Zeidel & Associates Negotiates Lease for Redevelopment of Resort Tennis Facility into Padel and Pickleball Destination

Situation

Zeidel & Associates represented the owner of a branded luxury resort hotel located in the southern United States in connection with the lease and redevelopment of an underutilized tennis facility into a premier padel and pickleball amenity. The project contemplated the refurbishment of the tennis courts, addition of padel and pickleball courts and related amenities such as restrooms, a reception/social area, and a café, with the expectation that the facility could host private events.

The owner’s objective was to transform an existing hotel amenity into a more active and differentiated resort offering that would enhance the guest experience and support the hotel’s positioning as a luxury destination. The facility would serve guests of the hotel, guests of an adjacent affiliated resort hotel, and facility members, but would not be open to the general public.

The owner presented the firm with a letter of intent and the tenant’s proposed form of lease.

Approach

Noting that the letter of intent was brief, Zeidel & Associates helped the owner and management company work through various deal points, and recommended that the tenant lease form be rejected and replaced with its own owner-protective form of lease. The firm then drafted and negotiated the lease with a focus on aligning the tenant’s redevelopment and operating obligations with the owner’s broader resort objectives. A key drafting challenge was defining the leased premises because the facility was not located on a separate legal parcel, requiring the lease to describe the premises with sufficient precision while accounting for its integration with the surrounding resort property.

Because the tenant would be responsible for constructing the new facility at its expense, the firm focused on ensuring that the lease contained a workable framework for the design, approval, construction, and completion of the improvements.

To address the owner’s concern that the tenant actually complete the redevelopment in a lien-free manner, Zeidel & Associates guided the client through an evaluation of the tenant’s organizational structure and negotiated a construction guaranty from the principal of the tenant covering the tenant’s obligation to complete the initial installations, as well as an ongoing payment and performance guaranty from the tenant’s corporate parent.

The firm also helped clarify the economic arrangement agreed to by the parties. Rather than requiring traditional fixed rent, the lease required the tenant to provide free court time to hotel guests and guests of the adjacent affiliated resort hotel, while also paying percentage rent based on tenant’s gross sales. This structure supported the owner’s goal of enhancing the guest experience while allowing the owner to participate in the economic performance of the facility.

In addition, the firm assisted the client in addressing its concerns with the operational integration of the facility with the hotel and adjacent affiliated resort. The firm provided in the lease that hotel guests were given priority during certain hours, the tenant’s operations were required to satisfy the applicable luxury brand standards, and the hotel manager retained oversight rights relating to service quality, inspections, guest satisfaction, and operational coordination, as well as a right of first refusal to provide catering service.

The firm also required the tenant to improve its form of liability waiver to better protect the owner and hotel manager.

Finally, the firm coordinated with counsel for the branded hotel management company to ensure its approval of the lease, and incorporation of its requirements regarding insurance coverages and other matters.

Result

Zeidel & Associates helped the owner complete a lease that supported the redevelopment of an underutilized resort tennis facility into a distinctive padel and pickleball amenity while preserving important owner, hotel manager and brand protections.