IPI found in default of land lease agreement

Sixto K. Igisomar

The Department of Public Lands has notified Imperial Pacific International (CNMI) LLC that it is in default of their lease agreement over the public lands in Garapan where IPI’s resort and casino facilities sit for failing to pay rent and interest in the amount of $263,595 and for breaching the lease by failing to replenish the $250,000 security deposit.

In a letter to IPI president Lingli Cai dated Oct. 18, 2022, DPL Secretary Sixto K. Igisomar said they are giving notice that IPI is in breach of other terms of the lease and providing IPI with an opportunity to cure.

Failure to comply with the notice will result in the immediate termination of the land lease, Igisomar said.

Cai or IPI was given 30 days from the date of the letter to cure the violations by completing corrective actions.

Igisomar’s letter to IPI, among other things, were discussed during the Commonwealth Casino Commission board’s monthly meeting at the Springs Plaza Building in Gualo Rai yesterday. Board chair Edward C. DeLeon Guerrero said he believes that he and one of the commissioners should meet to look into this matter and see the next step that need to be taken.

He said he believes that the Office of the Attorney General is also assisting DPL because this affects IPI’s gaming operation if DPL decide to take action.

The chairman said they should meet with Igisomar to discuss the issue.

In his Oct. 18, 2022, letter to Cai, Igisomar said that among the corrective actions that IPI can make is to pay all outstanding rent and interest in the amount of $263,595, and to pay $250,000 to replenish the required security deposit.

He said IPI should submit a copy of IPI’s valid fire and damage insurance policy, with extended coverage endorsements, jointly in the names of IPI and DPL, covering the full insurable value of all permanent improvements on the premises.

The DPL secretary said IPI should submit, among other things, the required financial statement for the year ending 2021 audited by public accountants certified and licensed in the U.S.

He said payment of rent in the amount of $250,000 was due April 29, 2022, for the period beginning April 29, 2022 through April 28, 2023.

Igisomar said the lessee failed to pay this rent within 30 days after the due date and that with interest, the total amount due by IPI at this time is $263,595.

Pursuant to the lease agreement, IPI agreed to pay rent annually in advance.

He said the rental fee for the first five years of the lease term is $250,000; for the subsequent five-year term, rent is based upon the then-current appraisal fair market value.

Igisomar said that, as stated in DPL’s Aug. 6, 2021, final notice of violation, lessee failed to timely submit the required appraisal report at the end of the initial five-year term.

He said although the amount of rent may change, IPI’s failure to submit a sufficient appraisal report does not excuse its obligation to pay rent; once the appraisal report is submitted and approved, an adjustment to lessee’s account balance will be made.

Igisomar said DPL applied IPI’s $250,000 security deposit to the rent due for April 29, 2021 through April 28, 2022, but the security deposit and accrued interest were insufficient to account for the full amount due.

In addition, the DPL secretary said IPI failed to cure the violations in DPL’s Aug. 6, 2021 final notice of violation, which include failure to submit a compliant appraisal report of the premises.

DPL acknowledges that IPI has submitted an appraisal report dated Nov. 22, 2021 prepared by LBT Appraisal.

Igisomar said, however, the appraisal report is insufficient as it does not include the value of the entire premises and specifically omits one piece of land.

He said IPI also failed to submit a copy of lessee’s valid fire and damage insurance policy, a copy of IPI’s valid commercial general liability insurance policy, and copies of all required licenses, certificates, permits, and other authorizations.

On other breaches, Igisomar said IPI failed to replenish the $250,000 security deposit, which was withdrawn to pay for unpaid lease rental and interest fees for the period beginning April 29, 2021 to April 28, 2022.

Finally, he said, IPI failed to submit the required financial statement for year ending 2021 as audited by public accountants certified and licensed in the U.S.

The financial statement was due for submission by July 1, 2022.