Another Greedy Landlord Destroys an Institution

http://www.latimes.com/bu...Most+Viewed+Stories%29

Are you sure this particular time it's a case of a greedy landlord?  It sounds like the restaurant is in serious trouble on it's own.  The article says that Junior's sales have dropped 20% in three years and their costs have skyrocketed.  The article does not state what the landlord demands were for the new lease.  Yes, it's awful when a great old restaurant closes, but it's not automatically the landlord's fault (often times it is, but it might not be in this case). 

As a (very small-time) commercial landlord I want absolutely nothing but business success for my tenants. 
 
Several years ago there was a generational change in the management of a long-time tenant, a 'white table cloth' Italian restaurant.  When recent reviews on Urbanspoon and Yelp turned sour I feared the worst.  Sure enough, they went from timely pay to "slow-pay" to "no-pay". 
 
In the end I not only got stuck with 6 months' "no-rent" I had to pay an agent a hefty fee to find a new tenant and then had to pay for an even heftier build-out allowance for the new tenant before I saw even a dime of "new rent".  Through all of that I made timely payments to the property's mortgagor and timely payments to the taxation authorities.  (What do you think their attitude would have been if I had tried to have them "participate" in my financial misery)?  Thank goodness this "tenant gone bad" only occupied 2% of the property; that's why I avoid "big box" like the plague.
 
Happily, the new tenant is very successful; so successful that they expanded into a vacant ajacent space and built a piano bar.  This morning I checked them on Urban Spoon and 88% of the 171 reviews are positive.  Such is the "creative destruction" of the free market.
 
As 'venerable' as Junior's Deli was, the market was clearly "telling them something" when their gross revenues declined by 20%; in a business sense that "something" is "marked for death".  Their clientele spoke this eloquently by withholding their patronage and taking it to other places which better satisfied their needs, wants, and desires. 
 
Believe me, "landlord greed" played no part in this process; all they wanted is a fair market rent for their 11,000 s.f. property and for it to be paid timely and in full.  In fact, given my "sob story" above one might even feel a little pity for the costly process this failed business is forcing them through!
 
& BTW:  why is a "deli" whining about a $4.00/# increase in the cost of corned beef?  Any Deli "worth its salt" (and worthy of the name) brines and seasons their own corned beef, pastrami, etc.  And the last time I looked, wholesale brisket is cheap as dirt.  Also, if I had a business grossing $7MM out of 11,000 s.f. I would have made it a priority to become my own landlord, like those 'venerable' NYC delis and specialty groceries who own their own buildings.    

Mar,
 
After reviewing the article, I agree with Pigiron.
 
If the Kosher Style Deli's are anything like the small handful of deli's left in the NYC area they're mostly relying on tourists for  a culinary treat that unfortunately is taking its last gasp of breath.

They are looking for a new location. 
 
Sales are down in the Los Angeles area almost across the board.  Unfortunately that's where things are these days as prices on everything are rising.
 
Junior's is never empty so I'm not sure if they're using the figures as a bargaining tactic.  That harp store picture I posted last month was taken while I was sitting in a crowded Junior's.  My mother and I eat there often.
 
My mother is landlord to a hot dog stand and a Subway.  She adjusted the rent for the year rather than lose tenants by raising it even though the raise was in the lease.  Sometimes you have to be flexible.
 
I believe it's some of both working in this picture.
 
I knew Marvin Saul.  Years ago I had breakfast with him, my brother and a few others once a month at Junior's.  They were all Lion's Club members and I tagged along. 
 
As I've said in past posts, the Pico Boulevard/Westwood area were/are my stomping grounds.  My brother's store was on Pico around the corner from Junior's and down the block from Apple Pan.
 
Junior's will be missed and other businesses in that area will feel the ramifications of the loss of Junior's.
 
I'm also reacting to the loss of another of my favorites. 

Mar, I'm glad to hear that they are looking for a new location; 11,000 feet is a HUGE space for a deli and their present staff of 95 has to include many who work part-time.  Their present annual gross receipts of $5.6MM could still be extremely profitable with a smaller overhead.  Moving and a little downsizing may well be the best thing that ever happened to them.
 
I know that it is "counter-intuitive" to have sympathy for any landlord, but I tell you truly that I would far rather have the property taxes I pay rather than my residual claim as the owner.

Funny, I had this discussion at work about the decline of the New York style deli. The landscape is changing and the kosher deli seems to have no part in this change. I grew up on the north side of Chicago and remember a slew of deli's on Kedzie, Montrose, Lawrance Ave. And by the time I went back in 1980 most of them were gone. Sadly there are none herein Austin worth visiting.

Brisket is not as cheap as chips these days

When you have a busy Deli in a major market with high rent and have tons an tons of product to $tore that takes a good month until it's ready to serve....there are many additions cost$ that the consumer does not always take in account.

Metroplexjim, I really appreciate your insight! I have seen many places in this area go under and blame rent and/or economy as the reason they closed but I have been to many of them and know the reason they closed was that they were no good in either food or service and nobody came.

When a business disappears there is only one person to blame, the owner. In this case the old man died and the son couldn't handle it.
Or the guy who wrote the story didn't like Landlords.
It's quite possible the son made up his mind that if he couldn't get the rent he wanted he would complete the down sizing he already started somewhere else. Maybe from 11000 SQ FT to 6000 SQ ft.
The existing Landlord could never match that price.

Reminds of when I took my wife to see Rent, not knowing what it was about.  I was cheering for the landlords, hoping they'd bulldoze their building and run off the freeloading scum.
 
Now that's a happy ending! :)

JRPfeff


Reminds of when I took my wife to see Rent, not knowing what it was about.  I was cheering for the landlords, hoping they'd bulldoze their building and run off the freeloading scum.

Now that's a happy ending! :)

 
As an economic policy "rent control" has a demonstrated, consistent history of causing truly unfortunate, unintended consequences.

It's true that the sons are not the father.  This could very well play in to what is happening.
 
In Los Angeles 6,000 square feet could cost the same or more than 11,000 square feet.  Location!
 
That's probably the same everywhere.
 
 

Location!

Zoning as well. You can have the sq. footage and be zoned-out. Landlords that have jewels...keep them in the crown...for good reason.

It took 2nd Ave. Deli a long time to find another location.

mar52


It's true that the sons are not the father.  This could very well play in to what is happening.

 
Sadly, that's what happened with my little "sob story" above.  The scion came in and "sophisticated" the menu by jacking prices and featuring offal.  Even though Anthony Bourdain (on his expense account) may have been impressed, neither "move" was received well by the wealthy, reserved Ft. Worth neighborhood in which his establishment was located on my premises.

CCinNJ
 

Landlords that have jewels...keep them in the crown...for good reason. 

 
Yes! 
 
As opposed to residential, the value of commercial real estate is driven not by speculation, appearance, or pride.  It is rationally, "green eye-shade" determined by the value of the tenant leases.  Yet, taxation authorities pay little attention to this fact and "assess" by location (comparables) and physical facility.
 
A "crown jewel" tenant should really consider purchasing his premises.  If they ever think that they can "get away" with paying less than fair market rent "just because", they are egregiously incorrect.  The "tax man" always has his gun at the landlord's wallet and doesn't want to hear any "sob story" or "tradition" crap.
 
As a landlord I really don't OWN anything.  I just control it, for better or worse.  Even after I get rid of the mortgagor, I will still "report" to the tax-man, always and forever. 

But in Los Angeles & NYC there are only so many commercial listings that would fit the needs for potential tenants. Those tenants wanting to become owners often bid against potential owners that wish to become their landlord...with the cash-in-hand to make it happen before the tenants wanting to be owners can hail a cab to the bank.

Do they have triple net in Texas?
 
Triple Net killed me as the leasee.  I was responsible for the landlord's taxes and licenses.  The one that bothered me the most was that I had to pay for her business license that afforded her the right to collect money from me.
 

Triple net is simplified.
The Landlord collects all the expenses to run the building from the tenant or he forfeits  the building.
The tenant collects all the expenses to run the business from his clientele or he forfeits the business.
If the landlord and tenant don't make a profit on top of their expenses it's classified as a hobby.

Before everybody praises all landlords and blames all tenants I thought that I would share a story about a local Kansas City restaurant that has been visited by many Roadfooders when they come here. I am a regular diner at this restaurant and have listened to the employees gossip. They talked about how problems with the property started right away. The physical plant was old and worn out. The Electrician and HVAC guys were there so often that they got to know the manager by name. The parking lot began to crumble into gravel and potholes formed on a regular basis and the landlord wouldn't do anything about it. Now I admit that I don't know whose responsible for what as far as maintenance is concerned but more then once I heard customers say as they were leaving that the parking lot needed to be fixed before they would come back.
 
It got to the point that by last summer, I heard more then one employee mention that they thought that there was a good chance that they would be unemployed come Spring when the lease is up. Finally, after more then three years of a beat up parking lot the landlord came in rebuilt it in September. The employees don't know if a new lease has been signed or not but at least the talk about loosing their job in the Spring has stopped. I am an ex restaurant manager and I know that the landlord and the tenant have to be able to work together if they expect to be successful.
 
CNW
 
 

These days (most often unless property ownership was established way back in time) landlords of large commercial properties in the highest-ticket real estate markets are not individuals or a family...but a real estate investment trust that has no emotional attachment to anything but their investors portfolios.

It's about their business and best interest...nothing else.

They know that if/when things do not work out with a tenant (no matter how beloved) a new tenant will move right in.

If you look around at the locations that used to be a restaurant deli etc. in the high-ticket markets ...and for whatever reason things did not work out with a lease many cases the new tenant that follows happens to be...a bank.

The businesses that have owned their own property for a very very long time in NYC are fortunate. It's impossible to consider purchasing a property in this market...considering the majority of properties in NYC also come with an expensive building above it.

As is true in all professions and lines of endeavor, there are indeed bad landlords.  From back in my business days in Metro-DC one particular retail group comes instantly to mind. 
 
Please do not take the instances I cited above to make all landlords "angels"!  Truly, all I am saying is that often there are two sides to an unfortunate circumstance such as Junior's.

My parking lot would cost a year of tenants rent.
Sounds simple but there are also other expenses in every year.
My lot is 11 years old I budgeted (hoped) for 20 years.
I hope I don't have to stretch it but the tenants always want a deal.
It would be no problem if I had the same tenant for 20 years but every time a tenant leaves it can cause a 6 month loss in revenue even if a new tenant moves in right away.
They always want at least 2 months to renovate, they say that it benefits me, they are improving my building.
So they make it what they want but then they leave, trouble is it's not what the next tenant wants so we have the expense to rip it out before we can start anew. 

It's about their business and best interest...nothing else.
 
CC. This better be true about all businesses or they will eventually fail.

It was meant as a statement in regard to why a landlord would not go out of their way and make any  concessions so many of the beloved Roadfood establishments in high-ticket markets  remain in business.

I realized that.
It still remains, business is business. Unless it benefits business you should beware. Charity is a whole other animal.

Hardly charity. Many of the deal breakers are what's to be done in terms of improvements with a location that has been there generations before the reps. were born. In return the standard "concession" would always be a lease extention to ensure the current iconic tenant will not be out on the curb...in 36 months looking at a new Duane Reade or Chase Bank....while having to scramble to see if they can land elsewhere.

That's usually where it all breaks down...in NYC.

Still, if you owed a building and had a choice, greasy spoon that's hard on a building and may fold anytime or a bank that will pay and be there for 20 years.
The cart guys can set up outside the door.

We're not talking about greasy spoons. Many of the lost businesses were a very big part of the culture of...home (for many) and will be mourned. This is Roadfood. That's what happens.

You're definition and my definition of a greasy spoon are probably different. I thought we were talking about bad landlords and good business not morning the loss of landmark road food.
Here we seem to loose a landmark business a year, some are Road food some are hardware stores. The common denominator in most cases is they have outlived their usefulness. Not enough customers willing to eat the fat or pay the price.  McRib is king.