Performance Food Group’s distribution center at 7420 Ranco Road. The food distributor’s lease dispute with its landlord has spilled into court. (Jack Jacobs photo)
A two-decade business relationship has soured between Performance Food Group and the landlord of the company’s Henrico distribution center.
In a lawsuit filed last month, the property’s owner, Ranco-Ric LLC, says that the publicly traded food distribution giant’s 22-year lease at 7420 Ranco Road is coming to an end, and the agreement’s renewal option can’t be exercised because PFG is allegedly in default.
But PFG contends that it has renewed the lease and plans to stay put for another five years at the 332,000-square-foot warehouse after the initial lease term ends later in 2024.
Ranco argues that PFG is in default of the lease agreement because the tenant has allegedly allowed the facility to fall into disrepair and has failed to appropriately restore those alleged deficiencies. The suit states that the Ranco Road facility needs more than $5 million in work to remediate mold found in the warehouse’s offices, redesign fire and life safety systems and address other issues.
The landlord also contends PFG had already waived its right to a renewal option on the property by the time the company sought to do so.
The lawsuit, which was filed in Henrico Circuit Court, seeks a judgment that PFG has defaulted on its lease and that the lease will terminate on Sept. 30.
Ranco-RIC LLC has owned the property for more than 20 years. It is unclear exactly who is behind the LLC. The complaint describes the company’s members as citizens of Virginia, Delaware and Florida. A company vice president named Evander S. Jones Jr. signed the 2002 lease between Ranco and PFG, per court filings.
An attorney for Ranco declined to comment about the case.
A PFG spokesman also declined to comment on the suit, and the company had not filed a response to Ranco’s complaint as of Tuesday morning.
Ranco’s alleged troubles with PFG began in late 2021, when the governor’s office announced that the Fortune 500 firm would be relocating its Henrico operation to a new-construction facility in Hanover County. The Goochland-based company stated publicly at the time that it would be departing the Henrico facility, which Ranco says is the first it had heard of the plans.
“That decision by PFG was first announced – not to Ranco – but to the general public, through a news release by the governor of Virginia celebrating an economic development deal,” the lawsuit states.
(From left) President and COO Craig Hoskins, Performance Foodservice Virginia President Robbie Horton and Performance Food Group Chairman and CEO George Holm at the ribbon-cutting ceremony for Performance Food Group’s Hanover distribution center in 2023. (BizSense file)
Ranco claims that in the ensuing months PFG maintained it intended to depart the Henrico property, and that the company “repeatedly” updated the landlord on the progress of construction in Hanover and also connected Ranco with real-estate brokers and prospective tenants to take over the Ranco Road property.
But in early 2023, PFG formally reversed course on its relocation plans. It would instead plan to operate both in the Henrico facility as well as the new Hanover center that opened that same year.
Ranco claims that it was made aware of PFG’s intention to stay on Ranco Road during a tour of the Henrico facility with a potential tenant. The group apparently encountered a PFG manager who told Ranco’s broker leading the tour that the food distributor wasn’t going anywhere.
The episode was followed by a March 2023 letter from PFG declaring that it would exercise the lease’s renewal option and initiate a five-year lease at Henrico to start Oct. 1, which Ranco a few days later rejected in a letter of its own.
The change in plans came as an unwelcome surprise to the landlord, which had already refinanced the loan on the facility “on far less favorable terms” due to the planned exit of PFG from the property and expected vacancy there, per the suit. Ranco’s position is that PFG can’t renew the lease because it had already waived its ability to do so through its declarations to the landlord of its exit.
“This reversal of PFG’s decision came as a complete and total surprise to Ranco, pulling the rug out from under Ranco after it had relied on PFG’s prior, unqualified representations that it would be leaving the Ranco Road Facility before the end of the initial Lease term,” the suit states.
Also in dispute is the amount of repairs needed at the property and who should shoulder those costs.
Ranco said that in the course of shopping the property to prospective tenants, the landlord came to realize that the facility needed repairs. The landlord commissioned a review of the property in 2021 that found a need for repairs and updates of more than $5 million. By August 2022, PFG disputed how much of that fell under its purview under the lease terms.
According to Ranco’s suit, PFG agreed to do $1.3 million of repairs that the company felt were within its obligation.
Ranco’s lawsuit stated that PFG in June 2023 communicated that it had addressed “all the defaults that it contended it was required to resolve,” however Ranco claims that PFG won’t provide documentation regarding the work it says it has done. The lawsuit alleges that Ranco has determined through its own inspections that PFG hadn’t addressed the facility’s problems.
Having determined needed repairs to the facility still hadn’t been completed, Ranco sent a final default notice to its tenant. Its suit claims that move prompted PFG to “hit the panic button” and to call in the services of “legions of lawyers and contractors to attempt to salvage what had already been abandoned–the tenant’s right to occupy the Ranco Road Facility.”
Performance Food Group trucks in the parking lot of its distribution center on Ranco Road in Henrico County. (Jack Jacobs photo)
The lawsuit states that PFG has since indicated that it plans to continue to lease the Ranco Road facility and that the food distributor maintains that it has renewed the lease and will continue to operate at the site until at least Sept. 30, 2029. On Tuesday morning, PFG appeared to still be operating at the Ranco Road facility.
The Henrico facility was built in 1969. PFG had owned the property and operated in it, before selling it to Ranco in 2002. PFG, through various affiliates like Performance Foodservice, has continued to lease and occupy the building in the ensuing 22 years.
Attorneys Noah Sullivan and Ryan Starks of Gentry Locke are representing Ranco in the dispute. PFG is represented by Ryan Frei, Patrick Dillard and George Martin of McGuireWoods.