SOUTH PORTLAND – The South Portland City Council voted unanimously Monday to lease the old armory building on Broadway to Fore River Sound Stage, LLC, which hopes to transform it into a movie production facility.

The agreement caps nearly three years of negotiations with Fore River, on top of several years of hand-wringing, going back to 2006, when the city outbid the Children’s Theater of Maine to buy the property for $650,000.

“We can’t look at how we got it, because, the fact is, I think we made a bad investment,” said Councilor Tom Blake. “We can’t go there. The fact is, we now own the building, the building has deteriorated considerable since we acquired it, and it’s not worth what we paid for it.”

Fore River principal Eric Matheson of Cape Elizabeth said he hopes to pump “a couple of million dollars” into building improvements over the next three to four years.

“We have a couple of investors, although a couple others have dropped out,” said Matheson. “Our intention is to purchase the building, through our investors, and as soon as we can possibly do that, we will.”

“We’re trying to make this work without public funds, we’re trying to do this with private investment as a straight-up commercial venture,” said Fore River partner Mark Rockwood of Portland. “We want to make sure this building is salvaged, and turn it into the landmark everybody believes it is.

“It is going to take a few years to do this without hitting the public coffers for the money,” said Rockwell, “but we should be able to begin working in it within a relatively short timeframe, all things considered.”

The lease-with-option-to-buy begins June 1 and runs through May 31, 2016. It includes options for two, five-year renewals. In addition to the base rent of $550 per month, starting in December, the city will get 60 percent of gross receipts taken in by Fore River on building rentals. Forty percent of the city share, Gailey said, will be reinvested into building improvements. In addition, the city will direct money from downtown tax increment financing agreements to rehabilitate the building facade, on which the city will retain an easement.

According to City Manager Jamey Gailey, if Fore River does succeed in eventually buying the armory outright, it would return the property to the tax rolls for the first time since 1942.

“I see this venture as a terrific opportunity to further enhance and promote the creative economy within our community,” said Gailey. “If successful, the sound stage has the ability to provide a significant boost to the local and regional economy.”

However, at least one South Portland resident thinks the lease is a bad deal for the city.

“This is a horrendously poor lease agreement,” said Al DiMillo. “There is nothing in this that protects the city from getting totally screwed.”

DiMillo, who is an occasional columnist for The Current, claimed that if the city sold the armory at a loss for current market value – $461,000, according to city assessing records – it would immediately generate $28,000 per year for the city in property taxes. On the other hand, the lease deal with Fore River guarantees a minimum “base rent” return of just $3,300 in the first year, and $6,600 annually thereafter.

“You’ve got no guarantee that you are going to get anything other than $550 a month for 16 years,” said DiMillo, adding that Fore River could easily escape provisions that call for it to share a percentage of what is makes off movie studios by charging as little as $1 in rent and collecting the rest in “management fees” not covered in the lease agreement.

The problem, said DiMillo, is that while Fore River can get out of the lease with six-month’s notice, the city has no “escape clause.”

City Attorney Sally Daggett said that while giving Fore River an out-option is “slightly unusual,” it gets none of its own other than a right to terminate the lease at any time Fore River finds itself in default of the agreement.

She also said the city “has full rights” to examine to Fore River’s financial records “at any time,” to make certain it is not being cheated out of its fair share of any resulting revenue.

“That should prevent this issue raised by Mr. DiMillo, that the tenant might sublet the building for some low amount,” said Daggett. “The tenant has represented that that is not how they operate, and we take them set their word, but, obviously, the city has built in checks and balances.”

Others were less charitable of DiMillo’s watchdogging.

“Sometimes we make plans and intervening events change those plans. More times than I can count, Mr. DiMillo has been that intervening event for me,” said Jeff Selser, who had planned to leave the meeting after addressing the school budget during an open comment period, but said he skipped another planned function to also weigh in on the armory issue.

“For every month this building sits vacant, that’s another month the city earns zero in revenue off this building. Zero. None. That’s easy math,” said Selser.

“I applaud the city for this move,” said Selser. “I think this is a great thing. It is infinitely better than having a vacant building at the gateway to our city.”

“There is a risk, both for Fore River and for the city,” said Gailey. “But communities all over the nation are jumping into these risks, in order to see if something sticks. I think this is a good lease and I am personally very excited to move forward.”

South Portland will retain use of the armory’s west-wing garage as its fire department maintenance facility. It will move an existing fence to enlarge the area available for department use and will retain a perpetual easement to the garage bays if Fore River does succeed in buying the building.

The old armory building on Broadway in South Portland. (File photo)