Commercial Real Estate and Commercial Leases and Lawsuits and Restaurants and Law and Real Estate & Retail

Rock Bottom Brewery tries to hang onto downtown lease

November 3, 2010

Landlord John Goodman wants Rock Bottom Brewery out of its West Washington Street location in downtown Indianapolis by next June.

Goodman recently rejected the restaurant's attempt to renew its lease for five more years. Rock Bottom, part of a Colorado-based chain, has occupied 14,600 square feet at 10 W. Washington St. since June 1, 1996.

The renewal notice was invalid, he said in an Oct. 8 Marion Superior Court filing, because it didn’t come from the proper entity, which is the named tenant Walnut Brewery Inc., and wasn’t delivered by the U.S. Postal Service.

“It is unusual,” said Jon Buerge, director of development and property management for Rock Bottom Restaurants Inc. in Louisville, Colo. “I think this is more he wants the space back for whatever reason.”

Buerge insists that Rock Bottom’s notice was adequate because it arrived via overnight delivery from UPS and required a signature. Similar cases in other states have been resolved in the tenant’s favor, he said. Rock Bottom filed a notice on Tuesday to have the case moved to U.S. District Court of Southern Indiana.

It’s easy to see why Rock Bottom wants to hang onto the lease. The restaurant started out paying a base rate of $16.55 per square foot, plus 4 percent of gross sales, according to the lease document that accompanied Goodman’s complaint.

Rent escalated every three or four years until it reached the current rate of $20.55 per square foot. Under the first of two five-year renewal options, Rock Bottom would pay $22.60 per square foot.

“It’s probably a little below what the market is for downtown right now,” said Steve Delaney at Sitehawk Retail Real Estate. Rents for prime locations start at $25 per square foot and go up, depending various factors, he said.

Goodman’s attorney, Gregory Zubek, said he couldn’t comment on pending litigation.

In the petition for declaratory judgment, Goodman said he needed to quickly resolve the dispute with Rock Bottom so he would have time to find a suitable tenant for the space, which is adjacent to state Health Department offices. A compatible tenant would not “leak water, grease and other fluids into the ISDH space or otherwise introduce or produce noisome odors … as has happened from time to time in the past," the filing said.

Buerge said he doesn't know of any source of tension between the restaurant and landlord. “We’ve never had any sort of bad blood with Goodman. He’s been easy enough to work with.”

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