Mayer

I. Introduction

This appeal involves the question of whether respondent City of South San Francisco (City) must, in its condemnation action, compensate appellants Josephine Anne Mayer and Estate of Erwin Mayer (appellants) for the value of the City’s preexisting leasehold interest in Mayer’s property. Like the trial court, we answer this question in the negative and, therefore, affirm the judgment.

II. Factual and Procedural Background

The property around which this appeal centers is the South San Francisco Conference Center, located in the City of South San Francisco. Before its development in the late 1980’s as a conference center, the property was used as a warehouse facility. In 1989, the City leased the property from its owners, Josephine and Erwin Mayer (the Mayers) for 20 years with options to extend the lease term for 2 ten-year periods. The City paid no rent during the first 18 months of the lease term and constructed a conference facility on the site at a cost of $7.5 million. The City also agreed to pay all expenses relating to the occupancy of the site and, at the end of the lease term, the parties agreed that all improvements would be surrendered to the…