Douglas Emmett Tenants
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Santa Monica Tenant Alleges that Douglas Emmett Negotiated in Bad Faith (Lease Documents Included)


Posted: June 12th, 2017

Updated: April 26th, 2018


Update: Please read “Vote ‘AGAINST’ for Douglas Emmett Director Thomas O’Hern ” for more about this case.

Please read “Securities And Exchange Commission Urged To Investigate Douglas Emmetts Failure To Disclose Key Director Information” for more about this case.


Case details

Case Number: SC127215
Case Title: MACERICH PARTNERSHIP, L.P. VS DOUGLAS EMMETT 1995, LLC
Case Type: Other Real Property Rights Case (General Jurisdiction)
Filing Date: 3/10/2017
Court: Santa Monica Courthouse (Los Angeles County)
Status: Dismissed (4/6/2018)

Case Summary

In March 2017, a tenant of 401 Wilshire Boulevard in Santa Monica called Macerich filed suit against Douglas Emmett in Los Angeles court claiming that Douglas Emmett’s negotiating tactics “[constitute] bad faith and a failure to cooperate.” Because of Douglas Emmett’s alleged lack of fair dealing, Macerich has asked the court for declaratory relief.

In the course of the court proceedings, lease documents were made public. They can be read in the downloadable case filings at the end of this page.

Complaint narrative

The Macerich Partnership L.P. is an S&P 500 company, and one of the country’s leading owners, operators and developers of major retail real estate (NYSE: MAC). Macerich is also a tenant of Douglas Emmett (NYSE: DEI). Macerich leases space at 401 Wilshire Boulevard in Santa Monica, where it occupies the entire fourth, fifth, sixth, and seventh floors and a portion of the eighth floor.

In March 2017, Macerich filed suit against Douglas Emmett 1995 LLC in Los Angeles court claiming that Douglas Emmett’s negotiating tactics as the two parties renegotiate a lease “[constitute] bad faith and a failure to cooperate.” Because of Douglas Emmett’s alleged lack of fair dealing, Macerich has asked the court for declaratory relief.

Douglas Emmett has yet to file a legal response to the allegations put forward by Macerich. Presumably Douglas Emmett will seek to defend itself, and Douglas Emmett may deny or contest Macerich’s arguments.

However, for now the only case document available is Macerich’s legal complaint.

Per the complaint, Macerich and Douglas Emmett 1995 LLC signed a lease that took effect on 1 April 2008 and runs for a period of ten years, until 31 March 2018. Macerich agreed to pay $209,130.75 per month for 51,453 square feet of rentable space (45,954 of which was defined as usable).

According to the lease, Macerich and Douglas Emmett may renew the lease according to certain conditions. Should Macerich exercise its option to renew the lease, the lease provides a mechanism to determine the monthly rent payable by Macerich during the extended term.

According to Macerich, the lease provides that the monthly rent shall be equal to the “Fair Market Value” of the leased premises as of the commencement date of the extended term. The lease defines “Fair Market Value” as the “annual amount per rentable square foot that Landlord has accepted in current transactions between non-affiliated parties from new, non-expansion, non-renewal and non-equity tenants of comparable credit-worthiness, for comparable space, for a comparable use for a comparable period of time (“Comparable Transactions”) in the Building […]”

The lease states that Macerich and Douglas Emmett have thirty days to agree on the Fair Market Value of the renegotiated rent to be paid during the lease extension.

Macerich maintains that it timely exercised its option to extend the term of the lease for an additional five year period. Macerich notified Douglas Emmett of its plan to extend the term of the lease in February 2017, approximately one year before the lease was set to expire.

Because Macerich interpreted the lease to say that the extended term of the lease shall be determined by reference to “Comparable Transactions” at 401 Wilshire Boulevard, Macerich requested relevant information From Douglas Emmett about comparable transactions in the building. Macerich further requested that Douglas Emmett agree that the thirty-day negotiation period not begin until Macerich received information that would permit it to participate in the Fair Market Value negotiations.

According to Macerich, Douglas Emmett refused Macerich’s request that it provide the information necessary for Macerich to participate in the Fair Market Value negotiations. Douglas Emmett further rejected Macerich’s proposal that the negotiation period not commence until both Parties were in possession of the information necessary to permit them to negotiate the Fair Market Value of the rent for the extended lease.

Because Douglas Emmett did not provide Macerich with the Fair Market Value materials necessary to evaluate comparable transactions in the building, Macerich alleged that Douglas Emmett’s actions “[constitute] bad faith and a failure to cooperate.”

Macerich demanded that the court declare damages in an amount to be determined and that the court declare the lease requires Douglas Emmett to provide Macerich with information concerning comparable transactions in the building, thereby allowing Macerich to participate informedly in the Fair Market Value negotiations.

In the course of the court proceedings, lease documents were made public. They can be read in the case filing below.

Download Case Filings

Date Document
2017-03-10 COMPLAINT

Tagged: Tenant Issues - Lawsuits