Judge sides with leaseholder in Scott’s Addition parking spots spat

A 51-space parking lot fronting West Clay Street is at the heart of the legal dispute. (Mike Platania photos)

The planned redevelopment of an entire block of Scott’s Addition could be on ice for the next 16 years after a recent court ruling. 

Last week a Richmond Circuit judge ruled that North Carolina-based developer Hem + Spire has the right to renew its lease on a 51-space parking lot at 3210 W. Marshall St., potentially keeping the lease active through 2040.

The surface lot is part of the former Party Perfect complex that D.C.-based Dalian Development bought for nearly $4 million in 2018. In 2021 Hem + Spire bought a mixed-use complex across the street at 1300 MacTavish Ave. for $10.8 million, a deal that included a lease for use of the off-site parking lot. 

According to court documents, the current lease runs through 2030 and was previously renewed on Jan. 1, 2021, over six months before Hem + Spire’s purchase. Renewal in 2030 would be for another 10 years.

Dalian alleges in the documents that it sought to terminate the lease at the end of its current 2030 term to redevelop the entirety of the Party Perfect site, including the parking lot. 

Hem + Spire rebuffed that effort, claiming that language in the lease prevents Dalian from terminating the lease and alleging that Hem + Spire has the right to renew the lease in perpetuity. 

Dalian has previously stated its intention to develop the former Party Perfect site.

The disagreement spilled into court in 2022, when Dalian brought a lawsuit against Hem + Spire seeking a judgment to allow it to terminate the lease. The suit played out over the past two years, and the two parties made their arguments in court in December 2023. 

Last week, Judge Richard B. Campbell ruled that while the lease on the parking lot is not perpetual, the language in the lease does give Hem + Spire the option to extend it through 2040. 

“The precise terms of the lease give (Hem + Spire) the option to extend the lease for successive ten-year periods subsequent to the 2020 initial period: for the period 2021-2030 (first renewal period) and the period 2031-2040 (second renewal period),” Campbell wrote in his ruling. 

It’s unclear whether Hem + Spire will pursue keeping the lease through the next 16 years. Maxwell Joseph, Hem + Spire’s founding principal, declined to comment. 

Dalian claimed it made an effort to both preserve Hem + Spire’s parking and free up the land for redevelopment by temporarily relocating the spaces while a new development that would have included a parking garage was built on the site. The parking spots would then have been permanently relocated to the would-be garage once completed. Dalian said in the court documents that Hem + Spire rejected the proposal.

Dalian did not respond to multiple requests seeking comment for this story. 

Hem + Spire’s property at 1300 MacTavish Ave. includes the vacant former Riverside PACE office building, the 13-unit MacTavish Flats apartments and Slingshot Social Game Club. The property is being marketed for lease as creative office and retail space.

Meanwhile, the parking lot across the street has been locked with a handful of damaged vehicles inside it. 

As of this week, the lot is locked at both entrances.

According to its website, Dalian has developed high-end apartment complexes, typically sized around 300 units, in Pennsylvania, North Carolina and Texas. Last year Dalian spent $20 million on a 7-acre site in Raleigh, North Carolina, and set out to rezone that site to allow for up to 40 stories, according to a local Axios report. 

The company has not filed plans for the former Party Perfect site, but in court documents Dalian has stated that it plans to construct a multifamily residential project on the site and that Hem + Spire’s position regarding the lease is preventing the development. 

The judge disagreed with Hem + Spire’s claim that the lease is perpetual, writing in his ruling: “By long-standing Virginia precedent, a perpetual lease is extraordinary and cannot be created by mere inference.”

“The intent to create a perpetual lease must appear in a clear and unequivocal language, so plain as to leave no doubt it was the intention and purpose of the parties to do so,” Campbell wrote. “The lease (between Dalian and Hem + Spire) contains no explicit language creating a perpetual lease.”

Campbell added that it is “the meaning of the specific language in the lease defining the term of the lease, and this alone, that is in dispute,” and that “the express language of the lease precludes (Dalian) from terminating the lease on December 31, 2030.”

Hirschler’s Alec Boyd, Allison Klena, Robert Vieth and John Walk represented Dalian in the lawsuit. Hem + Spire was represented by Christian & Barton’s Roman Lifson, David Lacy and Grayson Cassada. 

While it appears Dalian’s project in Scott’s Addition will remain in limbo, Hem + Spire recently closed a deal elsewhere in Richmond.

In February, the firm auctioned off the 1860s-era Branch Building at 1015 E. Main St. and sold it for $1.31 million. The sale closed last week, and the buyer remains a mystery. The purchasing entity, 313 Virginia Holdings LLC, is registered to local attorney Brandy Brown of Dunlap Law. Brown said her client declined to comment at this time.