Nightclub & Bar - October 2009

Location, Location, Location

Real Estate Opportunities Abound for Entrepreneurs with Cash at the Ready

By Michael Harrelson

Libre Management, which owns the Cuba Libre concept, is expanding thanks to the availability of prime space made possible by today’s economic climate; shown here is the Atlantic City location.

One man’s misfortune is anoth- er’s gain, as the saying goes. With some once-solid food and beverage operations and brands going belly up, others opting out of lease renewals in prime real estate locations like Manhattan and still others teetering on the edge of profitability, the present may seem an inopportune time for anyone vested in the hospitality channel to be shopping for startup locations or going all in with expansion plans.

For all the dark clouds on the economic horizon of an industry accustomed to high single- and double-digit growth rates,

however, the real estate sites available because of the recent economic upheaval represent a golden opportunity of career-making proportions for those with the cash to take advantage of them.

In the words of Alex Picken, owner of Picken Real Estate and Nightlife Brokerage and a well-known New York City real estate broker, “What we are seeing right now are some of the best deals that we have ever seen in real estate, and I have been doing this for 20 years.”

Buyer’s Market

Widely recognized as the go-to person

in Manhattan for restaurants, nightclubs, bars and other entertainment-oriented properties, Picken’s real estate deals include iconic nightlife brands such as Copacabana, Providence and The Tunnel. He says the current favorable climate for acquiring once untouchable locations in New York City transcends the good times of the 1980s or the cyclical nature of the on-premise industry itself. “Sometimes, we have fully (outfitted) nightclubs or lounges where there is no key money or fixture fee included,” Picken says.

Unquestionably, he says, the 10-foot- tall New York City landlord of legend is being cut down to size in an entertainment marketplace where the supply and demand dictates of nearby Wall Street readily apply. Gone are the days, at least for the foreseeable future, according to Picken, when property owners can expect to routinely receive the 3 percent annual rent increases long standard in Manhattan and other prime hospitality locations across the country.

“The rents are lower than the norm over the past few years,” Picken says. “That is not always the case. Many landlords are asking for market values, but we are seeing rent reductions on an average of 25 percent. Someone renting [to a ten-ant] for $20,000 per month could be lucky to get $15,000 now.”

In short order, Picken says the tables have turned considerably in favor of tenants and would-be buyers versus the landlord interests. “On the new leases that are signed, [landlords] are telling tenants, ‘We may not be seeing profitable times for two to three years, so I am going to ease your string.’ That is some of the new standard negotiation regarding lease signings that we are seeing.”