restaurant closing notice

Jeff Grossman

Jeff Grossman
What a goodie.

To Our Loyal Customers, Friends, and Neighbors:

It is with great sadness the we must announce March 25th will be our final day in business.

Over the past thirty years, we served some of the most wonderful, talented guests—many of whom made us feel like an extension of their families and not just their neighborhood restaurant. And while you were always our customers, we also considered many of you our friends.

We love our neighborhood, and are grateful that we were given the opportunity to be a part of this community. Thirty years is a commendable run for any business, especially a NYC restaurant. You might be wondering whether we were yet another victim of astronomical rents? Well, to eliminate any speculation, here’s the story.

Yes, our rent had steadily climbed up, but no, it wasn’t the ultimate reason for our closing. In fact, we were willing to stomach yet another rent increase, and invest in gut renovating our space and committing to another decade or more. No, the truth is we simply weren’t wanted. Our landlords coveted a shinier, fancier model in our place. To our landlord, as well as to many in NYC these days, a celebrity chef-owned chain, or private equity backed steakhouse sounds a lot sexier than a family-owned Italian joint.

We get it. However, when we look out at the incredible number of retail vacancies polluting our neighborhood, including one prominently empty space on our very corner, we question whether pursuing big name tenants is shrewd business or simply quixotic. Commercial vacancies have become a blight on our communities, and yet it’s not for a lack of viable business models. It’s simply short-sighted greed.

On behalf of our wonderful employees, we thank you for your patronage and your friendship. And since we’re not bitter (ok, maybe a little), we wish the restaurant investment fund that occupies our humble subterranean space nothing but success and healthy financial returns. Lord knows we can use another chopped salad joint around here.

Goodbye,

Scaletta
 
i'd say that greed is the most powerful force in human existence. read 1493 for instance. or killers of the flower moon. or, etc., etc., etc.

the more non-fiction i read, the less hopeful i am about humankind.
 
I had no idea of this when we attended a very nice Bat Mitzvah party of very close family friends at Scaletta on March 24. That corner is now the ex-Scaletta next to vacant ex-Isabella’s. The prime location directly across from the American Museum of Natural History is no doubt a contributor to the greed. Progress.
 
originally posted by robert ames:
i'd say that greed is the most powerful force in human existence. read 1493 for instance. or killers of the flower moon. or, etc., etc., etc.

the more non-faction i read, the less hopeful i am about humankind.

I like the idea of non-faction literature.
 
Not anything new. I remember reading articles from about 25 years ago about how new restaurants revitalized Columbus Avenue on the UWS and then were forced to closed by rising rents once the neighborhood improved. They were replaced by boutiques which also went out of business because they couldn't afford the rents and stores stood empty for years because owners wouldn't lower their rents.

Even Union Square Cafe had to close not that many years ago.
 
Union Square Cafe closed in 2015 due to high rent. It had quintupled over the course of the restaurant's lifetime.

Its neighbors, Blue Water Grill and Republic are also closed or closing due to high rents (click). Blue Water Grill was being asked to pay $2M/year.

The problem, no surprise, is tax law: a landlord can deduct a vacant space from his taxes so he doesn't care if the space remains empty for up to 7 years. There is no penalty for thus maximizing return on their holdings, and so they do.

And it's not clear that this is a priori a bad thing. Such a weapon is useful against a crack house, say, or some other laggardly business that is interchangeable with its competitors. Fine restaurants, however, do not fit that categorization so we cognoscenti resent that this mechanism grinds them as well.
 
originally posted by Jeff Grossman:
Union Square Cafe closed in 2015 due to high rent.

As was the plan when it closed, USC re-opened 3 blocks away (albeit 7 months late), and based on two dinners I had there in late March & early April, is doing better work than ever. (It has been consistently busy since it re-opened.)

The problem, no surprise, is tax law: a landlord can deduct a vacant space from his taxes so he doesn't care if the space remains empty for up to 7 years.

Can you explain what deduction you have in mind?
 
originally posted by kirk wallace:
originally posted by Jeff Grossman:
Union Square Cafe closed in 2015 due to high rent.
As was the plan when it closed, USC re-opened 3 blocks away (albeit 7 months late), and based on two dinners I had there in late March & early April, is doing better work than ever. (It has been consistently busy since it re-opened.)
Right but would they have moved had the rent not shot up?

The problem, no surprise, is tax law: a landlord can deduct a vacant space from his taxes so he doesn't care if the space remains empty for up to 7 years.
Can you explain what deduction you have in mind?
It is my general understanding that, for the owner of a large number of units, there is a way to offset expenses from an empty building against taxes owed due to income from the non-empty buildings; and that there is a 7-year limit on this sort of bookkeeping.

In looking for some particulars I did find an IRS publication (pdf) that describes such a mechanism. I'm not sure whether there are others, perhaps regarding state taxes.

I found a different 7-year deduction period (startup expenses) but as I am not a landlord I imagine that my knowledge is salty.

And I have omitted discussing 'engineered blight' because it is relatively rare, I think, even if the two famous examples (Rappaport, Basciano) are really famous.
 
originally posted by Jeff Grossman:
originally posted by kirk wallace:
originally posted by Jeff Grossman:
Union Square Cafe closed in 2015 due to high rent.
As was the plan when it closed, USC re-opened 3 blocks away (albeit 7 months late), and based on two dinners I had there in late March & early April, is doing better work than ever. (It has been consistently busy since it re-opened.)
Right but would they have moved had the rent not shot up?

You are totally correct. I didn't mean to say otherwise. All I was pointing out is that they did not close permanently. But the rent increase for sure was why they moved.

a landlord can deduct a vacant space from his taxes so he doesn't care if the space remains empty for up to 7 years.

It is my general understanding that, for the owner of a large number of units, there is a way to offset expenses from an empty building against taxes owed due to income from the non-empty buildings; and that there is a 7-year limit on this sort of bookkeeping.

Yes (although the 7-year thing is a bit more complicated and nuanced). I was wondering if this was what you meant. The Landlord can deduct expenses (e.g., taxes, interest on mortgage, utilities (if any) and amortization of fixtures the landlord paid for, if any) of empty units, but the rent she is not earning on empty units is not an expense. So she really does care if the space remains unleased. A tax deduction (worth (federally) about 27 cents on the dollar these days) for carrying costs is cold comfort for not earning tens of thousands of dollar per month.

That said, one does from time to time see landlords in low density areas that have become "hot" taking the hit in not leasing commercial (or residential) units to move a building towards being vacant (or largely vacant) so that it is more attractive to a developer who wants to demolish (or gut) the existing building. But that is an economic trade off, not driven by the tax law.
 
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