Two Months Into the Pandemic, Mounting Unpaid Rent Is a Top Concern for NYC Restaurateurs

For Murat Uyaroglu, the owner of popular Brooklyn coffee chain Hungry Ghost, monthly rent on his 13 locations varies anywhere from $5,000 to $13,000 per month. Since the start of the COVID-19 pandemic more than two months ago, Uyaroglu’s business has plummeted by up to 70 percent in several locations, he tells Eater. Yet he continues to pay at least some rent to ensure that he’s not evicted once the existing state-mandated moratorium on rent ends on August 20 — and so that he’s not forced to fork out a mountain of cash all at once when the deadline ends.

“I understand that rent forgiveness won’t happen,” says Uyaroglu. “But I don’t want to lose any of my locations. Our leadership really needs to step up and offer us some kind of relief.”

As the shutdown on dining-in continues, and with little certainty on when restaurants can reopen at full capacity, rent continues to be the biggest concern for business owners across the city. Already, several NYC restaurants have permanently closed in part because rent has been impossible to pay with little to no revenue. Parul Patel, the owner of East Village’s historic Gem Spa, was looking at nearly $70,000 in rent and utilities payments before her family ultimately decided to close for good.

Many of the restaurants staying open haven’t been able to make rent at all after the dining room shutdown went into effect. And though rent deferrals offer short-term solace, almost all are concerned that they might be forced to pay a massive amount of back rent at once after the eviction moratorium lifts in August, while still dealing with a crushing loss in sales and customers.

A recent survey by the NYC Hospitality Alliance — which represents thousands of restaurants in the city — showed that of the 483 establishments surveyed, 87 percent were unable to make rent payments in May, or were only able to make partial payments.

“Luckily we do have some good landlords who understand the situation,” Uyaroglu says. “But when the governor’s moratorium ends, some landlords might evict us.”

Hungry Ghost Coffee [Official]

For now, a number of restaurateurs are making do by paying a percentage of their rent to stay on good terms with their landlords. Informal arrangements like deferrals or paying a percentage of sales from takeout or delivery are common, according to owners who spoke with Eater.

East Village bagel destination Tompkins Square Bagels was able to get a payment deferral for April and May for a location at 165 Avenue A, between East 11th and 10th Streets, where the landlord is Kushner companies subsidiary Westminster Management, owner Chris Pugliese tells Eater. Hungry Ghost has agreements for nearly all of its locations so that the business can pay anywhere from eight to 12 percent of what it’s making each month, while Clinton Hill neighborhood restaurant Otway paid 70 percent of its rent in April.

GupShup, the chic Indian restaurant near Union Square, didn’t pay rent when it closed in April, and now that it’s reopened for takeout and delivery, owner Jimmy Rizvi is working out a percentage rent agreement with his landlord for the upcoming months.

“We’re lucky to have a good landlord,” Rizvi says. “We’re just being completely honest with our landlord. I think most landlords know they’re going to have a hard time finding anyone right now.”

The Expat [Official]

Some restaurants have even been lucky enough to get rent relief or other assistance from their landlords. Columbia University owns the space for Harlem Southeast Asian restaurant the Expat, and it’s forgiven rent for April and May, according to restaurant co-owner Andrew Ding. The university has also been sending out surveys to commercial tenants to figure out what rent might look like in the coming months.

In another case, acclaimed upscale FiDi spot Crown Shy’s landlords are also investors in the restaurant, and they were amenable to cutting Crown Shy breaks during the pandemic. The building’s owners helped to alleviate rent payments and provided housing to restaurant staff who volunteered to live in the building temporarily, a way for Crown Shy to sell meals to tenants and donate food for nonprofit Rethink, according to general manager Jeff Katz and executive chef James Kent.

But rent forgiveness is far from ubiquitous, and for those who have rent deferral, not all the businesses have those agreements written into a contract. Uyaroglu of Hungry Ghosts says none of his arrangements are formal, and there’s nothing stopping his landlords from changing their minds at any time. Samantha Safer, Otway’s owner, says her landlord has mostly been silent in response to her emails on rent, so though they have a good relationship, she’s uncertain of what she’ll actually be liable for when the eviction moratorium expires.

Otway [Official]

As June approaches, Pugliese is unsure of whether he’ll get deferral again; the expectation from Westminster right now is that he would likely be asked to pay his back rent over the course of several months this year.

But with a $9,600 per month rent on his Avenue A store, an 80 percent decline in sales across both his locations, and little to no information about when things will go back to normal, Pugliese doesn’t know when paying back his rent will be feasible, he says.

Regardless of their different relationships with their landlords, many restaurateurs fear that landlords have the upper hand going forward, and that landlords could require them to pay the full back rent all at once when the state-mandated moratorium on evictions lifts. Pugliese, for instance, has already accrued nearly $20,000 in back rent so far, and with restaurants not expected to go back to normal anytime soon, that amount will only grow.

But so far, rent relief efforts from the government have been fleeting at best. For restaurateurs who’ve gotten a federal loan, only 25 percent of the funds can be used for rent and utilities over a two-month period, which owners say is too little in a city where restaurants often pay more than $120 per square foot for rent. State Senator Michael Gianaris, who represents parts of Queens, proposed legislation in March that would cancel rent for 90 days, but the bill hasn’t made any progress. The City Council proposed legislation last month that would pause NYC evictions for a full year, but that too hasn’t moved forward.

Almost all of the restaurateurs who spoke with Eater don’t expect their landlords to give full relief, and many understand that landlords — particularly the city’s smaller landlords — have a variety of payments to make themselves including mortgages, property taxes, and maintenance.

James Whelan, the president real estate trade group REBNY echoed those concerns telling Eater in a statement that “in order to support our complex and interconnected economy while preserving the New York’s cultural identity as the food capital of the world, it is critical that New Yorkers collaborate on effective policies at the City and State levels, and use our collective power to advocate for the additional federal aid.”

Indeed, restaurant owners are looking to government officials to step in for guidance on the situation. Uyaroglu says the federal government needs to step in with something similar to the PPP, but geared specifically to rent. A coalition comprising the Hospitality Alliance, NYS Latino Restaurant, Bar & Lounge Association, and the Real Estate Board of New York, has called on the city and state governments to create a fund that would help tenants pay rent and help landlords make payments on building repairs and taxes.

“The restaurant industry generates so much tax revenue,” says Pugliese. “We have definitely done our part and they need to do theirs.”

With additional reporting by Erika Adams.