[WSBARP] Leasehold Condemnation Question

[Kinnon Williams]

Erik,
The lease is onerous, but you need to look to the entire relocation package.
The relocation rules allow for up to: 1) $50K in business reestablishment benefits; and
2) unlimited move costs. Move costs include the cost to disconnect, move and reconnect trade fixtures which can be very expensive in a grocery store.
With regard to the property you need to look to what is being purchased. Is it a trade fixture that can be moved? Is it personal property or inventory which can also be moved.
Unless this is one of the last dying outlier Cities that is trying to deny relocation benefits your client will be due relocation under the federal rules as I was successful last year in getting a legislative change to require relocation benefits to all displaced persons and businesses with the overwhelming assistance of Senator Curtis King and his staff.
I am more than happy to discuss this further off line if you need any pointers or assistance.

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Kinnon W. Williams | Shareholder
Skyline Tower, Suite 1500 | 10900 NE 4th Street | Bellevue, WA 98004
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From: wsbarp-bounces at lists.wsbarppt.com [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Erik Marks
Sent: Thursday, April 19, 2018 4:48 PM
To: wsbarp at lists.wsbarppt.com
Subject: [WSBARP] Leasehold Condemnation Question

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<mailto:erik at egmrealestate.com>

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