PFG trucks in the parking lot of its distribution center on Ranco Road in Henrico County. (BizSense file photos)
Though its landlord insists the lease has ended, Performance Food Group isn’t leaving its Henrico warehouse without a fight.
The locally based Fortune 500 food distribution giant and the owner of its 332,000-square-foot facility at 7420 Ranco Road are now in dueling lawsuits over its use of the property.
In recent weeks PFG sued the warehouse’s owner, Ranco-Ric LLC, for its refusal to recognize PFG’s claims of a lease renewal. The move followed the landlord’s lawsuit earlier this year that argued PFG had violated the lease agreement and was ineligible to renew it.
PFG’s trucks were still loading and unloading at the Ranco Road facility this week, following the conclusion of its initial, 22-year lease there on Sept. 30. The company argued in a mid-October filing in Henrico Circuit Court that it had appropriately initiated a five-year extension, and claims the landlord is trying to force its exit from the property after “wrongly” declaring the lease terminated.
“Rather than honoring its contractual obligations, landlord embarked on a campaign of harassment to force PFG out of the facility so that it could obtain higher rent from someone else,” PFG’s complaint read.
Ranco argued in an amended complaint last month that PFG continued to “unlawfully” occupy the property. The landlord claimed PFG failed to meet its obligations to maintain the facility, and therefore defaulted on the lease.
“PFG has refused to surrender possession because it wrongly believes that it exercised a renewal option under the lease. … However PFG’s purported exercise of that right was not valid,” Ranco’s filing read. “At the time that PFG attempted to renew the lease, PFG was in serious violation of its repair and maintenance obligations.”
The landlord claims that the Henrico facility, which has dry and cold storage capabilities as well as warehouse and office space, is in need of $5.6 million of work, and that PFG allowed the facility to fall into disrepair.
Ranco, an entity tied to Charles Nabit of Florida and described in court documents as having Virginia, Delaware and Florida citizens as its members, claims it discovered the warehouse’s issues in 2021 after PFG informed the landlord it planned to exit the property and move to Hanover. PFG later changed course and now operates in both facilities.
Ranco stated in its amended complaint that PFG “unexpectedly” informed the landlord in early 2021 of its intention to leave the facility. In its initial filing from earlier this year, the landlord said it didn’t know about PFG’s plans to exit the Henrico facility for Hanover until the governor’s office announced the project in late 2021.
(From left) PFG President and COO Craig Hoskins, Performance Foodservice Virginia President Robbie Horton and PFG Chairman and CEO George Holm at the ribbon-cutting ceremony for PFG’s distribution center in Hanover in 2023.
As part of the move-out process, Ranco tapped Colliers to do an inspection of the facility, which identified various problems, including damage to loading areas, a lack of proper insulation, mold and a rusted 300,000-gallon water tank that supplied the building’s sprinkler system.
Ranco argued that when PFG confirmed it received the inspection report in September 2021, the tenant was on written notice of its failure to maintain the property. Ranco claimed that PFG didn’t address the issues within the time limits set by the lease, which violated the agreement.
PFG argued the report wasn’t an actual default notice. It said the report didn’t demand repairs, and wasn’t transmitted in the way a default notice would need to be per the lease, which specified certified mail or a similar method but not an email.
“Nothing in the Colliers Report or its transmission email suggested it was intended to serve as a notice of default,” PFG’s filing read.
PFG determined it was responsible for $1.3 million worth of work identified in the report.
The Goochland-based company argued in its suit that an event of default, of which Ranco alleged multiple occurred, involves specific conditions be met in order to be legitimate, and because most of its interactions with the landlord regarding alleged defaults occurred over email, those requirements weren’t met.
Between 2022 and early 2023, Ranco’s brokers led tours of the facility with prospective tenants. Ranco said that PFG representatives regularly communicated over email and verbally the company’s intention to vacate the facility during the period. Ranco argued those communications constituted PFG relinquishing its renewal rights under the lease.
“PFG made numerous oral and written representations, including under the formal notice procedures of the lease, and over the course of two (2) years,” Ranco said.
But PFG argued that the emails during the period did not constitute a formal relinquishment of its ability to renew the lease. The company said the correspondence that took place were not official statements regarding a move to exit the property under the lease agreement.
“Although PFG initially believed it would be relocating its operations at the Facility to a new facility in Hanover, that would not have precluded it from continuing to lease the Facility,” the food distributor’s filing read. “(PFG) knew it had a unilateral right to renew the lease that it could waive only in a signed written agreement. Therefore, it continued to act knowing it had options and flexibility with respect to the lease and facility.”
PFG ultimately reversed course on plans to depart Henrico – instead of relocating those operations to a new facility in Hanover, which opened in 2023, it would operate in both facilities.
Ranco said it was made aware of the change in plans during an early 2023 tour of the Henrico facility with a prospective tenant.
PFG sent a letter to the landlord in March stating its desire to exercise the first five-year renewal option on the property. Ranco sent a rejection letter days later.
Performance Food Group’s food distribution center at 7420 Ranco Road.
In April 2023, Ranco sent its final notice of default. Ranco stated that this letter spurred PFG to attempt to repair the facility. PFG reported it had completed all the work that fell under its purview in early June 2023, but Ranco argued that it provided insufficient proof of the work that was completed, and Ranco determined after an inspection that PFG hadn’t done the work it claimed.
“It was clear that PFG still had not cured the numerous and material defaults noticed by Ranco, contrary to PFG’s assurances and affirmative statements that it cured,” Ranco’s complaint read.
In response, PFG stated it provided “multiple letters containing explanations and color photos of the work completed.”
PFG stated that many of the demanded fixes weren’t its obligation to address, and considered many of the requests to be upgrades rather than basic maintenance or repair.
Ranco sued PFG over the lease dispute earlier this year. The court ruled against Ranco’s initial motion for a declaratory judgment on the matter.
Ranco then filed an amended complaint in mid-October claiming breach of contract, as well as a request the court order PFG to provide documentation related to the case, and a hearing on that is scheduled for January 2025. Earlier this month, both parties filed motions to dismiss the other’s suits.
Ranco is seeking a court order forcing PFG to vacate the property, pay the repair and maintenance costs, pay at least $24.7 million in rent and grant Ranco ownership of PFG’s property at the plant, which Ranco said has a value of at least $50 million. PFG, which has also claimed breach of contract, seeks a court order that allows it to remain in the facility.
Ranco bought the property in 2002 from PFG, which had owned and operated the warehouse since it was built in 1969. Since the sale, PFG, through various affiliates like Performance Foodservice, has leased the building.
PFG stated in its filing that the landlord agreed to allow it to continue to operate at the site through June 2025.
Ranco declined to comment on the case through an attorney. PFG didn’t respond to requests for comment.
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.