In re Bos. Language Inst., Inc.

593 B.R. 381

IN RE BOSTON LANGUAGE INSTITUTE, INC., Debtor

Case No. 18-12508-JNF

United States Bankruptcy Court, D. Massachusetts.

Signed November 13, 2018

John F. Sommerstein, Law Offices of John F. Sommerstein, Boston, MA, for Debtor.

MEMORANDUM

Joan N. Feeney, United States Bankruptcy Judge

I. INTRODUCTION

The matter before the Court is the Motion of RREF II Kenmore Lessor II, LLC ("RREF") for Relief from Stay to Proceed with Summary Process Eviction (the "Stay Relief Motion"). RREF, a Massachusetts limited liability company and an affiliate of Related Beal, supported its Stay Relief Motion with the Affidavit of Will Grosvenor, a Director and General Manager for Related Beal, a real estate development and management company, which, through affiliated companies, owns commercial real estate throughout the region, including 648 Beacon Street, Boston, Massachusetts where Boston Language Institute, Inc. (the "Debtor") operates its business as a tenant under a written Lease for premises, defined as "[t]he entire third (3rd) floor" of "One Kenmore Centre, 642-648 Beacon Street, Boston, Massachusetts (the ‘Building’)." It seeks relief from the automatic stay pursuant to 11 U.S.C. § 362(d)(1) and (d)(2).¹

The Court heard the Stay Relief Motion on August 17, 2018. At that time, the Court deemed the Stay Relief Motion and the Debtor's Opposition a contested matter under Fed. R. Bankr. P. 9014 to which the adversary rules apply, and scheduled an evidentiary hearing for September 20, 2018. At the conclusion of the evidentiary hearing held on September 20, 2018, the Court directed the parties to submit proposed findings of fact and rulings of law. In addition, RREF stated on the record that it waived its rights under 11 U.S.C. § 362(e)(1).

The issue presented by the Stay Relief Motion is whether RREF has established that it, in fact, intends to "substantially rehabilitate all or any substantial portion of the Building (two or more floors)" containing the Debtor's leased premises pursuant to a "Notice of Termination of Lease and Tenant's Right to Possession" dated June 28, 2017, 2017. In its Stay Relief Motion, it stated that it had determined "to renovate the premises and building, specifically, the First, Second, and Third Floors," although it also stated that "[i]t has been planned that space on the Third Floor [occupied by the Debtor] will house a site construction and sales office for premises owned by Related Beal or its affiliates." The Debtor, in its Opposition, denied that RREF is planning "substantial rehabilitation" referencing the records of the Boston Redevelopment Authority in which RREF and Related Beal represented that they planned "modest modifications."

Upon consideration of the evidence presented and the submissions of the parties, the Court now makes its findings of fact and conclusions of the law pursuant to Fed. R. Bankr. P. 7052.

II. FACTS

The Debtor commenced a Chapter 11 case on June 29, 2018. On July 19, 2018, it filed its schedules of assets and liabilities, and Statement of Financial Affairs. On Schedule A/B: Assets – Real and Personal Property, it listed a leasehold interest at 348 [sic] Beacon Street, Boston, MA, disclosing that the leasehold contained approximately 7,745 square feet of space and that the Lease expires December 31, 2020. The Debtor indicated that the value of the Lease was "Unknown." On Schedule E/F, it listed Trustees of Boston University ("Boston University") as the holder of a claim in the sum of $13,535. The Debtor did not list Boston University or RREF on Schedule G: Executory Contracts and Unexpired Leases.

On October 10, 2018, the Debtor filed an Emergency Motion to Extend Time to Assume or Reject Lease of Non-Residential Real Estate. On October 12, 2018, the Court entered the following order:

Upon consideration of the RREF II Kenmore Lessor II, LLC's Motion for Relief from Stay to Proceed with Summary Process Eviction, which motion is under advisement following an evidentiary hearing, the Court hereby overrules RREF II Kenmore Lessor II, LLC's Objection to the Emergency Motion and grants the Debtor's Emergency Motion in part. The Court extends the time within which the Debtor may assume or reject its lease with RREF II Kenmore Lessor II, LLC's until December 21, 2018.

RREF and the Debtor are parties to a written Lease which Lease originally was between One Kenmore Centre Limited Partnership ("One Kenmore") as Landlord and the Debtor as Tenant for premises at the One Kenmore Centre located at 642-648 Beacon Street, Boston (the "Premises"). The Building at 642-648 Beacon Street contains six floors and the Debtor's Premises includes the entire third floor as well as "adjacent sidewalks ... together with the right to use in common, with others entitled thereto, the hallways, stairways, and elevators, necessary for access to the Premises." The ground floor of the Building contains three entrances, one at 648 Beacon Street which is used primarily for offices located on the second through sixth floors, as well as for Back Bay Publishing, and the two other separate entrances, one for the former Bruegger's Bagels space and the other for the former Amsterdam Falafelshop space at 646 and 642 Beacon Street, respectively.

On December 13, 2007, One Kenmore's successor and RREF's predecessor-in interest, Trustees of Boston University ("Boston University"), and the Debtor entered into a First Amendment to Commercial Lease. The First Amendment to Commercial Lease provided in paragraph 3 the following:

LANDLORD'S TERMINATION OPTION

Notwithstanding any other provision of the Lease to the contrary, if Landlord determines to demolish or substantially rehabilitate all or any substantial portion of the Building (two or more floors), Landlord may elect to terminate the Lease as of any date by giving Tenant written notice of such election no later than twelve (12) months before the effective date of such termination, which shall be specified in Landlord's notice. If Landlord so elects, then this Lease shall terminate on such specified date with the same force and effect as if such date were the date originally designated for the expiration of the Lease term.

(emphasis supplied). On May 5, 2009, Boston University and the Debtor entered into a Second Amendment to Commercial Lease. On December 26, 2012, Boston University and the Debtor entered into a Third Amendment to Commercial Lease. On October 30, 2015, Boston University and the Debtor entered into a Fourth Amendment to Commercial Lease, which provided: "The Term of the Lease is hereby extended for an additional five (5) year term commencing January 1, 2016 and expiring December 31, 2020 (‘Third Extension Term’). Tenant has no further option to extend the Lease." In addition, pursuant to the Fourth Amendment to Commercial Lease, "Landlord and Tenant ... explicitly acknowledge[d] that the termination options of Landlord and Tenant in the First Amendment to Commercial Lease remain in effect."

By virtue of written assignments of Lessor's interest in the Lease, RREF is successor-in-interest to Landlord's interest in the Lease for the Premises, which are currently occupied by the Debtor.

RREF and 642 Beaconaf, LLC d/b/a the Amsterdam Falafelshop were parties to a lease dated April 1, 2014, demising approximately 2,010 square feet of space located at 642-648 Beacon Street, Boston, Massachusetts. On February 10, 2017, RREF and 642 Beaconaf, LLC entered into a Lease Termination Agreement with the lease termination effective on the date of the agreement.

On May 22, 2017, RREF, through counsel, sent a Notice to Quit to Back Bay Publishing in which it stated: "notice is hereby given to you of the termination of your tenancy as a month-to-month Tenant-At-Will [for premises at 648 Beacon Street] and you are requested to surrender, deliver up, and quit the Premises no later than June 30, 2017, as the expiration of that month of your tenancy which shall begin next after this date. Failing such vacating, legal action shall be commenced to evict you."

On May 22, 2017, RREF, through counsel, sent a Notice of Termination to Bruegger's Enterprises, Inc., in which it stated: "Pursuant to Section 4 of the Fourth Amendment to Lease [covering premises at 642-648 Beacon Street], and in connection with Landlord's intention to substantially renovate the Building, Landlord hereby gives notice to Tenant of Landlord's election to terminate the Lease effective November 30, 2018."²

On June 28, 2017, RREF, through counsel, sent to the Debtor a "Notice of Termination of Lease and Tenant's Right to Possession. The notice provided:

Pursuant to Section 3 of the First Amendment to Commercial Lease dated December 13, 2007, and in connection with Landlord's determination to substantially rehabilitate the Building, Landlord hereby gives written notice of its election to terminate the Lease, effective June 30, 2018. This notice supersedes the notice previously sent to you on or about May 22, 2017.

On January 26, 2018, RREF's affiliate Related Beal sent to the Boston Redevelopment Authority a "Letter of Intent with Respect to Kenmore Square North Redevelopment, Boston MA." The Letter provided in pertinent part the following:

Related Beal, LLC, on behalf of RREF II Kenmore Lessor I LLC, RREF II Kenmore Lessor II LLC, RREF II Kenmore Lessor III LLC and RREF II Kenmore Lessor IV LLC (collectively the "Proponent"), submits this letter as a Letter of lntent filed in accordance with the Executive Order Relative to the Provision of Mitigation by Development Projects in Boston. The Proponent intends to undertake the redevelopment of the Project Site (defined below), located in the heart of Kenmore Square with frontage on Deerfield Street, Commonwealth Avenue and Beacon Street, into a vibrant mix of commercial uses, including office, retail, and restaurant (the "Proposed Project"). The Proponent has entered into long-term ground leases from the Trustees of Boston University ("Boston University") for the

...