Judge Grants Injunction To Halt Ukrop's Auction, Fixture Sale

By Amber Lester Thursday, September 02, 2010

An employee loads groceries for a customer in this file photo of the Ukrop's on Mooretown Road.

Texas-based American General Life Insurance Company (AGL) filed a $2 million lawsuit on Aug. 13 claiming it should be allowed to purchase the former Ukrop’s, which has sat vacant since Jan. 31, 2009.

At the time of the filing, Ukrop’s had enlisted Grafe Auction to advertise an auction of the property to take place Sept. 21. Its advertisements indicated the property could be purchased for $885,000 before a Sept. 10 deadline. Ukrop’s has since cancelled the auction.

At Thursday’s hearing, AGL’s lawyers, Andrew Franck and Sheldon Franck, successfully argued that Ukrop’s also could not move forward with a planned sale of fixtures to Supermarket Equipment Sales, LLC. Substitute Judge Walter Ford also granted an amendment filed Aug. 20 to add Georgia-based Supermarket Equipment Sales, LLC as a third party to the civil case. The lawsuit, still pending, seeks $2 million in damages.

AGL purchased Williamsburg Market Shopping Center through foreclosure for $7 million in June. Although the former Ukrop’s location is attached to the shopping center, the building and parking lot belong to the grocer, which sold all of its locations earlier this year. Ukrop’s entered into an operation and easement agreement with the center’s previous owner, WaitzerWMC, that gave the shopping center’s owner six months to buy the property if it stopped functioning as a grocery store for 12 consecutive months.

Ukrop’s closed the location on Jan. 31, 2009 and it is still vacant. AGL had until July 31 of this year to exercise its repurchase rights, and notified Ukrop’s of its intent to purchase by certified letter dated July 23. Only three days before, Ukrop’s had signed a contract with Supermarket Equipment Sales to purchase its fixtures, such as refrigerators, grills, cash registers and more, for $750,000.

The fixtures were the center of the dispute in court on Thursday. Ukrop’s lawyer, Courtney Paulk, argued the fixtures were Ukrop’s personal property and furthermore, the repurchase notice was not issued in a timely manner. Andrew Franck argued his clients hope to lease the site to a grocer and many of the fixtures were integral to the operation of the facility as a grocery store.

Ford agreed with the latter, saying AGL did give timely notice. He did, however, say not enough information was known about the fixtures on the property and said the injunction would be granted “until this can be settled.” It was not clear at the end of the hearing whether the parties would enter mediation.

Despite gaining the injunction, AGL still faces a tight deadline to turn around the struggling shopping center. Gerald Divaris, whose company Divaris Real Estate leases the center, testified that several tenants have a co-tenancy provision in their leasing agreements that allow them to go to a reduced rent rate if the anchor store leaves the center. Divaris said the ROSS clothing store originally paid $11 per square foot in rent, but when Ukrop’s left, went to a reduced rate of $3 per square foot.

“That’s a severe penalty on the landlord, and the intent of it is to find a replacement quickly,” he said.

Furthermore, several tenants, including ROSS, reserved the right to terminate their contracts on Jan. 31, 2011 if the anchor store was empty. “So our objective is to get a store running [in the Ukrop’s location] in five to six months,” he said. “And we haven’t identified a prospect.”