[WSBARP] Leasehold Condemnation Question

[Erik Marks]

Potential tenant is operates a mid-size specialty supermarket, located in-line within a larger shopping center.  The entire parcel is subject to a condemnation action.    Tenant has 1 year remaining on its lease with an unexcercised 5-year extension term that bumps the rent by only 2%.  There is value on the leasehold (below market rent) and replication costs of TI's are in the $4m range.  In fact, the Tenant recently purchased the supermarket from its prior operator and payed out-of-pocket money for the under-market lease and in-place TIs.      So far, so good.  But enter the CBA form Multi-Tenant NNN Lease.  The condemnation section reads:

 

"Landlord shall be entitled to the entire award from the condemning authority attributable to the value of the Premises, the Building or the Property and Tenant shall make no claim for the value of its leasehold.  Tenant shall be permitted to make a separate claim against the condemning authority for moving expenses [when a condemnation triggers lease termination], provided that in no event shall Tenant's claim reduce Landlord's award."  

 

 

As I read this section, it says that all condemnation proceeds related to the real estate and fixtures is to be paid to the Landlord.  And the Tenant will receive only the cost of relocating its personal property ("Moving Expenses").  

 

I find it hard to believe that our region's  "standard form" commercial lease would/should yield such a prejudice and forfeiture against a tenant.  Does anyone have suggestions about how this situation might be approached to find value for the tenant?  

 

Thank you,

Erik

 

 

-- 

Erik G Marks 

Attorney at Law 
2255 Harbor Ave SW

Suite 203

Seattle, WA 98126

 

office: 206-264-4598 
cell: 206-612-8653

erik at egmrealestate.com

 

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