Raleigh business sues Downtown South, saying developers pushing them out
A small business has sued the developers of the planned Downtown South project, claiming it’s being pushed out of its lease early.
The owners of GreaseOutlet.com, LLC, who rent about four acres just inside the Interstate-440 Beltline, claim in a lawsuit filed Tuesday they are being kicked out in April despite a lease they say allows them to stay until 2031.
“All we want to do is run our business,” said Charles “Chip” Haskell, co-owner of GreaseOutlet, in an interview with The News & Observer. “That’s it. We want to run our business and have (them) say our lease is valid.”
Downtown South is a proposed $2 billion sports and entertainment district with retail, housing, hotels and offices, all anchored by an outdoor stadium. The developers say it will be a southern gateway into downtown Raleigh.
The lawsuit is against MK South II, which was created to acquire property for the project, on behalf of North Carolina Football Club owner Steve Malik and John Kane of Kane Realty Corp. The lawsuit identifies Raleigh-based Trademark Properties as MK South’s real estate agent and property manager for GreaseOutlet.
“While we aren’t at liberty to comment on the specifics of this lawsuit, we remain focused on our work to ensure a clean site for the benefit of the community and environment,” Bonner Gaylord, chief operating officer for Kane Realty Corp., said when contacted by The News & Observer on Wednesday.
Company collects restaurant grease
Haskell and co-owner Robert Boyd Andrews picked the spot off of Walker and Wilmington streets for its heavy industrialized zoning and the ability to get permits from the city and state. They process “brown grease” from restaurant dishwashers to treat and use for composting before the water can be returned to the city’s water system.
“We heard about Downtown South through the news,” Haskell said. “Quite frankly our plant manager said, ‘Have you guys heard about this thing called Downtown South that is gonna build a soccer stadium in Downtown Raleigh?’ We said, ‘No, that’s great. More restaurants.’ You know? We looked forward to them getting built.”
Then they realized it’d likely be built on top of their current location.
The lawsuit claims they’ve spent $1.5 million to “secure all applicable environmental permits” required to be in business, and sought an amendment to their lease to extend the agreement until 2031. That amendment was agreed on by the previous owners of the property, Raleigh Reclamation, LLC, the lawsuit said.
The lease amendment lets GreaseOutlet extend its lease for up to 10 years beyond the original five-year term in exchange for paying “an additional 3% in rent on each one-year anniversary of the lease during the extended term,” according to the lawsuit.
“Due to the significant investments in fixtures to the property and in order to safely comply with all applicable environmental regulations, (GreaseOutlet) sought to amend the lease to include an option to extend the term until 2031,” according to the lawsuit.
The lease also requires GreaseOutlet to obtain all necessary government permits and licenses, but MK South will not sign a state renewal permit application, according to the lawsuit.
“Instead, on or about January 24, 2021, MK South offered to sign a (North Carolina Department of Environmental Quality) authorization for a limited 2-year period rather than the standard 5-year approval, but only if (GreaseOutlet) would agree to modify the terms of the lease to expire in two years,” according to the lawsuit.
Lawsuit says developers knew of lease extension
MK South was notified three times of the amended lease leading up to the purchase of the property GreaseOutlet rents, according to the lawsuit. MK South was also notified during closing.
In August, GreastOutlet told MK South it planned to extend its lease for the first five-year extension and prepaid the annual rent in the amount of more than $41,000, which was deposited, according to the lawsuit.
Five months later, “MK South abruptly changed course and informed (GreaseOutlet) that it considered the lease amendment to be invalid, and that it would terminate the lease on the original expiration date of April 30, 2021,” according to the lawsuit. MK South also refunded the rent payment.
“We spent a lot of time, energy, resources and finished doing this long before anyone contemplated Downtown South,” Haskell said. “It wasn’t like we said ‘We are going to come build on Downtown South.’ I mean that was years, two or three years ahead of that. So it shouldn’t be a surprise that we are a business that has a lease, what we believe to be a valid lease, going to 2031.”
The Raleigh City Council approved the controversial rezoning request for Downtown South in December 2020. The developers then bought the last piece of land, including the property occupied by GreaseOutlet, for the project for $38 million. Now the city is crafting a tax increment grant policy that could help finance the projected stadium and other amenities in the project like affordable housing.
This story was originally published April 1, 2021 at 5:45 AM.
