BROOKINGS – An objection was raised over the transfer of a liquor license during last Tuesday’s meeting of the Brookings City Council. The council voted unanimously to approve the transfer.
The application was to transfer an on-sale liquor operating agreement from Old Market Eatery, owner Jesse Lee, to Gonz Productions, also known as Main Street Pub, owner Garner Hansen.
“A public hearing and action by the local governing body is required for all alcohol licenses. This license would be effective upon S.D. State Department of Revenue final action and license issuance, then subject to an annual renewal,” according to an attachment to the agenda, available on the city’s website.
Item details were included in the memo from City Clerk Bonnie Foster.
According to city code, the city council reviews all applications submitted to the city for available on-sale alcoholic beverage agreements, including transfers, in accordance with the following factors: the type of business the applicant is proposing, the manner in which the business is operated, the extent to which minors are employed, adequacy of the police facilities to properly police the proposed location, and other factors, including the hours that business is conducted, according to the memo.
Kirk Simet, a longtime resident of Brookings, owns SLH Holdings and HME Management, which “employ about 80 people” and are headquartered in the Old Market building, now known as 5th & 5th.
“This is a very serious matter we got in front of us here” involving his business deal with Lee and a lawsuit, Simet told the council, adding he’s consulted with attorney Tim Hogan.
Simet detailed the history of the Old Market liquor license, starting in 2011, when Jael Thorpe put in a restaurant and obtained the liquor license.
“Back in 2013, Jael sold the restaurant, Old Market Eatery, which included the license agreement … to Jesse two years later for $200,000. I have a copy of the purchase agreement,” Simet said. “So there’s value in that space; there’s value in that liquor license.”
Simet said he bought the property in 2018 for $490,000, and “put another $550,000 into that building” and has several tenants in the building now.
He said 5th & 5th has put $110,000 into the Old Market Eatery for appliances and re-doing the downstairs.
“Jesse had a long-term lease upstairs and a 30-day lease downstairs,” Simet said.
The lease was signed in March 2020.
“Well, guess what hit? COVID,” Simet said.
Simet said he understood why the city shut down some businesses in the city.
“Everybody else tried to make a go of it. Everybody,” Simet said, adding other businesses did take-out, whatever they could to stay open, at least part-time. “Old Market didn’t.”
Simet said his company deferred lease payments for Lee.
“The day he was supposed to start paying the full lease payments … no check,” Simet said. “Jesse defaults.”
Simet met with City Attorney Steve Britzman, City Manager Paul Briseno and Foster to see if there was a way to prevent Lee from selling the liquor license.
“He owes us $23,000 right now. That grows at $6,000 a month. His lease is valued at $400,000,” Simet said. “Not only does he walk out the door, within five days, he files a transfer of the license.”
“That asset was gone, so we’re fighting hard to keep that liquor license in that location where it’s been so we can go find a potential nother tenant,” Simet said.
People wanting to put in a restaurant want a liquor license and won’t consider the location without one, he said.
“I don’t care if you give it to me, but don’t give it to him,” Simet said to the council.
He said a lawsuit was filed last week against Old Market and Jesse Lee.
“The only asset I have is to not allow him to transfer that liquor license. You let him transfer it, that asset’s gone,” Simet said. “You can stop it. If nothing else, put it on hold. Let us fight through this.”
“Don’t let this happen. The city has the right, without cause, to pull that license. You have that right,” Simet said. “I’m not even saying (to) pull it from him, just don’t transfer it. Let us figure it out.”
Attorney Tim Hogan said the lease’s remaining months would amount to nearly $400,000.
Simet’s company has tried to find a tenant, but the first question is, ‘Does this include the liquor operating agreement?’ Hogan said.
“Without the operating agreement, 5th & 5th has found that it’s nearly impossible to find a tenant for the Old Market space,” Hogan said.
“What we’re asking the city to do tonight is just simply not approve the transfer, to determine that the license is an important part of the 5th & 5th building,” Hogan said. “We’re asking the city council to deny or move to a study session in the future the operating agreement.”
Hogan said Old Market shut down March 27 and defaulted on the lease Aug. 15. They were served a notice to vacate on Aug. 27; they vacated the premises on Sept. 11.
“They failed to make any payments under this lease, and they remain in default, and they are not in possession of this property. This authorizes the city today to terminate the operating agreement with Old Market Eatery because they are not the owner of this building and they’re not in possession of the premises,” Hogan said last week.
They were asking the council to deny the transfer of the liquor license, Hogan said.
Jesse Lee of Brookings addressed the council,
“One thing that Kirk forgot to mention, is that when the building was purchased, I was a partner in his company,” Lee said. “Improvements were started before there was actual approval from me based on the fact that Kirk was actually trying to buy the restaurant at the time from me. … We could not come to an agreement on selling the restaurant to him.”
Lee said he delayed signing the lease because “I felt very uncomfortable” with things that were going on at the time.
He said the city did not shut him down. “I chose to do it out of the safety for my employees and for the community.”
“Also on that, too, I just want to make sure that everybody understands that it’s not your position to mediate between us,” Lee said to the council.
“This is a pretty black-and-white transfer. There’s rules for this and we follow them all and that’s why we’re here,” Lee said.
Lee said he did propose an agreement with Simet, offering assets from Old Market he didn’t want. “It was denied. And I was told multiple times that they had no plans to use the space as an establishment.”
“I love the Old Market,” Lee said, adding he hoped to provide Brookings with another establishment soon. “As you know, I have a pretty long history of developing establishments in this town and every one of them is still in business.”
Councilor Patty Bacon clarified they were voting on the liquor agreement transfer.
“So, all this background is irrelevant to us. We’re not part of any business or legal obligations at all. Our only job is to process the application and determine that the applicant is in good standing to receive that,” she said.
Bacon asked Foster if all of Hansen’s paperwork was in order.
“That’s correct, Council member Bacon,” Foster said. “Garner and Jesse Lee have met all of the requirements set forth by state law and city council policy on liquor operating agreements.”
“To me, it sounds a lot like a big civil case between you two. I don’t think you should involve the city,” Councilor Joey Collins said.
Britzman said the council is required to follow state statute on public hearings.
“You’ve conducted the public hearing. I just want to make sure that, you know, the council is clear as to their range of choices that you have,” Britzman said. “Fundamentally, you’re deciding whether the applicant (Gonz Productions) is suitable to hold the license, … and whether the proposed location is suitable.”
Britzman said previous legal cases establish, “The local governing body has a legitimate interest in managing the alcoholic beverage licensing in its jurisdiction, to assess whether an alcohol sales location is suitable.”
Councilor Nick Wendell said they had requested information on precedent, whether the city of Brookings had “ever linked anything like unfulfilled terms or unpaid rent” to an alcohol license.
“It didn’t appear to me as though that precedent had been set in our community,” Wendell said, adding if they did that on this transfer, it might be precedent-setting.
“I don’t know that it is safe for us, necessarily, to set new precedent in our decision-making process this evening,” Wendell said.
Bacon asked Simet if he had an interest in owning the liquor license.
“Yes, (I) want the opportunity to market that license to a new tenant,” Simet said.
She asked if he had made an application for himself, and Simet said no, he had not.
Bacon asked if the city had a habit of publicly posting that a license is available. Britzman said the city could approve the transfer and issuance of any operating agreements under state law and the local option.
“So we are not out of line if we choose to … approve this tonight,” Bacon said, which the council later did.
Contact Jodelle Greiner at [email protected]