Experior Global Warehousing, LLC v. BTC III Hamilton DC LLC [2024]

Factual Summary:

To supports its lease obligations for a commercial warehouse, Experior Global Warehousing, LLC (Tenant/Applicant) applied for and caused Huntington National Bank (Issuer) to issue a USD 1.5 million letter of credit in favor of BTC III Hamilton DC LLC (Landlord/Beneficiary). By the Lease Agreement, Landlord/Beneficiary could demand LC sums “[u]pon the occurrence of any default by Tenant ... to satisfy any arrears of Rent”. The LC was secured by equipment used by Tenant/Applicant in its business operations; Landlord/Beneficiary allegedly required an LC in lieu of a security deposit because of Tenant/Applicant’s inadequate credit report. No LC text, choice of law or practice rules were mentioned.

The five-year Lease began January 2023 and carried a monthly rent of USD 391,463.33. Tenant/Applicant intended to use the warehouse to store packaged products on concrete flooring. Lease Agreement Section 3.1 provided the warehouse would be leased “as is”. Landlord/Beneficiary also disclaimed any warranty that the warehouse would be suitable for a particular purpose; i.e. the warehouse was not designed for a specific tenant. Tenant/Applicant could terminate the lease only if more than half of the premises were affected by fire or “other casualty” and Landlord/Beneficiary could not timely repair the warehouse with insurance proceeds. The Lease did, however, require that Landlord/Beneficiary tender the premises with HVAC systems, plumbing and electrical systems in “good working order.”