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Frank Theatres to exit mall by end of April

Matthew Lane • Jan 17, 2017 at 6:00 PM

KINGSPORT — The credits will soon be rolling on Frank Theatres' presence in the Model City.

The owners of the Kingsport Town Center and Frank Theatres have reached an agreement (consent judgment) in which the theater will vacate the mall by April 30.

However, that deadline could be extended depending on how quickly Frank can arrange new lease agreements for some of the equipment that will remain.

Hull Property Group, the owners of the Kingsport Town Center, filed a complaint against Frank Theatres last month in an attempt to evict the company from the property. HPG claimed Frank had breached its lease and had not paid rent since March 2016.

Frank countered by arguing the case could not proceed because the entire controversy is subject to arbitration, as per the management agreement.

A court hearing was scheduled for Jan. 10 but was postponed until Jan. 20 to allow the two parties to negotiate the matter. On Tuesday, the attorney for HPG filed a consent judgment in Sullivan County Law Court.

According to the judgment, the agreement only resolves the issue of possession of the theater property. Other legal disputes, such as the matter of unpaid rent and unfiled invoices, are reserved for future disposition.

Frank leases 11 projectors located in the theater from Sony Electronics. The judgment states that within the next five days Frank would request of Sony to enter into a new lease agreement with HPG for the projectors.

In addition, four 3-D lenses are used by Frank in the theater. Again, within five days Frank is to request of Real D Inc., to enter into an agreement with HPG for possession of the lenses, releasing Frank for any liability.

If the new agreements are not able to be completed by April 30, HPG can extend the vacate date by two, 30-day periods, the judgment reads. Everything else, except the proprietary signage, books and records, papers and food and beverage products, will remain in the theater after Frank vacates.

According to the original complaint, HPG alleges Frank Theatres breached its lease, was given notice to vacate the mall last October and hasn’t paid rent since March.

The filings note Frank was wired more than $1 million in 2013 for facility improvements, including the purchase of projectors, seats, a sound system and concession equipment. However, the delivery invoices for these improvements add up to only $717,000, according to the court filings.

On the rent side, HPG claims it is owed more than $328,000 and that Frank has defaulted on a management agreement, which is based on net sales at the theater.

In its brief, Frank Theatres makes a number of arguments as to why the lawsuit should be dismissed: the appeal bond in the case is deficient, the case is not a case of unlawful detainer under state law and that the case exceeds the statute of limitations.

Hull Property Group acquired the 40-year-old shopping center in June and has recently announced plans to renovate the mall's interior, possibly beginning in February. HPG is looking to invest $4 million to $6 million in this first phase, eventually transforming the mall into more of a “fashion-type mall” catering to apparel tenants.

Last month, the Board of Mayor and Aldermen approved a measure allowing the Kingsport Economic Development Board to begin negotiations with HPG on a financial incentive package for the mall property. The deal will likely include a 20-year PILOT (payment in lieu of taxes) in which HPG would essentially pay the city a reduced amount of property taxes during this time.

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