X Corp., the social media company formerly known as Twitter, has been ordered to pay more than $8 million to its former landlord in Boulder after a judge determined it broke its lease.
“Twitter was not entitled to a credit for rent due on Dec. 1, 2022, and its nonpayment of rent for December and thereafter was a breach,” Judge Nancy Salomone wrote May 23.
In 2020, Twitter agreed to lease 64,500 square feet of the 70,000-square-foot Railyards at S’PARK office building, which was then under construction at 3401 Bluff St. The lease called for the company to stay 10 years, until 2032. It lasted a little more than one year.
Twitter stopped paying rent in late 2022, was evicted and sued its former landlord for wrongful eviction, and was sued for back rent. A five-day trial was held this past March.
The triple-net lease between Twitter and S’PARK’s owners, The John Buck Co. in Chicago, provided Twitter with a tenant improvement allowance of $5.8 million. As Salomone noted in her verdict last week, “The central dispute in this litigation is whether Twitter satisfied the lease conditions precedent to accessing that tenant improvement allowance.”
The 192-page lease for 3401 Bluff St. required Twitter to build out the property and send documentation proving that it had before it could collect the allowance. Twitter did the build-out work — at a cost of $40 million, by its own estimation — but, in the period following Elon Musk’s purchase of the company, never sent evidence of that to its landlord.
Salomone was persuaded by a video deposition of Joseph Killian, a former Twitter executive, who testified that Twitter stopped paying rent in December 2022 as a “renegotiating tactic — a tactic to save money.” By comparison, the judge found trial testimony from Nicole Hollander, a top Musk aide who led Twitter’s real estate division, “not at all credible.”
“This testimony suggests to the court that Twitter’s cessation of rent payment reflected business strategy rather than a bona fide belief in its entitlement to rent credit,” Salomone wrote.
Because Twitter could not claim a rent credit in December 2022, its refusal to pay rent was a breach of its lease, the judge determined. With that, she ordered the company, which now goes by X Corp., to pay $8.3 million, plus interest and the Buck Co.’s attorney fees.
The Buck Co. had asked for $8.5 million. Twitter thought the amount should be far less, since its former landlord has not taken serious efforts to lease the space after Twitter’s eviction, holding out for one very large tenant rather than subdividing. Salomone disagreed.
“(The Buck Co.) has wagered that the likelihood of waiting for a market recovery will ultimately be more profitable than dividing the building and seeking smaller leases at lower rates,” the judge wrote in her verdict. “The court does not find that strategy unreasonable.”
The John Buck Co. was represented by a trio of attorneys — Jose Ramirez, Shawn Eady and Sarah Perkins — from the Denver office of Holland & Hart, who declined to comment.
Twitter was represented by Jonathan Hawk and Kathryn Barragan at McDermott Will & Emery, plus Damien Zumbrennen with Zumbrennen Law, who also declined to comment.
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