GRAND RAPIDS — A property investment company is suing Amazon.com Services LLC after the online retailer allegedly demolished portions of a warehouse property in Grand Rapids and caused about $10 million in damages before backing out of a lease agreement.
That’s according to the details of a federal lawsuit New West Michigan III Industrial Investors LLC filed on Friday in the U.S. District Court for the Western District of Michigan regarding a 925,000-square-foot building at 3951 Trade Drive SE that the company purchased in 2019. The location was the former headquarters of Amstore Corp.
Court documents indicate Amazon and New West Michigan III entered into an early access agreement on Jan. 3, allowing the e-commerce giant to conduct due diligence before signing a lease for the site. This included “any non-invasive pre-construction activity required for the project,” such as conducting feasibility studies, planning, measuring, and construction of improvements and installation of furniture, fixtures and telecommunication.
An Amazon official emailed the property owner on May 1, notifying the Bloomfield Hills-based company that Amazon was no longer a prospective tenant of the site, citing anticipated construction costs that would be roughly twice what the retailer expected.
The notification came less than two months after Amazon opened a $150 million fulfillment center in Gaines Township.
Kojaian Management Corp. Executive Vice President Tony Antone — a beneficial owner of New West Michigan along with Michael Kojaian — said in an email to Amazon that the initial assessment of damage to the property was $9,425,500, which did not include costs related to restoring structural integrity of the building.
That included removing gas supply lines throughout the building; disconnecting sprinklers; demolishing office and bathroom space and a freight elevator; and removing HVAC units and windows.
“We remain deeply concerned about the safety of the building, including potential code violations, and will take emergency action for safety and insurance reasons if required,” Antone said last month in an email with Amazon, according to court filings.
In the case, Antone said a representative of Amazon indicated “that the only ‘path forward’” for the site would be for the retailer to buy the property, although “Amazon never proposed a dollar amount for such a purchase nor did Amazon present a written offer” to the owners.
Amazon “drastically exceeded” the terms of the access agreement, Varnum LLP Attorney Mark Hills wrote in a memo included in the court filings. Amazon demolished 45 percent of electrical, mechanical, fire protection and plumbing infrastructure, according to Hills.
Other alleged damage occurred on the building’s roof, which voided the roof’s warranty, and also the exterior of the building, the property owner alleged in the filing. As well, the demolition work compromised the building’s structural integrity, “which must be immediately addressed to avoid catastrophic loss,” Hills wrote.
New West Michigan III is suing Amazon for breach of contract, negligence, gross negligence, common law conversion and statutory conversion, the last of which would qualify for triple damages, or approximately $30 million.
Officials from Kojaian Management and Amazon were not immediately available to comment on the lawsuit.
EDITOR’S NOTE: This story has been updated to correct the spelling of Mark Hills’ last name.
Signs at the site indicate the property currently is being marketed for lease.
News coverage in the real estate and development section of MiBiz is made possible by advertising support from Rockford Construction Co. Inc. Rockford is a nationally recognized construction, real estate development and property management provider, serving West Michigan and beyond for more than 30 years. This advertisement has no effect on editorial consideration in MiBiz.