Judge: Middletown acted properly in terminating lease with sports complex

MIDDLETOWN — The Town of Middletown properly terminated its lease agreement with Delaware Sports Complex LLC, according to a 10-page federal court ruling issued Monday.

Financial woes earlier forced developers to halt work on the proposed 170-acre site of athletic fields and the town had issued an eviction notice as the DSC filed for bankruptcy to reorganize its business plan.

Citing the intent to build a sports complex designed to attract large-scale events to the area, United States Bankruptcy Court Judge Kevin Gross said the DSC fell short of expectations stated in the lease.

“Although the lease does not contain timelines for the development of the fields and buildings, the ‘time is of the essence’ provision in the lease established the (DSC and town’s) expectation that the entire project would be accomplished and promptly,” Judge Gross stated in the order.

Also, according to the Court, the DSC’s lack of commitment to a required $2 million-plus traffic impact study by the Delaware Department of Transportation clashed with lease terms to comply with “all present and future laws,” and regulations of governmental authorities …

On Tuesday, DSC developer Daniel Watson said, “We are disappointed about this setback. We are assessing several alternatives.

“Since its less than 24 hours after the opinion, we are in the early stages of considering our options.”

Middletown Mayor Kenneth L. Branner Jr. reacted similarly, saying, “The bottom line is that it is a big step. We have to look at our options now and see where it goes from here.”

The ruling came after both sides presented their cases in bankruptcy court on June 21 and 31 in Wilmington. The DSC had listed nearly $1.6 million in debt claims to 13 creditors, including $195,000 supposedly owed to the Town of Middletown.

The town and DSC signed a 99-year lease for $1 annually on Feb. 24, 2016. A notice of default was filed by the town on Feb. 1, 2017, and the DSC filed for bankruptcy on May 23, 2017.

The judge described the lease as “an odd document” based on a property listing of 319.69 acres that covered more than land for the proposed sports complex. The town mistakenly included acreage from the Doc Levinson Memorial Park it owns next to it on Levels Road near U.S. 301 and the Maryland state border.

There was no timeline for the project listed in the lease, which Judge Gross described as “strange.”

The town had promised to “operate and maintain … at its expense, a lagoon, treatment facilities, and a pumping station or stations for wastewater,” according the judge found and “the cost of doing so appears to be significant.”

Mr. Watson purchased ownership of the DSC from original partners Scott Lobdell and Brian Ellis after the town had filed its notice of default against them. It was unclear what became of original partner Matt Richter’s interests, the judge noted.

At the evidentiary hearings in June, according to documents, Mr. Watson maintained that no DelDOT traffic study would be needed due to only six fields being developed and lighter projected traffic.

Reach staff writer Craig Anderson at canderson@newszap.com

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