would be customers find the tavern is closed

Zebra Lounge, Enology Wine Bar, and Alliance Tavern have all occupied 3238 Wisconsine Avenue NW in the last two years. Enology ownership didn’t have the results needed for sustained success so they changed concepts to Alliance Tavern adding a new and different menu and chef to attract more customers. The Washington Post reviewed the local tavern recently but apparently it was too little too late. Alliance Tavern is now closed for business. The space is located at the corner of Wisconsin and Macomb with good visibility and nice finishes. Most likley a new concept will reappear in the coming months under new ownership…again.

We signed as a new client last week, a very nice ownership group with a problem retail tenant. As they described the situation, I was not very surprised, having heard the story many times before as a property manager.

The tenant said they’d pay last week, but they did not. The story keeps changing, and the tenant now owes $60,000 in back rent. The landlord is hoping we can get the tenant back on track.

Typically retailers who are not paying rent have serious business issues and will most likely not become current, I explained. The best we can do is take action to facilitate their removal from the property as soon as possible. However, if there is a chance the tenant might pay the past due rent and become current, it will be because the Landlord has resorted to hiring a professional property manager who will hold the tenant accountable. We work closely with several Washington DC law firms who have real estate litigation attorneys including Greenstein, Delorme & Luchs  and Veritas .  We reduce legal costs for our clients by absorbing the time associated with tenant negotiations and letting the attorneys focus on the actual litigation work including the consent judgment praecipe.  As property managers, we form relationships with our tenants based on professional courtesy, respect, and fairness. In return, we hold the tenant accountable to the terms of the lease. This means enforcing the agreement on a monthly basis, charging a late fee if the rent is a day late, or serving notice if tenants are not compliant with any other substantial lease obligation.

A bad tenant (or one close to going bad) will work every angle possible with a kind hearted Landlord, but they realize very quickly that such tactics are futile against a seasoned property manager. Many would say that we are paid to be “the bad guy”, but we do not see it that way. We are here to have the hard conversations and take the actions necessary to maintain a solid landlord/tenant relationship. Once a tenant knows exactly where they stand and just how we enforce the lease agreement, we learn exactly what kind of tenant we are dealing with.

During this economic slowdown smaller retailers have struggled and the chances of collecting back rent are not good, which is why we recommend legal action on any unpaid balance older than 30 days. In our experience, Landlords have the best chance of recouping all or a portion of their lost rent when action is started swiftly, within the month that is unpaid.

A firm but fair approach will keep good tenants good, and bad tenants packing.

DC Landlords may still provide tenant improvement allowances to fund the build out of new retail space for tenants. However the tightened credit markets and increased failure rate of retailers has changed their thinking. Some Washington DC Landlords previously willing to provide allowances are now challenged by their lenders to do so and others are tightening standards for providing an allowance, if any.  The amount depends on several factors including the creditworthiness of the tenant, the terms in the lease and the total square footage of the space. Generally, a landlord offers more for larger tenants with excellent credit and longer lease terms.

Before releasing the monies, most Landlords will require retail tenants meet certain terms and conditions which should be specified in the lease and may include:

(a)        Completion of the improvements in or to the Premises required by the Lease;

(b)        Acquisition by Tenant of a Certificate of Occupancy for the Premises properly issued by the governmental body having jurisdiction;

(c)        The opening by Tenant of Tenant’s business in the Premises;

(d)        Tenant furnishing to Landlord unconditional waivers of lien and sworn statements from Tenant’s general contractor and any subcontractor showing that all of said persons have been paid in full;

(e)        Submission by Tenant to Landlord of a breakdown of Tenant’s final and total construction costs, along with all supporting invoices, agreements and related documents covering the amount of the Allowance;

(f)        Receipt by Landlord of Internal Revenue Service Form W-9, Request For Taxpayer Identification Number and Certification. Tenants may have to report Tenant Allowance as income depending on several factors and should check with a CPA regarding tax implications.

A few large apparel retailers are actively looking in Washington DC for a downtown location. The closed Barnes and Nobles at 14th and F Street was recently leased by T.J. Maxx and Kohl’s has toured multiple sites including the former ESPN Zone on 12th and F Street.

Yet for many clothing and shoe retailers, prospects for growth have dimmed significantly since the recession. According to today’s Wall Street Journal, consumers are shifting more spending toward personal technology gadgets leaving less for apparel. Many soft goods retailers are changing strategies including Nine West who is seeking to exit it’s new Georgetown location at 1227 Wisconsin Ave less than 24 months after signing a long term lease.

Curbside Cupcakes

Originally uploaded by Capital Retail Group

It is critical to limit overhead while still producing a quality product in the cupcake business. Since retail rents in downtown DC pricey, some retailers have gone mobile like Curbside Cupcakes
There are many quality entrepreneurs making a great product such as Hello Cupcake and Georgetown Cupcake.

However, how many cupcake retailers can survive in DC?
Here’s the current list

Consumers are still spending cautiously as noted in the Wall Street Journal this weekhttp://online.wsj.com/article/SB10001424052748704111704575354731133711108.html posing a real challenge especially to soft goods retailers in the Logan Circle area who are still squeezed by high rents and lower than expected 2010 sales volumes. Recently The Written Word http://www.writtenword.invitations.com downsized and smartly shed their retail business at 1427 P Street NW  moving  to 1926 17th Street, NW. In mid-July, Pacers http://www.runpacers.com the highly regarded running specialty retailer, will be moving into the 2,200 square foot space paying more than $10,000 in rent per month to property owner SJG Properties.

Dave & Busters: Zeroing in on ESPN Zone in D.C.? - Washington Business Journal.

Constitution Cafe, another new fast casual eatery has opened in the NOMA neighborhood. Father-son owners Su and Sean Kim focus mostly on buffet breakfast and lunch catering to 2,500 DOJ and 1,000 ATF workers. Yet existing food establishments say business could be much better. The expected influx of new workers to the area is moderate. Some government employees bring their lunches to work in an effort to save money while others telecommute once per week reducing the frequency of customer visits. It is doubtful there is enough daytime business in NOMA to support all of the food establishments including Five Guys www.fiveguys.com , Au Bon Pain, Heidi’s Brooklyn Deli www.heidisbrooklyndeli.com, Café Phillips , Potbelly, and Pound Coffee. Some food operators dependent on the government workforce for business have not met their sales projections. Unlesss they expand to reach the local community by operating on weekends and nights we forecast some struggling under capitalized operators to shut down later this year and by replaced by more well positioned companies.

Walgreens

Originally uploaded by Capital Retail Group

Mid-Atlantic Commercial Properties, a division of Fort Lauderdale-based Morgan Property Group, redeveloped the property for longtime owners, the Lung family, who closed the restaurant in 2007 and leased the building to Walgreens. Yenching Palace is the secret location where President John F. Kennedy’s negotiators met with representatives of the Soviet Union in 1962 to prevent a war during the Cuban Missile Crisis. Also at Yenching Palace, Richard Nixon’s Secretary of State, Henry Kissinger, discussed better relations with the Chinese. After that, Yenching Palace became a popular restaurant among the diplomatic community. Kissinger dined there regularly.

For the first time, the 2010 Mid Atlantic International Council of Shopping Centers (ICSC) show was held at the Gaylord National convention center much to the satisfaction of attendees.

For 2010, ICSC forecasts a 3.9% increase in shopping centers growth mostly attributed to government stimulus programs initiated in 2008. Sales improved in almost every retail category in 2009 as evidenced by the luxury category which posted a 10.8 % increase in sales over 2008. GDP increased 2.2% in the 3rd Quarter of 2009 and ICSC forecasts modest economic expansion in 2010 with soft goods to be especially slow.

A recent ICSC consumer spending survey showed 82% of the respondents rated their financial position as fair or good. Gary Rappaport of The Rappaport Companies noted essential and frugal spending now translates to pent up demand for more significant consumer spending later.

Retailers who successfully managed their inventory to lower levels during the recession are poised for expansion in late 2010 and beyond. Many retailers including Starbucks said they are motivated to expand within the urban core of Washington DC at the expense of fewer locations in the suburbs. Store closures slowed significantly in 2009 with an actual net gain of 377 stores nationwide. A majority of retailers in attendance said they are focused on profits and less on expansion for the remainder of 2010 due to the credit crunch.

Most panelists at the ICSC show agreed few new projects would commence until 2011 or later when commercial credit becomes more accessible. Locally, Doug Olson the Executive Vice President of Monument Realty said his firm cannot obtaining financing for their Half Street project located adjacent to the National Stadium in the Capitol Riverfront area of Washington D.C. He predicted financing would be secured in the future and the project would move forward to completion.