The above photo was of a demonstration rally we had last year. Thank you to everyone for your support.
The Boston Globe's article announced the RI Attorney General and the RIDEM is ordering Procaccianti Developers to leave Galilee and TERMINATE its operation of its parking lots in Galilee as it failed to maintain the conditions of its hotel as required by its original lease by PRIX abandoning the Lighthouse Inn. Procaccianti Lawyers are fighting back. Please see Procaccianti's rebuttal.
Here is the link to the Boston Globe Article: RI Trying to Shoo Parking Lot Operations from Procaccianti Developers
Thank you all for your support. However, it is not over until it is over. Procaccianti Developers has 10 Billion in investable assets. However, the pressure is on them now. You would think their reputation is more important than their fight in Galilee. The revenue from the parking lot may be 400,000 to 500,000 per year, and that is small potatoes for Procaccianti Developers. Yet they continue to fight.
Below is the letter sent to the RI Attorney General's Office from Procaccianti Developers' lawyers.
Thankful and Grateful to all of you,
Dr. Al Alba
ADLER POLLCCK®SHEEHAN P.C.
One Citizens Plaza, 8th floor
Providence, RI 02903· l 345
Telephone 401 ·274·7200
Fax 401·751-0604 / 351-4607
175 Federal Street
Boston, i\IJ\ 02 l l 0·22 l 0
Telephone 617-482·0600
Fax 6 l 7-482-0604
wwwa pslawcom
May 2, 2023
VIA EMAIL
William R. Landry
Blish & Cavanagh, LLP
3 0 Exchange Terrace
Providence, RI 02903
Matthew I. Shaw
Office of the Attorney General
150 South Main Street
Providence, RI 02903
Re: PRIX, LLC
Dear Counselors:
We are in receipt of your letter of April 28, 2023 and write on behalf of our client, PRl X, LLC ("PRl X"), to address the factual and legal predicates of the position taken by the Director of the Rhode Island Department of Environmental Management ("RIDEM") and the State of Rhode
Island, through the Office of the Attorney General (the "State"), which are inaccurate and unsupported by the facts and the law.
I. The Lease Has Been Extended Through 2026. First, RIDEM and the State's position that RlDEM did not approve an extension of the Lease to
2026 is (1) based on an incorrect reading of the Agreement and Indenture of Lease dated October 16, 1990 (the "Lease"), (2) based on a misunderstanding of the law related to a party's unilateral right to exercise its right to renew a lease; (3) inconsistent with RlDEM's own interpretation of the Lease over the past 18 years, (4) foreclosed by RlDEM's agreement in July 2021 that the extension period provided for under the terms of the Memorandum of Agreement dated July 22, 2021 ("MOA'') "shall not modify, reduce or otherwise alter the remaining five-year extensions contained within the Lease," and (5) inconsistent with RlDEM's recent request for a certificate of liability insurance naming the State as an additional insured in accordance with the Lease. As RlDEM is well aware, Section 12 of the Lease gives PRIX (as assignee of the Lease):
ADLER POLLCCK @SHEEHAN P.C.
May 2, 2023
Page 2
[T]he option to renew this lease for 5 five year renewal options each
upon the same terms and conditions as are herein contained,
including base annual rental and percentage rent, excepting,
however, an option for further renewal. The minimal insurance
requirement, and minimum liability period shall be fixed by the
Director of the Department of Environmental Management and with
the approval of the State Properties Committee ( or their respective
successors in their functions), as to each renewal option.
Lease j 12. The Lease provides that PRIX, as Lessee,
in order to exercise such option, must have give [sic] notice in
writing by certified mail to the LESSOR at least six (6) months
before the expiration date of this lease or the current renewal term
of its intention to exercise such option. Id. ( emphasis added).
By letter dated October 5, 2020, and sent by certified mail to Janet Coit, Director, RIDEM, PRIX exercised its option by gave timely notice of its exercise of its renewal option effective August 1, 2022 through December 2026.
At no time after PRI X's exercise of its renewal option through December 31, 2026 did RIDEM question, contest or reject PRI X's October 5, 2020 renewal. Rather, when the Lease was approaching its July 31, 2021 expiration, RIDEM recognized and acknowledged the renewal by entering into the MOA with PRI X granting PRIX a 180 day extension commencing on August 1,
2021 and terminating on January 31, 2022. See MOA ~ 1. In doing so, RIDEM expressly agreed that the 180-day extension "shall not modify, reduce or otherwise alter the remaining five-year extension contained in the Lease." MOA ~ 6 (emphasis added). Consistent with a scheduled reevaluation of rents for the Galilee district, PRI X had to pay "increased rental at the appraised value during the extension period commencing on August 1, 2021." MOA ~ 5. The State and
RID EM' s acceptance of the payment made thereafter further demonstrates its recognition of PRI X's extension of the Lease. Thus, contrary to the State and RIDEM's newly minted position, by the express terms of the parties' MOA, RID EM acknowledged nearly two years ago PRI X's exercise of its remaining fiveyear extension and agreed that the 180-day extension shall not modify, reduce or otherwise alter that extension.
In light of the 180-day extension and for the avoidance of any doubt, a week later, by letter dated July 29, 2021 and sent by certified mail to Terrence Gray, Director, RIDEM, PRIX renewed its timely notice of its exercise of its renewal option effective January 1, 2022 through December 31, 2026.
1 Again, at no time after PRI X's July 29, 2021 exercise of its renewal option through December 31, 2026 did RIDEM question, contest or reject PRI X's renewal.
The Lease gives PRI X the right to exercise its option to renew, as it did, and does not require the State or RID EM to review or approve of PRI X's exercise of its option. The option belongs to PRI X and has consistently been exercised, recognized and acknowledged by RIDEM.
Importantly, the option is unilateral and self-executing. It does not require acceptance by the State orRIDEM.
An option to renew a lease "is a unilateral contract under which the lessee retains an irrevocable right to extend the lease during the option period." Norton v. McCaskill, 12 S.W.3d 789, 792
(Tenn. 2000). "An option traditionally constitutes a unilateral contract that requires consideration and binds the offeror while granting the offeree a right within a specific period." Howell v. Advantage Payroll Services, Inc., No. 2:16-cv-438-NT; 2:16-cv-439-NT, 2017 U.S. Dist. LEXIS 203 225, at * 9 (D. Me. Dec. 11, 201 7) ( citing Corbin on Contracts, § 11: 18; 11 Williston on Contracts, § 5: 16 (2022); Restatement (Second) of Contracts § 87 (2022)). The right to renew is
only lost if the lessee fails to give timely notice in accordance with the terms of the option. Norton, 12 S. W.3d at 792. An option is transformed into a contract "when there is an unconditional, unqualified acceptance by the optionee of the offer in harmony with the terms of the option and within the time span of the option." Petro/ink, Inc. v. Lantel Enters, 230 Cal. Rptr. 3d 283, 290
(Cal. Dist. Ct. App. 2018); accord Karn v. Di Lorenzo, 111 A. 195, 196 (Conn. 1920); HowardArnold, Inc., 109 A.3d 473,477 (Conn. 2015).
As one court has explained, "when an option is incorporated into a lease, it is done for the benefit of the lessee to guarantee the right to possession beyond the lease term, if desired. This is particularly desirable in a commercial setting because it is important to maintain a designated and established business site, without having to relocate every year. Given an option to renew a lease,
a lessor is without authority to reject an otherwise timely exercise by a lessee to renew a lease."
Mountaintop v. Colombian Emeralds Int'!, 43 V .I. 193, 199 (V .I. 2001) (holding that it was "not only ludicrous, but without merit" to argue that a tenant who timely exercised an option to renew had only a month-to-month tenancy).
RIDEM has recognized and honored the self-executing nature of PRI X's option to renew for nearly 18 years. PRI X began exercising its option to renew in December 2005 and at no time thereafter did the State or RIDEM ever claim that they had a right to accept or reject PRI X's 1 By virtue of the MOA, PRI X already had an extension of the Lease through January 31, 2022.
exercise of its option to renew. Moreover, to the contrary, RIDEM expressly recognized in the MOA PRI X's remaining five-year extension under the Lease.
Finally, fewer than two weeks before sending your letter, consistent with its understanding of the lease renewal, RIDEM requested that PRI X provide it with a certificate of liability insurance naming the State as an additional insured on a primary and non-contributory basis in accordance with the Lease. When PRI X, through its counsel, provided the requested certificate, RIDEM's
counsel responded "Thank you. This looks good." RIDEM's course of conduct is, therefore, wholly inconsistent with any notion that RIDEM had not approved PRI X's July 29, 2021 exercise of its option to renew.
Thus, there is no basis in either law or fact for the assertion that PRI X's July 29, 2021 exercise of its option to renew was not approved; nor is RIDEM's approval legally or factually relevant.
II. The State and RIDEM's Claims of Defaults Are Belied by the Facts and the Law
and Are Made on a False Pretense to Avoid Payment of the Full Replacement Cost of the Hotel to PRI X.
RIDEM's assertion that there are uncured defaults under the terms of the Lease is also unfounded.
RIDEM had knowledge of the condition of the premises, acquiesced in multiple renewals of the
Lease, confirmed the renewals of the Lease and otherwise induced PRI X to believe that RIDEM understood and consented to the conditions that it now contends constitute a default.
RIDEM has been well aware of the condition of the premises and any building, structure or other appurtenance thereof for years. As RIDEM acknowledged in a Request for Proposals jointly prepared by RID EM and PRI X, "PRI [X] notified RID EM in 2015 of its intentions to close the hotel, continue to operate the parking functions and seek out a redevelopment of the Site." Request
for Proposals at 3. RID EM acknowledged that "the hotel would require a substantial investment as there is no vertical transportation, no central heating or air conditioning, the bathrooms are small
and outdated, and the building is not ADA compliant." Id.
Notwithstanding the condition of the premises and the hotel in 2015, which RIDEM has expressly acknowledged, RID EM did not object to PRIX' s exercise of its renewal option and, by letter dated March 30, 2016, RIDEM's Chief of Program Development, Terri Bisson, wrote to PRIX and reconfirmed that PRIX had "four remaining five-year renewal options" in its Lease.
Thereafter, and with its knowledge of the condition of the premises and the hotel, on July 22, 2021 RIDEM expressly agreed that PRIX had a remaining five-year extension to the Lease. MOA ~ 6 Months later, in a Request for Proposals jointly prepared by PRI X and RIDEM, RIDEM acknowledged that "the hotel has been closed and out of use since 2015" and that "the hotel would require a substantial investment as there is no vertical transportation, no central heating or air conditioning, the bathrooms are small and outdated, and the building is not ADA compliant." Id. the Request for Proposals also included photographs of the hotel. Accordingly, at the time RIDEM agreed to honor PRI X's remaining five-year extension under the Lease it was well aware of the condition of the premises and the hotel. And, when it did so, it recognized that PRI X's obligation was to "maintain the Premises in a manner suitable for use as
a public parking lot in a safe and clean manner" and imposed no corresponding obligation on PRI X to maintain the hotel in any particular way in recognition of the fact that the hotel had been closed and out of use since 2015. MOA, 4.
The federal court's decision in In re Q.T, Inc., 118 B.R. 47, 49-50 (Bankr. E.D. Va. 1990) illustrates the point. There, the landlord claimed that the tenant failed to validly exercise its option to renew a lease because it was in default of the terms of the lease related to maintenance of the property. Id. at 49. The evidence in the case, including photographs of the property, showed that the premises were in a shabby condition. Id. Rusting vehicles and debris littered the lot. Id.
Additionally, liquid waste was present underneath a wastewater tank. Id. The lease obligated the tenant to maintain the property in the condition in which the property was leased. Id. The landlord testified that the property failed to meet that standard at the time of the renewal. Id. at 49-50. After the renewal, the landlord claimed that the tenant was in default. Id. at 50. The federal court held
that the landlord was equitably estopped from claiming the property condition constituted a default.
In so holding, the court observed that "[w]here a party to a transaction induces another to act upon the reasonable belief that he has waived or will waive certain rights, remedies or objections which he is entitled to assert, he will be estopped to insist upon such rights to the prejudice of the one misled." Id. ( citing United States v. Wood, 99 F.2d 80, 83 ( 4th Cir. 193 8) and Big Vein Pocahontas Coal Company v. Browning, 137 Va. 34, 120 S.E. 247 (1923)). "Such inducement may exist where a party acquiesces in another's conduct. A person who permits another to infringe upon a right, and stands by in such a manner as to induce the person committing the act to believe that he assents
to it being committed, is estopped from complaining of the infringement. Id.
For all of these reasons, the State and RIDEM's claimed default is pretextual and the State and RIDEM are estopped from claiming such default.
Moreover, even if the State and RIDEM could claim some default=-which they cannot-the State and RID EM cannot take any action with respect to such claimed default for at least 60 days as they
are required to permit the alleged default to be cured and, in the event that the alleged default cannot be cured in 60 days, for such further period as is necessary to cure the default. Lease §
The State and RIDEM's claim that the February 24, 2023 letter from James Cambio, Building Code Commissioner, to RIDEM constitutes a default under the Lease is also misplaced. The first time PRI X was made aware of the February 24, 2023 letter was when it received your April 28, 2023 letter. At no time did either the Building Code Commissioner or RID EM make PRI X aware
of the State Building Office's inspection or its findings. The Building Code Commissioner's notice was issued in contravention of state law and, as such, it is ultra vires, and is void and of no force or effect. See Arnold v. Mayor of Pawtucket, 41 A. 576, 577 (R.I. 1898) (government action
taken in contravention of state statute is ultra vires and void).
The Building Code Commissioner issued his notice pursuant to R.I. Gen. Laws § 23-27.3-124.2 but that statute requires the Building Code Commissioner to "issue notice of the unsafe condition to the owner of record." R.I. Gen. Laws§ 23-27.3-124.2 (emphasis added). While the State is the owner of record of the land, PRIX is the owner of record of the hotel that is the subject of the
Building Commissioner's notice. See March 4, 2005 Deed from Galilee Hotel Associates, LLC to PRIX, Book 617, Page 393 (conveying by quitclaim deed the buildings on the Property, including the hotel, to PRI X subject to the terms of a 1986 Lease and the easements and restrictions of record, which included a reversionary interest in the State). Although the State maintains a
reversionary interest in the hotel, PRI X is and remains the owner of record. Accordingly, the Building Code Commissioner's notice is void and has no force or effect. To conclude otherwise would violate PRI X's due process rights as it would effectively deprive it of notice and an opportunity to be heard. By statute, an owner has a right to appeal an order issued pursuant to R.I. Gen. Laws§ 23-27.3-124.2 within 30 days of mailing or posting of the notice or
order. Here, more than 30 days have passed from the date of the Building Code Commissioner's letter to RID EM and at no time has RID EM made PRIX aware of the letter (nor would such notice comport with the statute, which requires that the Building Code Commissioner provide the owner of record with notice) and at no time has the Building Code Commissioner sent any notice to PRI X as owner ofrecord. Thus, the State and RID EM cannot declare a default on the basis of a secret notice issued in contravention of state law and that is void as a matter of law. Again, even if the State and RIDEM could claim some default-which they cannot-the State and RIDEM cannot take any action with respect to such claimed default for at least 60 days as it is required to permit the alleged default to be cured and, in the event that the alleged default cannot be cured in 60 days, for such further period as is necessary to cure the default. Lease § 1 0(b )(ii).
The State and RIDEM's assertion that PRIX is in default because it has failed to keep the premises clean and in good repair is also misplaced. As the Lease makes clear, PRI X's obligation is to keep the premises clean and in good repair "ordinary wear and tear thereof ... excepted." Lease
§ 7. The existence of seagulls on the property-an act of nature-is not a violation of PRI X's lease obligation and, at most, would constitute "ordinary wear and tear," which is excepted. As the phenomenon that occurred in the month of April 2023 in the City of Providence demonstrated, the appearance of seagulls is beyond any property owner's control. Even RIDEM agrees. 'See
Molly Levine, DEM Says Swarm of Seagulls in Downtown Providence is "Natural," NBC 10
News (Apr. 26, 2023), available at https://turntolO.com/news/local/providence-seagullpedestrian-bridge-natural-food-chain-predator fish-herring-gulls-black-backed-seekonkmenhaden-april-26-2023 (last visited Apr. 29, 2023). As RIDEM Chief Public Affairs Officer Mike Healey explained, the existence of seagulls is a natural and normal occurrence and "an
example of a natural food chain." Id. In the end, seagulls are "smart, opportunistic predators" beyond the control of the City of Providence, no less any one property owner. Id.; see also Allison
Shinskey, What's With All the Seagulls in Downtown Providence, WPRI (Apr. 27, 2023), available at https :/ /www.wpri.com/ dont-miss/whats-wi th-all-the-seagulls-in-downtownprovi dence/ (last visited Apr. 29, 2023). PRI X has worked tirelessly throughout its tenancy to control what otherwise is a natural and normal occurrence. Its efforts have ranged from removing
gulls' nests to installing electronic speakers, which emit modulated high frequencies to drive gulls away. Even a representative of RID EM acknowledged there were fewer gulls after the installation of the electronic speakers. Moreover, to the extent that the State and RIDEM assert that dumpsters and waste receptacles are overloaded, if upon investigation there is any issue related to overloaded dumpsters and waste receptables, any such issue would be curable under the terms of the Lease and would not provide a basis to terminate the Lease.
To the extent that the State and RIDEM purport to declare a default on the basis that the requirement in the Lease that the leased premises shall be used for purposes of conducting thereon a motel and restaurant business and related activities, as explained supra, RIDEM has long been aware that the leased premises are not presently used for purposes of conducting a motel and
restaurant business and related activities. Indeed, PRIX provided RIDEM notice in 2015 of its intentions to close the hotel, continue to operate the parking functions and seek out a redevelopment of the Site." Request for Proposals at 3. RIDEM was not only aware of PRI X's intentions, it supported its redevelopment efforts. Moreover, RIDEM not only acquiesced to PRI X's continued leasehold interest in the absence of its operation of the hotel and restaurant, in March
2016, RIDEM expressly agreed both to renew PRI X's Lease and that PRI X retained four remaining five-year renewal options ( even in the absence of its operation of the hotel and restaurant) and in July 2021, RIDEM again expressly agreed that PRIX retained the remaining five-year extension under the Lease ( even in the absence of its operation of the hotel and restaurant).
The State and RIDEM's claim that PRIX is in default based on its alleged failure to comply with Section 4 of the Lease is also incorrect. Section 4 of the Lease permits PRI X to sublet a portion of the leased premises without consent of the State or RID EM so long as PRIX remains liable for the performance of all obligations of the lessee and the sublease has a term of not more than two
years. Both of these conditions were satisfied here.
ADLER POLLCEK@SHEEHAN P.C.
May 2, 2023
Page 8
Enterprise Rent-A-Car was the licensee of parking spaces for two consecutive summers seasons only. The first license term was for June 1, 2020 through September 30, 2020 (a period of four months). The second license term was for June 1, 2022 through September 30, 2022 (again, a period of four months).
Additionally, PRI X remained liable for all the performance obligations of the lesee under the Lease during the eight months that Enterprise-Rent-A-Car was a licensee. Thus, the State and RIDEM's assertion that PRIX in in default of the Lease for having sublet a portion of the premises to Enterprise-Rent-A-Car for a term greater than two years. PRI X entered into no such arrangement.
In the absence of any legal or factual basis for the claimed defaults, PRI X can only conclude that the State and RIDEM's position, as conveyed by your letter of April 28, 2023, is pretextual and is being used to advance some unknown wrongful agenda and desire to see the premises put to another use, to the detriment of PRI X's rights. The State and RIDEM have already expressed their preference that the premises be put to another use. See Request for Proposals. Under the terms of the Lease, once the State and/or RIDEM
determine that the leased premises ( or any part thereof) are desired by the State and/or RIDEM for an alternative public use, they must provide PRIX with "written notice given twelve (12) months in advance" of their request that PRIX vacate the premises and their intent to terminate the Lease.
See Lease § 3(a). Section 3(a) provides, in relevant part:
If, during the term of this lease, the LESSOR, through its
Department of Environmental Management determines that the
leased premises, or any part thereof, are desired by the LESSOR for
an alternative public use, and upon written notice given twelve (12)
months in advance by the LESSOR to the LESSEE to vacate, this
lease shall be terminated and thereupon declared at an end; to the
extent of the premises so desired, and, in the event the entire leased
premises is so desired, both the LESSOR and the LESSEE shall be
fully released and discharged of all and any of the terms, covenants
and conditions of this lease, provided the LESSEE has paid to the
LESSOR all accrued rental and other charges that may be due under
this lease, and, in the event a portion of the demised premises is so
desired, all terms, covenants, and conditions of this lease shall
remain in full force and effect, except that LESSOR shall prorate the
annual rental for each remaining year pf the lease to compensate for
the portion taken. Lease Moreover, if the State and RIDEM have determined that the leased premises ( or any part thereof) are desired by the State and/or RIDEM for an alternative public use and gives PRI X the required i2 months' notice of its intent to terminate the Lease, the State and RIDEM are obligated to pay
PRI X "an amount equal to the 'full replacement cost' ... of any buildings or improvements effected by such termination." Lease § 3. Full replacement cost "shall be determined by an architect, engineer or contractor selected by [PRI X] and reasonably acceptable to [the State and RIDEM]." Id.
Significantly, "[f]ull replacement cost" includes "all costs and expenses which would be directly or indirectly incurred in reconstructing or replacing the buildings or improvements, including without limitation, all material, labor, licensing, permitting, architectural, engineering, design,
administration, supervisory, travel, storage and all other related costs and expenses." Id. Accordingly, PRI X would be entitled to the costs and expenses associated with rebuilding the hotel (without regard to the depreciated value of the property), as opposed to the value of the hotel (which would take into account the depreciated value of the property). See Brown v. Everett Cash
Mut. Ins. Co., 157 A.3d 958, 963 (Penn. Super. Ct. 2017) (recognizing that full replacement cost is the cost to repair or replace property with new property without deduction for depreciation, deterioration or obsolescence, while actual cash value takes into account depreciation).
The State and RIDEM cannot, through false pretense, declare that the Lease has expired (when it has not) or declare a default for purposes of circumventing their obligation to give PRI X 12 months' notice of their intent to terminate the Lease and to obviate their obligation to pay PRI X the full replacement cost of the buildings and improvements on the property.
For the foregoing reasons, PRI X requests that the State and RIDEM confirm in writing that they immediately withdraw the April 28, 2023 letter and their declaration that the Lease is terminated 30 days after April 28, 2023. Correspondingly, because the Lease remains in full force and effect,
there is no basis in either law or fact for the assertion that notice is required pursuant to Section 5 of the 2017 Tripartite Agreement between and among the State, through RID EM, PRI X and Coastway Community Bank (the "Tripartite Agreement"). Accordingly, PRI X requests that the State and RIDEM send such written confirmation to counsel for Coastway Community Bank.
Should the State and RIDEM fail to do by May 15, 2023, PRI X intends to exercise all rights at law and equity that it has, including its right to seek a temporary and permanent injunctive relief, as well as a declaration of its rights and the State and RIDEM's obligations under the terms of the Lease, including that the Lease has been extended through 2026 and the State and RIDEM are estopped from claiming defaults related to conditions of which they were aware of and in which
they acquiesced when the Lease was renewed on multiple occasions.
Additionally, if the State and RIDEM fail to confirm in writing that they immediately withdraw the April 28, 2023 letter and their declaration that the Lease is terminated, and that failure interferes
with PRI X's relationship with its lender, PRI X also reserves its rights to pursue claims against the State and RIDEM for tortious interference with PRI X's business relations.
In the alternative, PRI X reserves its right to seek a declaration that if the State and RIDEM's choose to terminate the Lease to put the property to another public purpose, they must pay PRI X the full replacement value of the hotel without regard to the depreciated value of the property, deterioration or obsolescence.
Because PRI X believes that the information contained in the April 28, 2023 letter is legally and factually wrong, in order to avoid other potential claims and causes of action, the April 28, 2023 letter and this response should not be released or published to others, including but not limited to the media.
Finally, PRIX reserves all of its rights and defenses in law and equity. We look forward to hearing from you by May 15, 2023.
JOHN A. TARANTINO
j tarantino@apslaw.com
.JL~i~~
NICOLE J. BENJAMIN
nbenjamin@apslaw.com
cc: Steven P. Deluca, Esq.