Breed says city policy on rents to change
There are no more clear bowls of pho, crispy imperial rolls or garlicky wokfried noodles at Green Papaya, a San Francisco restaurant owned by Thai Van. The South of Market Vietnamese spot at the base of the Fifth and Mission Parking Garage has reliably fed hungry conventiongoers for more than 10 years, but with the nearby Moscone Center closed, the windows are boarded up.
Van temporarily shuttered Green Papaya this month with the hope of reopening whenever conventions come back to San Francisco — but he’s in a bind, as his landlord wants him to resume paying his normal $11,000 monthly rent payments July 1, even though he doesn’t expect it to be open and making money by then.
Van wouldn’t be so surprised if it weren’t for the identity of his landlord: the city of San Francisco, which also owns Moscone Center. Convention centers are in the state’s fourth and final phase of reopening, coinciding with the end of the stayathome order.
“How are they going to ask me to pay rent when they’re not allowing customers to come in? It’s like they want me to pay for a hotel room and tell me to stay outside,” he said.
The city division that owns the restaurant property is the San Francisco Municipal Transportation Agency. Other San Francisco businesses similarly have the transportation agency as landlord, though few are so dependent on the cityowned Moscone Center for foot traffic as the Fifth and Mission garage businesses. SFMTA sent Van a letter March 30 stating his rent could be deferred for April, May and June but that he would have to resume paying rent in July and pay deferred rent by the end of the year.
After The Chronicle reported on Green Papaya’s predicament Wednesday, Mayor London Breed said in a tweet that the city was working on “relief efforts, including rent forgiveness” for small businesses like Van’s.
“No one is getting forced out of cityowned properties because of inability to pay rent during this pandemic,” she wrote.
SFMTA transportation director Jeffrey Tumlin said his agency would meet with the city attorney Thursday to work through the details of forgiving commercial tenants’ rent.
“It’s critical we support all of our tenants in this difficult time. We want to make sure all of our tenants survive,” he said. “Back in March, we didn’t know how long shelterinplace would last or what the economic impact would be. Now we’re seeing the economic impact is big.”
“We are sorry our March letter led to some confusion,” he added.
Supervisor Matt Haney, who represents Green Papaya’s district, said rent forgiveness is the right approach.
“These small businesses aren’t bringing in revenue, they’re doing the right thing for our city and for public health by closing. They shouldn’t be forced to pay rent with money they don’t have,” he said via text message.
When SFMTA board member Gwyneth Borden heard about Green Papaya’s situation, she was disappointed in the city.
“I don’t think it’s reasonable to (expect they can) afford back rent when restaurants have been shut down by no fault of their own,” said Borden, who also advocates for restaurants as part of the Bay Area Hospitality Coalition, a restaurant industry group that formed during the coronavirus crisis.
Both Borden and Van have their eyes on a California bill that could make a big difference for Bay Area restaurant owners struggling during the crisis: Sen. Scott Wiener’s SB939, the moratorium on commercial evictions bill with new amendments that encourage restaurant owners and landlords to enter good faith negotiations about their rents given the dire landscape.
The amendments came from Borden and the Bay Area Hospitality Coalition. If passed, the legislation would apply to restaurants with a decline in revenue of at least 40% compared to before shelterinplace. If nothing fruitful came out of negotiations, the restaurants would be able to terminate the lease and not be liable for more than three months of rent accumulated during shelterinplace.
“We wanted to create more leverage and reasons for landlords to come to the table,” Borden said. “Rent is going to be the difference maker as to whether people reopen or if people shutter altogether.”
Borden said she hopes rent reductions and rent forgiveness would come out of these negotiations, since deferred rent just results in a pile of debt that needs to be paid later. What many restaurant owners would prefer is for rent to reflect a percentage of their sales — ideally less than 10%. It’s not out of the realm of possibility, Borden said, as some new restaurants already negotiate for a low base rent and a percentage rate in tandem.
“In this circumstance, when you can’t predict what your revenues are going to be, it’s a better and more sustainable model,” she said. “In terms of keeping restaurants alive, there has to be a better partnership with landlords.”
Hope for SB939 or some other form of statewide rent forgiveness held Van back from signing an agreement with SFMTA stating that he would resume normal rent payments July 1 and repay all deferred rent by the end of 2020. He’s worried about whether that signature would legally mean he couldn’t take advantage of renegotiating for reduced rent, should the bill pass. SB939 goes to the Senate Judiciary Committee on Friday.
Van and other tenants said they felt pressured to sign the repayment agreement as recently as this week. Tumlin said the communication from “more lawyery type people” to tenants was unclear and was meant to “lay the groundwork for forgiveness.”
Despite the lack of foot traffic from Moscone Center, Van tried to operate Green Papaya during shelterinplace. It didn’t go well. In March, he earned less than $10,000 — not enough to pay rent, let alone all the other costs of running a restaurant. In April, he made just $3,000.
“It’s only enough to pay utilities, not insurance and not the guy in the kitchen me and my wife work with,” Van said.
He successfully received a loan from the Paycheck Protection Program, but the funds must primarily be used to pay employees, not rent.
“I could walk away,” Van said. “But I have so much passion in it. I’ve put so much time in it.”