Michael Satsky and Brian Gefter, the operators of Lily Pond nightclub in East Hampton, went to court to prevent their landlord from terminating their lease on the space with one year left on the deal. Yesterday, Eater got its hands on the court documents. The basic story is this: Satsky and Gefter agreed to a three summer deal for Lily Pond with the leaseholders of the Three Mile Yacht Club in East Hampton, a space that had never taken off out east due to its isolated location. In March, these leaseholders came to Satsky and Gefter and said that they had received a more lucrative offer from another operator, and had decided to take that deal and buy out the Lily Pond team from the new down payment. They offered to keep Lily Pond in place if Satsky and Gefter would sign a new four year deal for the space at worse terms than they currently enjoy. The two went to court and got an injunction, because after all, a deal is a deal. Seems pretty straightforward. But what was really interesting was the original deal terms and seeing how these Hamptons operating agreements work.
In 2008, the East Hampton nightclub known as Le Flirt was a failed enterprise. Hoping to bring in additional cash for their money losing venue, Le Flirt's owner Frank Cilione turned to Satsky and Gefter to capture that Manhattan party scene that invaded the Hamptons all summer long. The two sides struck a three summer deal on terms that were advantageous to Satsky and Gefter to say the least. The key terms are as follows:
· Satsky and Gefter (the Operators) controlled every Saturday and holiday Sunday during the summer season, with the option to control Fridays as well for no additional cost.To summarize, the Operators put up almost no money for a chance to operate a Hamptons nightclub all summer long for 35 percent of the net profits, a ridiculously sweet deal for Satsky and Gefter and one which they are desperate to maintain through the end of the operating term. So when the Landlord showed up with a new agreement that sought to get annual cash payments in the low six figures up front and a better split, they went to the judge to protect their rights. They head back to court on April 12 for a decision. It seems like Johnny Law is on their side on this one.
· The Landlord paid for all up front renovations and capital improvements for the space.
· The Operators had sole control over the operation of the club, including guest list, meaning they could refuse to let the landlord inside!
· The Landlord got 65 percent of the profits after operating expenses and 20 percent of the gross alcohol sales, and the operator got the remaining 35 percent of the profits. However, the Landlord paid for all of the booze upfront and the operator could give it away to whomever they wanted.
· The Landlord was responsible for maintaining insurance, paying fines and keeping the license in good standing, not an easy thing to do in East Hampton
· If the project failed, the Operator had zero financially responsibility to the Landlord.
The other interesting point is that the nightlife world is very small, and there are only a handful of operators who could be successful in the Hamptons who don't already have a deal. Satsky and Gefter may try to force their landlord to name the third party in court, resulting in some very bad blood in a very small world. It will be West Side Story in the Meatpacking District!
· Hamptons Landlord Seeks To Evict Lily Pond [~ENY~]
· All Hamptons Coverage [Curbed Hamptons]