The rolling wipeout of beloved New York City restaurants, which claimed the fabled 21 Club two weeks ago, might only be getting started.
And as painful as it would be to food lovers, it would hurt landlords even more as retail vacancies of all kinds mushroom in each of the five boroughs.
Many of the “couple of thousand” eatery closures to date, as estimated by the New York City Hospitality Alliance (NYCHA), were small neighborhood spots less “iconic” than media accounts claimed. But industry insiders fear that the coronavirus pandemic might soon drag down bigger fish — and a lot of them.
The potential loss of so much ground-floor space could be the last straw for landlords already reeling from the wider retail collapse and from some lenders’ reluctance to renegotiate terms amid COVID-19 restrictions.
Tony Fortuna, owner of Upper East Side institution TBar Steak & Lounge, said, “Twenty to 30 percent of restaurants might not make it till spring, and I could be one of them.”
Like other owners, Fortuna is praying for a second taste of $284 billion Paycheck Protection Program (PPP) funds from the federal government, which just began accepting applications. The loans can convert to grants under certain conditions — which proved a lifeline to many restaurateurs last spring.
Because TBar has no income except from takeout and delivery — its sidewalk is too small for meaningful outdoor seating — speed in accessing the funds is of the essence.
“It’s a race against time,” Fortuna said.
Jimmy Haber, the CEO of ESquared Hospitality (which owns BLT Steak and BLT Prime, among other popular spots), said, “I think up to one in four restaurants will close” depending on how quickly the latest PPP round reaches owners and unless there’s further federal legislation specifically aimed at restaurants. The RESTAURANTS Act proposal that’s been stalled in Congress would provide an additional $120 billion in aid to independent eateries.
NYCHA president Andrew Rigie called the PPP “a Band-Aid on a cannon wound.”
“We need the structured support provided in the RESTAURANTS Act, a revitalization fund that provides grant to help pay for months of missed rent, payroll, vendor expenses and more,” he said. “The good news is that incoming Senate Majority Leader Chuck Schumer is a huge advocate for the act.”
The crisis’s main causes are well known: Gov. Andrew Cuomo’s indoor-service ban, which doesn’t apply most elsewhere in the state even though the city’s infection rate is much lower; the inability of outdoor dining to make up for the loss of indoor service; and landlords who either are unwilling or unable to cut their struggling restaurant tenants a break.
Bad as things look, Rigie fears a larger catastrophe in the making.
“Thousands of restaurants are being artificially kept open because of the eviction moratorium and suspension of enforcement of personal liability guarantees in leases,” he said.
“Thousands of restaurants are being artificially kept open because of the eviction moratorium and suspension of enforcement of personal liability guarantees in leases.”
Andrew Rigie, NYCHA president
A partner in a dozen three- to five-story apartment buildings in Manhattan that were heavily dependent on rental income from sidewalk-level restaurants, told The Post, “Some of them are zombies, meaning they’ll use my space only as long as the rent moratorium goes on.”
The landlord, who didn’t want to be named because “everybody will hate me,” said, “It’s bad enough they’re not paying me — even after I offered them deals. It’s worse when they turn out the lights. There aren’t enough nail salons on earth to fill them all.”
In fact, nearly 90 percent of restaurant operators were paying less than their full rent as of October, the NYCHA found in a survey.
The crisis is most acute in Manhattan. Near-empty offices in Midtown, Midtown South and in FiDi, and streets without tourists in Times Square, left restaurants without customers even for alfresco service.
In one high-profile situation, the owners of Carmine’s in Times Square are suing landlord Paramount Leasehold for trying to evict the 480-seat trattoria over $2.9 million in unpaid rent. Carmine’s accuses the landlord of tenant harassment for trying to collect full rent for a business that can’t legally operate due to the indoor service ban.
But the same struggles are more quietly unfolding at perhaps thousands of locations caught in the pandemic’s cruel embrace.