The owners of Sarcoa point the finger at the Hamilton Waterfront Trust for allegedly mishandling the events that led to their decision to invest $4 Million to construct their entertainment complex in the former Discovery Centre. “Had we known that our plans for patio entertainment could not be accommodated, we would have walked away from the project,” said Sam Destro, who along with Marco Faiazza, is half owner of the upscale spot. Sarcoa-aside–both Destro and Faiazza are highly-regarded Hamilton businessmen –Destro is one of the largest Esso dealers in Southern Ontario and has a substantial portfolio of commercial real estate. Faiazza is a partner in a paving business and also has significant real estate holdings. But now they are threatening to sue the Hamilton Waterfront Trust over its handling of the negotiations and drafting of the lease that allowed Sarcoa to set up business on the prime waterfront site in the first place.
“We made it clear that our plan was to operate an entertainment facility from the outset,” said Destro. “The Waterfront Trust fully understood our intentions, and even praised us for taking on the project.” Indeed a Spectator account from the summer of 2012 when the arrangements to build the restaurant were finalized, refers to “an outdoor stage for live music.” Similarly, a glowing 2012 Metroland story on the HWT quoted HWT Chair Bob Charters describing the project as an “entertainment centre,” and adding, “We’re pretty lucky to get these guys to turn it (Discovery Centre) around.” On the strength of the lease and negotiations with HWT; the owners constructed the restaurant which included a lavish patio complete with stage, lighting and sound, investing $4 Million of their own money supplemented by $1 Million from the City. The city bylaw on patios reads in part: “No part of the land on which the outdoor patio is situate shall be used as a place of entertainment for the purpose of providing entertainment or amusement including live or recorded music or dance facilities. “ The owners say they relied on the HWT to obtain all permits and permissions from the city.
The HWT drafted a lease that appears to contain conflicting language—on the one hand, acknowledging the intention to provide live entertainment on the patio, but also calling for the nightclub to adhere to local bylaws. A person familiar with city planning says that had the lease been circulated through various city departments including the legal department, the conflict with the use of the patio for live entertainment would have likely been noticed. But as a stand-alone organization the Waterfront Trust was entitled to draft the lease without city staff input. Instead they used the services of a local lawyer. At that time the property was still owned by the Government of Canada and leased to the HWT. That lease explicitly called on the HWT to ensure that all local zoning and bylaws were adhered to and that nothing should be allowed on the property “that would constitute a nuisance”. Under the terms of the federal lease it was the responsibility of the Waterfront Trust to “obtain all permits, Licenses and authorizations required.” Accordingly, the Waterfront Trust then prepared and submitted the Sarcoa site plan for approval by the City Planning Department. The Bay Observer has examined the site plan application but could find no reference in either drawings or in the written application to the large stage that was constructed on the patio even though less significant items such as cement planters and fencing were shown. The owners say construction of the stage was almost complete at the time they signed the lease with the Waterfront Trust in 2012. The bar-stage complex is described on the applications as only “bar”. Accordingly the project received the green light in 2012. A source close to the project said that had the stage been identified on the site plan it would have raised questions.
The owners say they cannot recoup their investment without the entertainment component. The $5 million in leasehold improvements are worthless if the operation fails. In late July Sarcoa yielded to pressure not only from neighbours, but also ultimately even from their landlord, the HWT, and discontinued the patio live music. They say their sales have subsequently dropped by 50 percent. Plans being discussed to revise the bylaw to allow patio entertainment with an 11pm curfew will not help, says Sam; “We derived the bulk of our revenue after 11.” The owners’ business plan relied on using the windfall revenue generated during the short 12 week summer season to tide the business over the fall and winter months when the waterfront is mostly deserted. In addition to their financial losses Sam Destro sees a lost opportunity. “We wanted to be part of the renaissance of the waterfront. Beyond Sarcoa, we had much more expansive plans for the development of Pier 8.” Those plans are now in limbo.