Dispute threatens bayside businesses
Notable firms in lease dispute with Port of S.F.
“You can’t have boats in San Francisco without a place to repair them.”
Arvind Patel, owner, San Francisco Boatworks and The Ramp restaurant
For more than three decades, San Francisco Boatworks and the adjacent Ramp restaurant have survived as a bastion of saltiness in a fast-changing waterfront, a place where bottoms of vessels are painted, beer mugs drained and halibut fried up moments after being reeled in from the bay.
That 36-year run, however, could be in jeopardy over a lease dispute between the Port of San Francisco and Arvind Patel, who owns both businesses.
On March 11, the Port of San Francisco sent Patel a 30-day “notice to cure lease default” for the 100,000-square-foot property. It’s the site of the city’s only working boatyard as well as the Ramp, which over the years has morphed from bait shop and hot dog stand into a freewheeling waterfront joint known for Latin dance bands and after-work gatherings.
The port contends that Patel owes $779,151 under the terms of a lease that requires him to pay a percentage of gross receipts of both businesses. It also claims Patel’s operations are “not currently in good standing” because of noise violations and a renovation of the restaurant, according to the port. Patel later obtained retroactive permits for the work.
The fight comes as pandemic-driven losses have decimated the port’s budget, slashing revenues 40% from $173 million to $104 million. The agency is carrying $30 million in unpaid rent and has deferred $40 million in capital expenses.
Patel doesn’t deny that the money is owed under the terms of the month-to-month lease, which has been in place for 16 years. Like other businesses, he suffered losses during the pandemic and argues
that the terms of the boatyard portion of the lease are nearly three times the market rate. He is proposing a partial payment plan while negotiating a new deal.
In a statement, Randy Quezada, a port spokesperson, said the port is “currently in negotiations” with Patel’s group “on a rent relief package as well as lease renewal.”
“Since 2007, the Port has worked with them to address various permit and compliance issues and offered to bring their percentage rent rates closer to comparable retail tenants in the area,” he said. “However, because of their failure to correct these issues they are not currently in good standing and we have not been able to enter into a new lease agreement.”
While the port has offered many tenants rent relief packages during the pandemic, it is also trying to recover revenue from businesses that are back up and running. The port is a self-sustaining enterprise agency, under its charter, meaning that it is supposed to spend only what it collects in revenue.
In the case of the fight over these businesses, the port is trying to juggle two competing demands. On the one hand, it needs to make money off its property, but the agency’s mission is to preserve maritime uses. However, those uses might not generate as much revenue as much as other kinds of businesses but are essential to the city’s international reputation as picturesque town with an bustling waterfront.
Under the terms of the lease, Patel pays the port 6.75% of sales from the restaurant and 8.75% from the boatyard. Patel says he has no problem with the restaurant rent but that the boatyard rent is more than double what it should be. Boatyards have margins of less than 10%, and most on the West Coast pay less than 3% of sales, according to a study San Francisco Boatworks did of boatyards.
“It’s a dying business. It’s difficult to find qualified workers and to charge enough to survive,” he said.
Patel moved to San Francisco in 1972 from London and started sailing in the bay. In 1990 he became a partner in the boatyard with a friend, the late Mike Denman.
“There is something about this place, funky as it is, that hits a nerve with people,” he said. “It’s a waterfront dive. It’s an everyman’s hangout. Lots of music and dance. It’s an institution that, if it’s damaged or we lose it, we lose a tiny bit of what makes San Francisco San Francisco.”
About 500 boats are hauled out at San Francisco Boatworks every year — fishing boats, police boats, fire boats and lots of recreational sailing vessels and cruising boats. With a boatyard closing in Redwood City a few years ago, the 90,000-square-foot yard is the only place on the Peninsula to haul out.
“You can’t have boats in San Francisco without a place to repair them,” said Patel. “It’s a totally essential service.”
In a letter to the port, Patel pointed out that a much larger lease for a dry dock at Pier 70 called for rent that was 3.3% of sales, rather than the 8.75% he pays, and argued he has overpaid the port “$2.4 million in excess of market rates in percentage rent for the maritime boatyard operation since 2006, an enormous effective windfall for the Port.”
Patel proposed to pay about $182,000 in back rent and 6.7% in sales after January of this year. He said he would like to split the lease into two separate agreements, one for the restaurant and one for the shipyard.
Patel’s business has not made a rent payment since March 2020, other than one check for $2,000, according to the port. It reported $6.7 million in sales for March 2020 through January 2022.
Spokesperson Quezada said the port hopes to preserve both businesses.
“The Port understands the significant challenges that the pandemic has posed to our tenants but must treat all tenants equitably and cannot offer more support to (the Ramp and boatyard) than to others,” he said.
Boat restorer Allen Gross sees San Francisco Boatworks as a historic treasure and an essential business that must be maintained, even if it has to be subsidized by the city. Gross spent eight years at the shipyard restoring a 1889 cutterrigged sloop called Folly, the second-oldest boat on the West Coast.
“The icons of tourism are the boats on the bay, Fisherman’s Wharf, the Maritime Museum on Hyde Street Pier,” said Gross. “That is what people think about when they think of San Francisco. Without a boatyard you have no way to take care of the infrastructure of our image.”
Boatyards have been closing up and down the West Coast, he said. It’s unlikely that another operator would come along if Patel is forced out.
“Here you have all of these boats on the bay which need to have work done on them,” he said. “A fisherman barely making it with his crab catch — where is he going to go? Do you want that crab boat on Fisherman’s Wharf or not?”