Once a week, give or take, Eater Nightlife Real Estate Guru-in-Residence Steven Kamali will be giving you the online tour of one of his fine properties. As you know, he is the broker of record on many a fine NY nightlife establishment, quite a few of which change hands like clockwork every 36 months. Today, in a special edition of The Hard Sell, we're mixing it up a bit and bringing you an interview with Steve. Read about how his listings work, how he sets the fixture fee, what kind of venue the Kamali himself would open, and plenty more.
EATER: It seems like a lot of your listings are for venues currently open. Are these all places that have enlisted your help as they try to jump ship from the food and drink business? What's the story here, Kamali?
KAMALI: Typically, if you find a business listed on our weekly e-mails "NYC
for SALE" you can be sure that the ownership has done everything in its power to turn the business around and make it into a profitable venture, and has not been able to. In some unfortunate cases, the businesses that we have listed for sale are already behind in their rent to the landlord, in paying their vendors, and sometimes even their staff. We advise our clients to stay open as long as financially possible during our sales & marketing period so that we have more leverage with prospective buyers; as you can imagine once a food and beverage venue is closed, people don't see the point in paying a high Fixture Fee.
EATER: Do venues ever get delisted? Ie. Is a Kamali listing certain death, or just a red flag?
KAMALI: Our exclusive listings are an indication of imminent DEATH, the only reason a venue would come off of our listing sheet other than it being sold and/or leased, would be if the proprietors went bankrupt and the landlord seized the space. There have been no such cases in my experience where a business went on the market and then decided to be "taken off the market" to make another run for it...
EATER: What is a surefire way to ensure a venue's failure?
KAMALI: Failure is destined when operators overspend on designing and
building a space.
EATER: What do you look for in a property? What can you do to make your
KAMALI: I look for a space with good infrastructure (Electric, Venting, HVAC, Sprinklers, etc.) Beyond that I am looking for a venue with a long term lease and below-market rent, anything and everything else is easily replaceable and obtainable.
EATER: Speak of HVACs, what's the story with fixture fees? For example, how does Hansen get away with asking a cool mil, while some lesser seller prices the key money at $500K?
KAMALI: Unlike the Fashion & Art industries, Food & Beverage businesses are not valued based upon the perception of the previous tenant or the design of the existing space. The primary components that do affect the price of a venue are the following; location, an under-market rent, a long term lease, and the licenses it maintains (Cabaret/Liquor). The décor, furniture, fixtures & equipment (FF & E) in a space play a very small role in any given deal, b/c most operators end up gutting or rehabbing the space to change the perception of the business to patrons that may have already been there before. We advise seller's to establish a fair price so that the market of buyer's in the industry are seriously willing to consider the purchase of the venue...
EATER: Where is the market going?
KAMALI: The notion of paying a Fixture Fee has been foreign to many restaurateurs and nightclub owners across NYC in the past, but as the City, State and local Community Boards continue to regulate and enforce stricter licensing policies, purchasing an existing lease has become a reality for more and more operators. If I had to forecast the trend for the immediate future, I would venture to say that the value of existing leases with Cabaret & Liquor Licenses will continue rise and be inflated, so long as the industry continues to be unjustly regulated.
EATER: So back to your listings, what's the shortest time you've had a property on the market?
KAMALI: Believe or not, the majority of the transactions that we complete are off-market deals that people typically don't hear about, and in fact the details of such deals don't show up on our weekly e-mails of our listings. But with regards to venues that are officially placed on the market, where the information is shared with prospective buyers, brokers, and operators...from the moment a listing has gone out until the time we have received an accepted offer with a signed contract- our fastest deal to date has been 3 days!
EATER: The longest?
KAMALI: The simple truth about the Real Estate industry as it relates to Nightlife & Restaurants is that everything sells relatively quickly, the only time we find ourselves sitting with dead inventory is if there is a seller and/or landlord who is unreasonable in their asking price for the Fixture Fee or Rent. Otherwise, the market is extremely strong and bullish and has been this way for the past 4 years. But in one such case where the landlord was asking an unreasonable amount of money for a sub-par midtown space, the space was on the market for over 8 months.
EATER: If there was one property in all of NY that you could have as a listing, what would it be?
KAMALI: BUDDHA BAR-It's a beautiful space, it has an incredible infrastructure for any F & B business, and an unbeatable location that is ideal for doing a high volume business.
EATER: You'll have it soon enough. If you could open a bar/club/restaurant of any kind anywhere in NY right now, where/what would it be?
KAMALI: I would take over the jewelry store adjacent to PASTIS and convert it to a Florentine-style Café serving freshly made sandwiches and provincial Italian wines, and it would have a take-out window for lunch on the go. The restaurant would be designed as authentically as possible, it would have no waitstaff, and no conventional kitchen. Don't you dare take my idea!
EATER: Friday night at 11 PM -- where might we find you?
KAMALI: In bed watching TV-Friday night is the only night I stay in and get some rest!
Previously, in the The Hard Sell.