Archive | Naming rights

Ernst & Young seeks injunction to keep IBM name off Majestic Centre

Decision next week in naming & signage rights row

Accountancy firm Ernst & Young has gone to court to stop Kiwi Income Property Trust from putting new tenant IBM NZ Ltd’s name on top of the Majestic Centre in Wellington.

Justice John Priestley heard argument from all 3 parties in the Auckland High Court on Thursday and said he would deliver his ruling on Ernst & Young’s interim injunction application before next Wednesday.

Failure by the accountants to get the injunction would allow the IBM signage to be erected immediately, though that might last only a few weeks. Justice Priestley will hear the substantive case on Monday 3 March.

Ernst & Young is an original tenant of the Majestic Centre, on Wellington’s Willis St. In 2000 it recommitted early to the building, extending its lease on 5 floors from the March 2003 lease expiry to 2009, but relinquishing 2 floors which had subtenants.

When the building got its original resource consent, opposition by the Kelburn Residents Association stopped the building getting a name in bright lights on the roof, but Ernst & Young had an option on naming rights.

Kiwi Income Property Trust secured IBM as a tenant last year, drawing the computer company from AMP NZ Office Trust’s IBM Centre on Featherston St and offering IBM signage. The Featherston St building is to become the HP Tower from November.

Kiwi was able to offer signage after getting a non-notified resource consent which ignored the conditions of the previous consent. Ernst & Young was told about the IBM lease on 2 floors, and proposed signage, 3 weeks before its 1 May 2002 commencement date.

Ernst & Young opted for the cheaper course initially of going to Wellington City Council to overturn the new consent. After failing there, it went to the High Court to get an injunction.

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Judge rejects Ernst & Young’s Majestic Centre injunction call

Update, 11 February 2002: Justice John Priestley has turned down accountancy firm Ernst & Young’s quest for an interim injunction stopping Kiwi Income Property Trust from putting new tenant IBM NZ Ltd’s name on top of the Majestic Centre in Wellington.

Ernst & Young wanted the injunction until a hearing of the substantive argument in the Auckland High Court, now set down for hearing on Monday 7 April.

The judge recognised an IBM sign on the building could quickly become a landmark and effectively render Ernst & Young’s naming rights option of little value. The ruling enables an IBM sign to be erected, with the possibility that if the substantive judgment goes against Kiwi the sign would have to be pulled down again.

Ernst & Young seeks injunction to keep IBM name off Majestic Centre

Decision next week in naming & signage rights row

Accountancy firm Ernst & Young has gone to court to stop Kiwi Income Property Trust from putting new tenant IBM NZ Ltd’s name on top of the Majestic Centre in Wellington.

Justice John Priestley heard argument from all 3 parties in the Auckland High Court on Thursday and said he would deliver his ruling on Ernst & Young’s interim injunction application before next Wednesday.

Failure by the accountants to get the injunction would allow the IBM signage to be erected immediately, though that might last only a few weeks. Justice Priestley will hear the substantive case on Monday 3 March.

Ernst & Young is an original tenant of the Majestic Centre, on Wellington’s Willis St. In 2000 it recommitted early to the building, extending its lease on 5 floors from the March 2003 lease expiry to 2009, but relinquishing 2 floors which had subtenants.

When the building got its original resource consent, opposition by the Kelburn Residents Association stopped the building getting a name in bright lights on the roof, but Ernst & Young had an option on naming rights.

Kiwi Income Property Trust secured IBM as a tenant last year, drawing the computer company from AMP NZ Office Trust’s IBM Centre on Featherston St and offering IBM signage. The Featherston St building is to become the HP Tower from November.

Kiwi was able to offer signage after getting a non-notified resource consent which ignored the conditions of the previous consent. Ernst & Young was told about the IBM lease on 2 floors, and proposed signage, 3 weeks before its 1 May 2002 commencement date.

Ernst & Young opted for the cheaper course initially of going to Wellington City Council to overturn the new consent. After failing there, it went to the High Court to get an injunction.

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Judge gives injunction stopping Kiwi from putting IBM sign on Majestic

Ernst & Young’s pre-emptive rights would become worthless

Ernst & Young has won a judgment against Kiwi Property Holdings Ltd (manager of the Kiwi Income Property Trust) over plans to erect an IBM sign on the Majestic Centre in Wellington, but the decision has been appealed.

The accountancy firm went to court to stop IBM’s sign going up on the roof because, Ernst & Young said, the IBM sign would effectively prevent Ernst & Young from exercising its 1st right of refusal on naming rights.

The issues in the Auckland High Court hearing before Justice Barrie Paterson revolved around the difference between naming rights & signage, and the sanctity of a contract between Kiwi and IBM.

IBM NZ Ltd was 2nd defendant in the court case, but was dropped from the case shortly before it went to hearing.

The 31-level building was completed in 1991, by which time developer Primacq Holdings Ltd had collapsed. The building cost $200 million and was the final asset of the failed former government-owned DFC investment bank to be sold by the statutory managers.

Ernst & Young signed up for 9 floors of the Willis St tower for 12 years from 27 March 1991, but later cut back to 5 floors. It also had a 1-month 1st right of refusal on naming rights if the building’s owner wanted to change the name.

The accountancy firm had wanted naming rights, but a council condition for the development prevented signs above the podium level.

Kiwi bought the Majestic Centre in 1994 for just under $49 million, initially in partnership, later taking 100% ownership.

IBM secured its signage rights in April 2002 and moved into 2 floors in September. The signage was at an initial rent of $70,000 plus gst Evidence from 1 valuer for Ernst & Young was that naming rights in Wellington were in the $10-30,000/year range, with 1 example of $60,000/year.

Rob Fardell QC, for Kiwi, told the judge there was a clear distinction in the lease between naming & signage rights, and that Ernst & Young was trying to obtain rights for which it didn’t bargain or obtain under the lease. These were the signage rights above the podium level and the right to restrict others to place signs above that level.

Mr Fardell said Kiwi had no intention of changing the name from the Majestic Centre.

Property consultant John Whitehead, a former director of Mainzeal, called by Mr Fardell, said there was a difference between naming rights & high-level signage rights.

Naming rights normally required not only the commercial address of the property to incorporate the name, but also an obligation for all tenants to incorporate the name if they included a building description in their commercial address, on such things as letterhead or other business forms.

By contrast, high-level signage was simply a high-level billboard where a commercial sign is attached to the building at an upper level.

This seemed an appropriate point for the judge to consider whether the proposed IBM sign would prevent a “building letterhead” from being erected on this building. What he did, however, was to go through numerous examples of other buildings given in evidence as being relevant – but which he found mostly were irrelevant – before turning to a question of whether the term “naming rights” included the ability to erect signs.

Concurring with Mr Whitehead, Justice Paterson said: “Notwithstanding that IBM has received signage rights to which a holder of naming rights is entitled, I am of the view that the grant of signage rights does not, particularly at this stage, amount to a grant of naming rights… In this case, the evidence indicates that naming rights have not been granted. IBM has not been given the right to name the building…

“Finally, while many of the public may come to call the tower the IBM tower, if the signage is erected, the official name of the building for the purposes of clause 12.07 [of the Ernst & Young lease agreement] will remain the Majestic Centre.”

Justice Paterson found Kiwi didn’t breach its contractual obligations to Ernst & Young to give it 1st right of refusal on naming rights. But Kiwi put itself in a position where it couldn’t deliver the signage rights included in a grant of naming rights, virtually rendering nugatory the right of refusal. The judge found this was a derogation of grant and that Ernst & Young succeeded on this claim.

On the sanctity of the Kiwi-IBM contract, Justice Paterson found Kiwi recognised the IBM signage proposal might conflict with possible Ernst & Young rights: “Kiwi derogated from its grant with its eyes wide open.”

Although Ernst & Young hadn’t demonstrated any loss — because it only ever had a pre-emptive option which hadn’t become exercisable – the judge said if the sign was erected Ernst & Young would never be able to obtain any benefit under its pre-emptive rights, and granted the firm an injunction stopping Kiwi from erecting an IBM sign.

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