From time to time, in this line of work interesting emails will land in your inbox. Mixed in among the hate mail, the fan mail and the creepy ads trying to sell me a product I was just talking about, these interesting emails have a tendency to stand out.
It’s hard to explain, but when a good one lands, you just sort of know it. It has a feel to it. And that was the case a couple of weeks ago, when one dropped into my basket promising crazy info on a development project in Hoover—something called the Riverwalk Village.
Now, ordinarily, emails about development projects don’t stand out, because, let’s be honest, there is almost always something shady going on with any city’s major development projects. Finding it, proving it and relaying it in a readable format is another matter, however.
But this one was different. Because it began with a synopsis—a synopsis of a lease.
The weirdest lease I’ve ever encountered.
A lease that, after I obtained a full copy and verified it was real, befuddled everyone I showed it to, including some attorneys I contacted to ask about it. Those attorneys had worked for city governments and worked on a variety of economic development projects, and they’d never seen anything quite like it.
Let’s start with this: The lease signed by Hoover officials specifically says that the city has no right to occupy the building, which it is leasing, and that it will allow the owner of the building to serve as the exclusive leasing agent and is granted all rights and sole discretion to enter into sub-leases on the city’s behalf.
If you are confused by this, you understand why this grabbed my attention and sent me down a rabbit hole.
Honestly, the entire project and the fight over it is quite a story—one that I’ll get into in more detail in the near future. For now, since the project started with this weird lease, I will too.
Another thing to know: I asked Mayor Frank Brocato about this lease. I sent a number of very detailed questions, asking for an explanation and/or to be corrected if my interpretations of certain aspects of the lease were inaccurate. I offered to speak by phone. I gave the office a number of days to respond. Aside from acknowledging that the questions had been received and were awaiting a response, there was no response.
To give you some background, the Riverwalk Village project is a massive undertaking by development company Healthcare Resources. It will seek to repurpose the 90ish acres around the Riverchase office park, where Regions Bank’s corporate offices were located. There are a number of different aspects of the project, from residential homes to senior living residences to retail space. The centerpiece, though, is a health and wellness facility that officials hope will offer an ambulatory surgical center and multi-speciality care physicians.
In 2023, the Hoover Health Care Authority (HHCA) entered into a lease with the owner of the Riverchase office park to facilitate the development of the health and wellness center portion of the Riverwalk Village project. That lease was for the old Regions Bank south tower, which would house the ambulatory surgical center and doctors offices.
All of that is perfectly normal. The city formed a health care authority in order to create projects that would attract more health care facilities and operators to the city. It found a major project and a willing developer and decided to jump in.
In most cases, though, after signing the lease, the tenant (HHCA in this case) would then control who it leased the various office spaces to. That way, HHCA and Hoover officials would be able to control the costs, recoup rent and have oversight into the operators doing business in this massive project.
That is decidedly not the case with Riverwalk Village, though.
After stating clearly that HHCA has no right to occupancy or use of the property and must acquire written permission from the landlord (Healthcare Resources), the lease states this: “Landlord shall be entitled, in its sole discretion, to negotiate and agree upon the terms of all Subleases, including all base rent, additional rent, tenant allowances, operating costs, use rights or restrictions, tenant exclusives and general covenants and conditions applicable thereunder, provided, however, that in no event shall the base rent per rentable square foot payable under any sublease be less than the corresponding Base Rent payable hereunder. Landlord shall be entitled to execute for and on behalf of Tenant, and in the name of Tenant, all leasing proposals, letters of intent, term sheets and sublease, and all amendments, modifications, supplements, extensions, renewals or restatements of any of the foregoing.”
To put that contract-speak into layman’s terms, the lease gives Healthcare Resources exclusive rights to sublease the property that the city of Hoover is paying to lease. In addition, because there is a “base rent” setup, Healthcare Resources is guaranteed to receive a minimum rent amount per square foot, and any sublease entered into must either meet that base rent amount or the taxpayers of Hoover will pick up the difference.
Now, as weird as that sounds, it’s only somewhat strange in the world of commercial leasing. Ordinarily, though, giving up such control over subleasing, and providing a guaranteed base rent, would definitely come with significantly reduced rent, according to those attorneys I spoke with.
That hasn’t really been the case for Hoover, though.
Hoover, through its health care authority, has already paid $6 million in rent since signing the lease in 2023. It is expected to pay up to $16 million in rent over the next 10 years.
Additionally, city officials discovered after the lease was signed that it also was on the hook for operating expenses and taxes—what’s known as a “triple-net lease.” That adds an additional $27,000 per month. The admission that they didn’t know about the additional expense of $324,000 per year came during a city council meeting in June—more than two years after signing the lease.
Hoover could see its total rent amount reduced under the terms of the lease should the property its leasing achieve greater than 93-percent occupancy. However, the city and its health care authority have no control over that, because Healthcare Resources maintains all rights to subleasing. Which sets up a very odd—and precarious—situation for Hoover.
Let’s say that the amount Healthcare Resources would receive from a sublease is less than what it would receive from Hoover in guaranteed lease payments if the 93-percent benchmark wasn’t achieved. What’s to stop the Healthcare Resources from blocking a leasing agreement to ensure it receives the most possible money?
Nothing.
Hoover officials admitted under oath during a Certificate of Need hearing earlier this year that there is no provision in the lease preventing such a scenario. And they pretty much guaranteed that Healthcare Resources, as the landlord, would hold that authority.
“Tenant hereby prospectively ratifies, approves and affirms all actions taken by Landlord granted under the lease and Landlord has binding authority to act for Tenant. Tenant further agrees that upon request by Landlord, Tenant shall execute any instrument, document or agreement reasonably requested by Landlord for the purposes of further confirming Landlord’s authority hereunder or ratifying any instrument, document or agreement executed by the Landlord in the Tenant’s name,” the lease reads.
So, just to recap. Hoover taxpayers have paid out $6 million in lease payments so far and are expected to pay roughly $40 million, according to Brocato. For this, the city has no right to occupy the property, can’t choose the sublessors, can’t stop a sublease agreement and are on the hook for the base rent per square foot regardless of any sublease agreement.
That’s a great lease if you’re the owner/developer of the property. And in the end, it might work out for the city and all the taxpayers.
But it’s a pretty big gamble. And it’s very odd.
