Malco theaters has sued its Overton Square landlord over parking, fees

Tom Bailey | Memphis Commercial Appeal

Show Caption Hide Caption Malco sues its Overton Square landlord Two titans of Memphis leisure and entertainment butt heads in court.

The owner of Studio on the Square has sued its Overton Square landlord for, among other things, substantial reductions in the amount of free nighttime parking for moviegoers.

Malco operates a dozen Memphis-area theaters, and most are fronted with ample surface parking lots. That's not the case at Studio on the Square, which opened in May 2000 at 2105 Court.

"Studio on the Square is the only Malco Memphis area movie theater without a large surface lot in front of the theater,'' the lawsuit states.

The parking shrank further as the Midtown entertainment district drew more businesses, especially after Loeb Properties bought the Square in 2012 and spent millions renovating it, adding public art, security and programming.

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Much of Malco's lawsuit focuses on recent and planned construction that replaces surface parking lots in Overton Square.

But proponents of "new urbanism" generally support placing buildings up to sidewalks in place of large, suburban-style parking lots, which generally do not create an appealing place to talk.

The Square's lot on Trimble at Cooper once offered 475 free spaces. But those spots have been reduced to 137 since Loeb persuaded the city to build a pay-at-night parking garage on the west end and agreed to let Hattiloo Theatre build on the southeastern corner, the lawsuit states.

And all the lot's free parking spaces will be gone if Loeb is allowed to carry out plans to build a hotel on the northeast corner, Malco claims.

Malco filed the suit in January in Shelby County Chancery Court. The electronic court files made available this week by the clerk's office to The Commercial Appeal did not include a response from landlord Loeb Properties. A spokeswoman for Loeb declined to comment, saying the company's policy is not to comment on ongoing litigation.

Malco cites the terms of its ground lease that Loeb inherited when it bought Overton Square. In the contract, the landlord agrees not to reduce the parking areas and maintain the tenants' right "to use all common areas and common parking areas of the development,'' the suit states.

Even though the city built the parking garage, the city agreed to lease the garage to Loeb Properties and give Loeb 75 percent of any net profits from the parking revenue and keep just 25 percent, the lawsuit states. The garage has made a net profit after the first year or two, the suit states.

Malco has received "no consideration'' from Loeb for the loss of the free parking, according to the lawsuit.

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The theater company is also concerned about the future of two surface lots lining the north side of Madison Avenue in Overton Square. The lots flank Bayou Bar & Grill, 2094 Madison. The suit cited public statements from Loeb representatives that Loeb eventually plans to build on those surface lots.

Malco did not name a dollar amount, but said the diminished parking has reduced the company's net profits even after Malco invested in construction and digital upgrades at the theater.

"Loeb may own the land which comprises the Overton Square development but it cannot just do as it pleases with that land,'' the lawsuit states. "It has to develop and use the land subject to the contractual and property rights of others including Malco.''

Malco asks the court to block construction of the hotel, block any construction on the two Madison surface parking lots, and establish a trust fund for Malco's benefit using a share of proceeds from Loeb Properties sales revenue.

Malco's most recent lawsuit against Loeb — a previous suit was filed on different claims three years ago — also claims the owner of Overton Square is charging Malco too much money for maintaining the Square's common areas.

Loeb refuses to divide the costs among all businesses in the district and does not lower Malco's assessment by also counting patio and balcony spaces where restaurants sell food and drinks, the suit states.