Retail: Rent disputes cloud survival of small shops
Supe plans hearing on bad landlord behavior
San Francisco small businesses are struggling to pay rent during the coronavirus pandemic, sparking fights that include four tenants clashing with the same landlord in the Castro neighborhood.
On Tuesday, Supervisor Rafael Mandelman said he plans to call for a hearing on bad landlord behavior by highlighting the owner of 23232335 Market St. in the Castro.
Golden Pacific Properties LLC bought the fiveunit commercial building in February for $5.8 million, according to property records. It’s allegedly being unreasonable and demanding full rent dating to April 1, despite revenues plummeting for the small businesses during shelterinplace orders and onagainoffagain reopenings, according to the building’s four tenants and Mandelman. The company did not return calls seeking comment.
“There is economic devastation happening across this city and across the world,” Mandelman said before the meeting. “The economic environment when this ends will be vastly different from prepandemic times. Why a property owner is acting like this is beyond me.”
Mandelman emphasized the issue was larger than just one bad actor. He plans to call a hearing on how widespread failed rent negotiations are in the city, and local actions that could aid small businesses.
The pandemic is exacerbating the retail sector’s woes, which included falling foot traffic amid online competition and in San Francisco, high fees and long permit times. Shutdown orders have led to additional store closures.
A survey of the Castro and Upper Market areas in January found more than 50 empty storefronts and a vacancy rate around 20%. Since March, at least 20 more small businesses have permanently closed in the Castro, including Ritual Coffee, barbershop Male Image, and children’s clothing store MiniChic.
Mandelman and state Sen. Scott Wiener, DSan Francisco, sent a letter to the 23232335 Market St. landlord on Sept. 2, on behalf of home goods store Kenneth Wingard, D&H Jewelers, furniture store Stag and Manor, and Crystal Way, sellers of crystals, gemstones, metaphysics books and tarot readings. The letter said Mandelman has unsuccessfully sought to meet with the owner all summer to mediate an agreement that would be fair to the landlord and the tenants at risk of displacement.
Linda Amburgey, coowner of Crystal Way, has operated there since 2003 and was forced to close abruptly along with all nonessential retailers in the spring, shortly after the new owner arrived.
“We made our first rent payment in March and then we got shut down. In an instant, we had zero revenue,” Amburgey said.
She reopened the store on June 15, and after sales resumed she made rent payments for July and August. She said she sought a rent abatement from the landlord for the months she was closed but to no avail. Amburgey said she owes about $12,000 in back rent. She’s also closed her Sunset location, laid off her employees and isn’t in a position to hire them back, which means she can’t receive forgiveness for her federal Paycheck Protection Program loan.
“I don’t want to go into further debt. I’m seriously considering bankruptcy, which is a shame because the store is a source of healing for the community,” she said.
Shawn Higgins and Lindsay Daunell, coowners of D&H Jewelers, opened in 2011. They closed their store for three months beginning in March and took a 25% cut in revenue. They’re now open three days a week instead of seven, and by appointment only as clientele shrinks.
“It’s hard for us to look long term because we don’t know what’s going to happen, how long the pandemic is going to be around. To have a landlord that doesn’t want to negotiate makes it very difficult,” said Higgins. “A landlord would be a partner, not just a person who takes your money.”
He said they have twoandahalf more years left on their lease, and if they made it that far, they probably won’t renew.
“We’re good, longterm, viable tenants. All we’re asking for is to work something out,” he said.
The state regulates commercial rents. Gov. Gavin Newsom issued an executive order in March allowing local governments to offer eviction protections.
San Francisco first implemented a moratorium on commercial evictions on March 18, which is now set to expire on Sept. 30, along with Newsom’s order. The moratorium prevents any small businesses from being evicted due to a loss of income or other economic impacts caused by the pandemic. Tenants have up to six months to pay outstanding rent, so rent due from April 1 can be due on Oct. 1, according the city’s rules.
Mayor London Breed called for an extension of the governor’s order on Tuesday.
“Our local commercial eviction moratorium has been critical in providing small businesses an assurance that they can navigate these really challenging times without fear that they will be evicted because they can’t make rent,” she said in a statement.
Sen. Scott Wiener’s SB939, which allowed tenants who lost revenue because of the pandemic to renegotiate leases without penalties, died in committee in June.
“We anticipate there will be many permanent closures, and we’re concerned about that,” said Andrea Aiello, executive director of the Castro Community Benefit District. “It’s a sad situation. There are stories of landlords not decreasing rent, but I’ve heard more stories of landlords that are working it out with their tenants.”
One such landlord is Helen McClure, who owns a property at 545 Castro Street. She said she lowered her wellness spa tenant’s $3,800permonth rent by $400 each month for three months. Another tenant, pet store Best in Show, closed in June after 18 years in business. She said she lowered the store’s rent but the owners wanted to retire early and move on.
“Listen, I also have bills and mortgages to pay. It’s hard. But the point is to work it out with your tenants. It’s not like there’ll be retail tenants lining up to lease space after,” McClure said.