Will Las Lagrimas de Santa Monica (“Saint Monica’s Tears”) will ever stop falling on West Hollywood’s Main Street?
Last month, many businesses on Santa Monica Boulevard put plywood over their windows and doors for fear there would be break-ins and looting following the All Black Lives Matter protest on June 14. Fortunately that protest, which brought more than 20,000 people down Santa Monica Boulevard, was a peaceful one. Within the next few days most business owners removed the plywood.
But some still haven’t opened for business yet because of the COVID-19 pandemic (or they are restaurants and bars that were allowed to open briefly and then ordered again to close.) Others, like Gym Bar, the popular gay sports bar at 8737 Santa Monica Blvd., and Phonomenal, the Vietnamese restaurant at 8542 Santa Monica, and Basecamp Fitness at 8714 Santa Monica, have announced that they are closed permanently because of the financial damage wrought by the pandemic. But the pandemic isn’t the only problem. The dozens of empty retail spaces on Santa Monica Boulevard from Doheny to La Brea once housed other small businesses that faced problems that preceded the COVID-19 pandemic shutdown.
One of the issues is the “Amazon Effect,” the term that describes people’s growing propensity to shop online rather than visit stores in person. “Among other factors, the Amazon effect is cited as the primary reason for street-based stores’ declining sales, which have often foreshadowed the stores’ eventual closure,” reports Investopedia, the investment website.
Small business owners also are complaining about what they describe as “landlord greed.” Several agreed to speak to WEHOville about their issues with their landlords with the understanding that they wouldn’t be named for fear of retribution. However, Rick Schmutzler, co-owner of Gym Bar, went public about issues with his landlord (Elias Shokrian of Calitex LLC in Beverly Hills) in a post yesterday on Facebook. In addition to the financial impact of COVID-19, Schmutzler said an issue was “a really nasty one, two punch of a landlord who has been really inflexible in working with us.”
There has been a commercial tenant eviction moratorium in place in West Hollywood (it covers the period from March 16 to May 31, after which the business owners have six months to pay their back rent). City Council members John Duran and John Heilman have indicated that might support extending that moratorium. But even with the moratorium, some tenants say that landlords are finding ways to harass them for having delayed their rent payments because of the COVID-19 pandemic. One landlord has regularly sent someone to inspect her tenant’s shop to look for possible violations of the lease terms. In several other instances, tenants have tried to renew their expiring leases, only to be confronted with rent increases of 25% of more, which they say isn’t feasible given the economic collapse created by the pandemic. Some tenants looking to renew a lease also say they are now told they will have to accept a “triple net” lease, which means they will be responsible for paying not only the rent but also building insurance and trash pickup costs that the landlord used to be responsible for.
Commercial tenants’ issues with landlords aren’t a new thing in West Hollywood. “According to the local small business community, it is difficult to start a new business or sustain a small business in a city like West Hollywood,” said a City Hall report in April 4, 2016, that accompanied a proposal by Council members John D’Amico and Lauren Meister to develop ways to support small businesses. That report said that at that time there were 38 vacant spaces on Santa Monica Boulevard, a 10% vacancy rate.
“Landlords prefer short-term leases for new tenants (i.e., three to five years). In addition, landlords can insist on cash deposits, letters of credit and personal guarantees up front for security, which can be burdensome for small businesses, particularly when they are required to spend large sums of money to renovate or build out the space.
“When a lease is up, the landlord can require the tenant to pay market rate rents, typically much higher than what they are currently paying, in order to renew the lease. If the tenant has some success in the first lease term, they must be able to afford the much higher renewal rate or could face relocation or closing.”
Jay Luchs, a well-known commercial realtor who works with landlords and tenants, explained in a recent interview with WEHOville that some landlords will suffer if their tenants don’t pay what they owe because those landlords themselves have mortgages to pay. But Luchs acknowledged that landlords who own their buildings outright are in a better place to negotiate a deal with struggling tenants than are landlords who have mortgages to pay.
There are a number of landlords in West Hollywood who don’t have to worry about paying the mortgage on property they have owned forever, which means some have been willing to give struggling tenants a break, and some are content to let a space go empty until they can find a tenant willing to pay what they ask. Monty Overstreet, for example, owns buildings that house bars like Rage and Flaming Saddles in WeHo’s Boystown. Mark Montgomery’s family has owned the land that is the site of Sunset Plaza since 1860. One landlord who has seen a number of commercial tenants go recently is Joanne Nathan who, with others, owns the building on Santa Monica Boulevard at Palm that has housed the now-closed L A Optometrique, an optometry clinic and glasses and frames shop that was opened by Dr. Robert Dirksen in 2014. Dirksen has told WEHOville that Nathan’s management company wasn’t willing to negotiate with him on payment of his rent, which was $10,000 a month. Also closed in that building is the George Patrick menswear store, which opened in December 2019. (According to LoopNet, the 7,990-square-foot space that houses both George Patrick and Optometrique is now for rent with a triple net lease for $40,350 a month). Still open is Yogurt Stop, whose owners say they have had a difficult relationship with Nathan.
There also have been closures in the building that Nathan and her sister own on Santa Monica Boulevard that once housed Café d’Etoilé, Kock Dog, and the Bumsan Organic Milk Bar. Both Bumsan and Kock Dog had been in business for about a year before closing. Nathan’s Nathan Trust has filed for a permit to turn the Bumsan and Café d’Etoilé space into a restaurant and bar. Nathan recently told WEHOville that Marinate, a restaurant that features pressure-cooked meat, will soon be opening in the Kock Dog space. Nathan said the she and her sister had been willing to reduce rents for those tenants a little bit because of their financial struggles during the pandemic.
The building owned by Elias Shokrian’s Calitex LLC at the northeast corner of Santa Monica Boulevard and Hancock hasn’t just lost Gym Bar. The Coffee Bean & Tea Leaf coffee shop on the corner closed long ago as did the Provo Pizza location. Another tenant at that property also has told WEHOville that the landlord is difficult to deal with. Calitex is headquartered in Beverly Hills and with offices in Irvine, Tex. Shokrian has faced criminal charges for leaving an elevator unfixed for 10 months in a senior apartment complex and has been implicated in the scandal involving former L.A. County Assessor John Noguez.
What, if anything, can the City of West Hollywood do about the continuous shuttering of so many local businesses? Few of the items in the 2016 small business proposal by D’Amico and Meister appear to have been implemented. However, the City Council did recently agree to fund a program operated by the Chamber of Commerce that would mediate disputes between landlords and tenants
One suggestion raised by Meister was a tax on vacant properties. San Francisco voters approved such a tax in March. According to SFist.com, a news site that covers San Francisco, “starting in 2021, if a landlord allows a ground-floor retail space to remain vacant more than six months (over 182 days), that landlord will be taxed by the city $250 per linear foot of street frontage per year. That tax doubles in the second year to $500 per foot, and then it’s $1000 per foot every year after that … For example, an empty storefront with 60 feet of street frontage will cost the property owner $15,000 if it sits empty over six months, and $45,000 total if it sits empty for 18 months. After that, it’s costing 60 grand a year as it sits empty, so finding a tenant at any price becomes a much better business decision.”
The 68 photos posted below show the exteriors of many businesses (mostly on the Eastside) that have long had “for lease” signs in their windows and some projects (mostly on the Westside) that have been underway for a long time, with no clear sense of when (or if) they will be completed.
One of reasons for the slow progress of some development projects is the difficulty in getting a project approved in West Hollywood and California in general, given the negative impact on development of the California Environmental Quality Act. While meant to protect the environment, CEQA has become a tool used by opponents of development to slow, if not bring to a halt, some projects. The City of West Hollywood also makes development difficult. In an interview with The Real Deal, Steve Witkoff, a major developer based in New York City and the developer of the Edition hotel on Sunset Boulevard, described West Hollywood as “the toughest barrier to entry market in the country. It’s very difficult to get approvals and entitlements there. I think it’s even tougher than San Francisco.”
The slow-moving projects include the Melrose Triangle, planned for the 117,000 square foot lot bordered by Santa Monica Boulevard and Melrose Avenue to the south. The City Council approved the Charles Company project six years ago. The developer now wants to use empty lot primarily for office space, reducing the proposed number of apartments. Its co-founder, Arman Gabae, known professionally as Arman Gabay, now has been indicted on federal bribery charges, which some worry will have an impact on the project’s completion. There also are other empty lots where projects are in the works on Santa Monica Boulevard at Nemo and near Pavilions.
The empty Hamburger Haven building is supposed to be demolished as part of the Robertson Lane project, which also has been six years in the making. Then there’s the Bottega Louie restaurant, which has been in the works since 2016, and the French Market building on Santa Monica at North Laurel, which will be home to an office, restaurant and retail complex that has been in the works since 2015. One prominent but completely empty location is the lot on the southwest corner of Santa Monica and Crescent Heights boulevards, which the City of West Hollywood bought in 2015, declaring then that it didn’t know what it was going to do with it. The city eventually said it would use the land temporarily for a parking lot. But that still hasn’t happened.
In addition to the plans mentioned above for the Café d’Etoilé, Bumsan, and Kock Dog spaces, there are plans underway for some of the other empty storefronts pictured below. RollState is planning to open a small studio in the former LASC retail space where people can use foam rollers for exercise. Aeon Botanika at 8448 Santa Monica Blvd. has obtained its cannabis sales license but has yet to announce an opening date. There are plans to open at some point Herb, a cannabis cafe, at 7740 Santa Monica Blvd. The owner of Pleasure Chest, the adult toy store, has begun the redevelopment of the building at 7715 Santa Monica Blvd. that will house its Pleasure Med cannabis business. Curtis Thopmson’s recently closed 665, a shop at 8722 Santa Monica Blvd. for those with a fetish for leather, is being remodeled and will open soon under a new name.
But dozens of spaces on Santa Monica Boulevard that once housed beauty salons, bakeries, art galleries, clothing stores, and coffee shops remain plastered with lease signs that have been up since way before the pandemic began. Saint Monica of Hippo, for whom the City of Santa Monica (and thus the boulevard) is named, is said to have wept every night for her troublesome son Augustine, a wayward and lazy boy who eventually came around. There may be reason to hope that West Hollywood’s Santa Monica Boulevard also will find itself again. As Mehmet Murat Ildan, the Turkish playwright and novelist, said: “An empty street sucks your fullness; a full street fills your emptiness!”