached out to city development director Vince DeJoy, who tells WRFA the city is aware of the lawsuit and is hoping for a quick resolution, adding that it remains committed to seeing the business open in the near future.

According to the Post-Journal, the total project cost was estimated at $3.84 million. Financing for the project included a $475,000 state Main Street grant that was awarded through the Regional Economic Development Council program in December 2015. The Jamestown Local Development Corporation has a $180,000 loan attached to the project. The IDA also offered tax abatements for the property.

Last week DeJoy said JBC was expecting to open in mid-March.  Once open the business is expected to employ between 30 and 40 people. The restaurant will seat 280 guests in five different areas.

The JLDC board of directors held its first meeting of the new year and as part of new business the panel unanimously approved two resolutions that would provide $50,000 in grant funding to the National Comedy Center for an additional event at the Northwest Arena during the 2019 Lucille Ball Comedy Festival in August.

In addition, the board approved a resolution that would give $50,000 in grant funding to the Jamestown High School Marching Band, along with an upfront $25,000 loan for a major fundraising event on Friday, July 19 at the Reg Lenna Center for the Arts. The Marching band is hoping to generate a net profit of $15,000 from the event.

The funding would come from city’s Downtown Programming Fund.

City Development Director and JLDC Executive Director Vince DeJoy said the funding for the Marching Band event would be used to cover various costs associated with the event.

The Reg Lenna Center for the Arts will be the location for a special fundraiser for the Jamestown High School Marching band on July 19, 2019 featuring a “significant name and talent” according to organizers who are unable to disclose more specifics until contracts are signed. Funding for the event is made possible, in part, to the city’s Downtown Programming Fund.

“The total expenses for this program, including talent, travel, hospitality, production costs, stage, lights, marketing, etc. is $119,000. It’s a very significant name and talent that the Marching Band is hoping to bring to the Reg,” DeJoy said.

Because contracts still have to be signed for the entertainment that will be participating in both events, specific details of what the events would entail were not disclosed and would be released at a later date.

Also, while the JLDC board approved the funding allocations, the resolutions must also be reviewed by the state and approved in order to be finalized. That’s because the grant money comes from a $600,000 pool of money from the $10 million Downtown Revitalization Initiative Grant the city received in 2017.

Jamestown Mayor Sam Teresi, who serves as the president of the JLDC board, also provided a reminder of what the event program funding can be used for.

“This program is intended not to fund existing events and activities that are already underway. We’re not here to pay for somebody else’s sponsorship or subsidy, but to deal with brand new events that otherwise wouldn’t occur. Or in the case of an existing event like the annual Lucy Fest that’s operated by the Comedy Center where there is a significant and quantifiable increase and expansion in an existing event, and that’s what’s happening with the NCC event,” Teresi explained.

The JLDC also reminds the community that additional funding remains available for anyone wishing to put on a major event in the downtown area of the city and needs support to do so.

In other news from the meeting, the JLDC board approved a unanimous consent resolution that was signed in late 2018 involving changes to the terms of a $180,000 JLDC loan for the Jamestown Brewing Company.

That loan was one of several loans and funding sources the business owners – father-son duo John McLellan Sr. and John McLellan Jr. from Buffalo – requested in 2017 in order to get their operation off the ground. However, delays in the renovation effort of the building where the business will be located forced a delay in the opening. As a result of the delay, all lending sources – both public and private –  made an effort to restructure their respective loans to accommodate the McLellans and ensure they have enough startup capital for its opening, now planned for March 2019.

Because the JLDC loan exceeded $100,000, the changes had to also be approved by the Jamestown City Council – which it did by a vote of 8 to 1 during its October 2018 meeting.

And the JLDC board also welcomed two new members. Vicki McGraw will be the representative of the Jamestown Chamber of Commerce, taking over for Russ Diethrick. And Chris Sellstrom will be the representative for the Jamestown Renaissance Corporation, taking over for John Whitaker.  The JLDC  bylaws state that a representative from those two organizations, along with the Manufacturers Association of the Southern Tier, must have a seat on the board.

The Jamestown City Council during its October 2018 voting session.

The Jamestown City Council voted Monday night to restructure a loan for the Jamestown Brewing Company that was originally approved in the spring of 2017.

The loan comes from the Jamestown Local Development Corporation and is for $180,000. It was one of several loans and funding sources the business owners – father-son duo John McLellan Sr. and John McLellan Jr. from Buffalo – requested in order to get their operation off the ground.

However, delays in the renovation effort of the building the business will renting have forced a delay in the opening.

As a result of the delay, all lending sources – both public and private – have made an effort to restructure their respective loans to accommodate the McLellans and ensure they have enough startup capital for its opening.

The city council is required to sign off on any JLDC loan or any changes to past JLDC loans are over $100,000.

On the recommendation from JLDC executive director and city development director Vince DeJoy, the council approved the new terms of the loan, which says the business won’t have to make a payment for the first six months after disbursement. The new terms also mean the business will only have to make interest-only payments for the first six months and its repayment term was extended from seven to eight years.

The vote wasn’t unanimous. Councilman Andrew Liuzzo (R-At Large) was against it on the grounds that most privately owned businesses are not given the ability to restructure their loans once they receive them and he felt the city shouldn’t give this business additional assistance.

Jamestown City Councilman Andrew Liuzzo in August 2018

“If this was a private venture and whatever pitfalls or short comes happen, that person – because he has skin in the game – would have to figure out how to manage his debt and how to repay his loans,” Liuzzo said. “I find it troubling that because it’s subsidized we are very eager to help. Of course we want them to be successful, but that doesn’t happen when someone is doing something on their own and its a private capital investment.”

“Quite frankly, there is private investment. It’s called Five Star bank and they are offering the same terms [as the revised JLDC loan],” DeJoy countered. “This is something that is somewhat routine that any private lender would offer their recipient of their loan.  And let me make it clear that this money isn’t money that comes from the taxpayers of the city of Jamestown.”

It’s also worth nothing the redevelopment project of the building, and not the actual brewing business, is what’s being subsidized. While the property owner – G Patti Development – received significant state and federal funding for upgrading the building, the McLellans received little actual grants or tax subsidies for their business, with most of its investment coming from loans from both private and public sources.

The total project cost between G Patti Development and Jamestown Brewing Company was estimated to be $4,835,760. Of that, the total project cost attributed to just starting the Jamestown Brewing Company was estimated at $750,000. The JLDC loan covers about a quarter of the McLellan’s total cost.  The McLellans also received a $100,000 Al Tech loan from the county IDA andnd the Greater Jamestown Zone Capital Corporation also acted on a $50,000 loan for the business. The remaining funding for the business was provided by a loan from Five Star Bank.

DeJoy also explained that the business was not being given any type of break on the amount it would have to pay back to the JLDC and if anything, the extension meant the business will have to pay more money through interest than what it had initially paid.

Mayor Sam Teresi also explained that the business owners to have “skin in the game” because they are putting their own assets up as collateral.

“The owner has a requirement of providing between 10 and 15 percent of the total product cost in the terms of cash equity,” Teresi noted. “So their bringing their own dollars to the project. They are on the hook for every penny of the money they are borrowing and they’re providing collateral in the form of not only their business assets, but their pledging their own properties as real estate collateral for the deal.”

There also seemed to be misunderstanding regarding state grants that were given toward the project.

Jamestown Brewing Company will be located in the former Lillian V. Ney Renaissance Center at the corner of W. Third and Washington Streets.

According to a March 2017 article by the Jamestown Post-Journal, the original plan was to have the business open in late 2017 or early this year.

No opening date has been announced yet. A post on the Jamestown Brewing Company Facebook page from Oct. 11 stated, “Every day we are closer to drinking beer with you. As soon as we have our official opening date, you guys will be the first to know!”

Once open the business is expected to employ between 30 and 40 people.

According to Jamestown Development Director Vince DeJoy, the father-son team of John McLellan Sr. and John McLellan Jr. – who own the business – are asking their lenders to allow them additional time before they begin to start paying back their loans.

During this week’s city council work session, Jamestown Mayor Sam Teresi explained why the request was being made.

“This is not an issue with the business. The business has had its opening delayed through no fault of its own,” Teresi said, adding, “This is not meant to lay blame at anybody’s door step, including the property owner, developer, and landlord, because they’ve been confronted with things that are of no fault of their own that have delayed the renovation of the property – some things of environmental nature and things related to dealing with a building that is 60 plus years old and a lot of things that were previously unknown about the building. It’s quite natural for a project of this nature. Everybody’s working together to try and get this off on the right foot.”

Those lenders for the Jamestown Brewing Company business include two public agencies – the Chautauqua County Industrial Development Agency and the Jamestown Local Development Corporation (JLDC).

In March 2017, the JLDC board approved a $180,000 loan for the business, which is moving into the former Lillian V. Ney Renaissance Center on the corner of W. Third and Washington Streets and is currently converting it into a three-floor restaurant and microbrewery. The original terms of the loan were for seven years at 4 percent interest, with payments of the loan scheduled to begin shortly. Because that loan was over $100,000, the Jamestown City Council also had to sign off on it and voted unanimously in support of it in March 2017.

The total project cost, which not only included starting the business, but also acquiring and renovating the building, was estimated to be $4,835,760. Of that, the total project cost attributed to just starting the Jamestown Brewing Company was estimated at $750,000.

During this week’s city council work session, finance committee chairman Tony Dolce announced that the borrower had requested they be given more time before having to make payments on their JLDC loan.  In response, city councilman at large Andrew Liuzzo asked if there was any reason to be concerned.

“What’s the contingency plan if this doesn’t pan out like we’re hoping it does. It had trouble getting an opening date and they had to push that back. Things happen. So what happens if they can’t pay this loan back? What happens to our commitment to this project?” Liuzzo asked.

City Development Director and JLDC Executive Director Vince DeJoy explained that other lenders for the business – including Five Star Bank – have also agreed to allow a delay in first payment on their respective loans, adding that all vendors are understanding of the business’s circumstances.

“We would always try to work out a way if they got behind, work out something with the business that got the loan. But again, we’re in line with a number of other lenders and we will all as a group try to do everything we can to make sure this business succeeds,” DeJoy said.

DeJoy also noted that no money from the JLDC loan fun will be given to Jamestown Brewing Company until after the business is open.

“Absolutely no funds are released or disbursed by JLDC until the project is completed and the business is open and serving customers,” DeJoy told WRFA via email.  “Repayment typically begins the next full month, just like if you secured a car loan or mortgage.”

Mayor Teresi added that by delaying the payment schedule, the owners will have more on-hand capital to help ensure a successful opening.

“What everybody is trying to do is recognize that the opening has been delayed, as it’s been said, through no fault of their own. There’s been development delays with the real estate developer who’s delayed the business’s entry. All the lenders got together and said we’d like to provide some additional consideration and help to this business so that they can get open and get open on the right foot,” Teresi explained.

Because the JLDC loan for the project initially required city council approval, the council is also required to act on approving the revised terms of the loan. It will act on the matter during the Oct. 29 voting session.

The County IDA was also expected to act on revising the terms of its loan to Jamestown Brewing Company during its meeting on Oct. 23.

According to a March 2017 article by the Jamestown Post-Journal, the original plan was to have the business open in late 2017 or early this year.

No opening date has been announced yet. A post on the Jamestown Brewing Company Facebook page from Oct. 11 stated, “Every day we are closer to drinking beer with you. As soon as we have our official opening date, you guys will be the first to know!”

Among the items on the agenda is a site plan review for Jamestown Brewing Company – the multi-million dollar project that will be opening up in the Lillian Vitanza Ney Renaissance Center at the corner of Third and Washington Streets in Jamestown.

The Buffalo-based father and son team of Jon McLellan and Jon McLellan II, along with G. Patti Development, are in the process of renovating the building. Once complete, it will include a brewery, bar, banquet center and restaurant. If things stay on schedule, the business is slated to open around the beginning of August.

The commission also plans to review site plans for renovation work at the Robert H. Jackson Center.

Also the commission will hold a discussion on the 2018 Community Development Block Grant and Home programs, which are federally funded programs aimed at housing and redevelopment in selected areas of the city.

Tuesday’s meeting begins at 4:15 p.m. in the mayor’s conference room and is open to the public.

The Chautauqua County Industrial Development Agency is considering granting the exemption to the business, but must first hold a public hearing. The hearing will take place at 10 a.m. on Friday, May 19 in the IDA offices, located at 201 W. Third St., second floor of the BWB Building.

Jamestown Brewing Company is a proposed $4.8 million microbrewery and restaurant business being developed by John McLellan Sr. and John McLellan Jr., both from the Buffalo area.  As part of the project, the Lillian V. Ney Renaissance Center building is being purchased by local developer George Patti of GPatti Brew and will be transformed into a three-floor brewery and restaurant.

Financing for the project also includes a $1 million request in state funding from the Downtown Revitalization Initiative and a $475,000 state Main Street grant that was awarded through the Regional Economic Development Council program.

More details on the project, including the costs and benefits (as presented by the applicant), can be found online at the IDA website.