New Owner of Bentonville Building Sues Over Vacated Tenants

New Owner of Bentonville Building Sues Over Vacated Tenants
Madison Square at 1116 S. Walton Blvd. in Bentonville (Fineberg & Associates)

Did you hear that the California buyer of a $6 million office building in Bentonville has sued alleging fraud by the company that sold the property?

Desert Crest LLC, led by Richard Kirk of Covina, bought the 52,631-SF two-story Executive Center on South Walton Boulevard in a deal that closed in mid-January. Now Desert Crest is suing the previous owner, Executive Center II LLC, led by Phil Lee and John Hampton.

The Benton County Circuit Court lawsuit was filed by attorney Bo Renner of RMP LLP in Springdale.

The new owner alleges the sellers did not disclose that two tenants had already terminated their lease or had been released from their lease agreement.

The new owners said those failures were “intentional, deliberate and omitted to induce Desert Crest to move forward with a purchase it otherwise would not have.”

Desert Crest has rebranded the building as Madison Square and is currently renovating the property. Desert Crest is asking to be awarded damages, attorney’s fees and punitive damages because Executive Center II LLC “willfully and continuously” misrepresented the lease situation during the diligence period.

Attorney Bill Watkins of Watkins Boyer Gray & Curry in Rogers, who is the registered agent for Executive Center II LLC, told Whispers that “my clients have no comment at this early stage.”

The tenants who left the property were Harvests Revenue Group, which was the largest tenant, and Service Master.

Desert Crest alleged in the lawsuit that only after neither tenant paid rent in February did it discover that Service Master had been released from its lease agreement in December by property manager Jodi Lightner of Sage Partners and that Harvests Revenue Group had terminated its lease in November 2020.

The lawsuit included several exhibits that show that the two parties agreed to the $6 million purchase on Nov. 23, and HRG notified Executive Center II LLC that it was terminating its lease in a letter dated Nov. 24.

In that letter, attorney William Mayo of Tulsa wrote to Watkins that HRG was asking for more than $42,000 in damages because of a faulty HVAC unit at the property that the owners said did not need to be replaced. Mayo told Watkins that HRG would pay its December rent and then vacate the building by Dec. 31.

“After your [Aug. 21] letter, we learned your client had been in negotiations to sell the facility likely related to their refusal to correct the situation regarding the central air and heat and likewise a motive for their continued refusal,” Mayo wrote.

In the lawsuit, Desert Crest said, “though difficult to fathom a scenario by which a seller simply neglects to provide a prospective buyer two lease terminations and a demand of nearly $50,000.00 from its single largest tenant, Desert Crest now knows that this was not merely an oversight at all.”