The Real Deal New York

Cigar bars spark profits

November 26, 2007
By Tom Acitelli

Jason Alvator opened Velvet Cigars, his first New York cigar bar, in January, offering the stogie set a cozy room with hardwood floors and deep-cushioned chairs in the East Village on 7th Street near First Avenue. He plans to open in December a second Velvet Cigars, this one in Williamsburg next-door to the Peter Luger Steakhouse.

A unique surviving subspecies of New York’s smoky nightlife, cigar bars get different designations than the bars and restaurants whose air cleared after the mid-2003 passage of the city’s and the state’s smoking bans, which together basically wiped out smoking in almost all public places in New York. Finding the exact number of Gotham cigar bars is difficult and, even then, nailing down which ones allow cigars can be tough. Velvet Cigars, for instance, is a retail tobacco store, not technically what the city calls a tobacco bar. The city lists eight such bars, and at least one doesn’t allow cigars, only hookahs.

All eight of the tobacco bars are below 74th Street in Manhattan, according to the city health department, and Alvator says his Velvet Cigars is one of only six places in the five boroughs that allows cigar smoking inside. (The city’s “retail tobacco store” designation includes every place that legally sells tobacco, including bodegas and drug stores, but a retail tobacco store does not necessarily allow smoking.) The tobacco bars were grandfathered in either because they existed before 2002 and get at least 10 percent of their incomes from selling or renting tobacco products, or because they garner 50 percent or more of their sales from tobacco products.

Carnegie Bar & Books, two-level cigar bar on West 56th Street between Sixth and Seventh avenues, serves alcohol and Frank Sinatra with its cigars, and caters to a sharply dressed clientele behind dark windows. Carnegie’s ownership declined to give the exact amount for what it pays to lease its Midtown space, but did say the amount is similar to other retail space in the neighborhood. Ground-floor retail generally rents from about $150 to $330 a square foot in that area, according to a report from the Real Estate Board of New York.

“Bearing in mind that the Carnegie club’s been there for eight years, we’re paying a competitive rate for roughly 3,750 square feet,” said Mark Grossich, owner and chief executive of Carnegie owner Hospitality Holdings. In 1990, Grossich opened Beekman Bar and Books on First Avenue, considered the first cigar bar in New York by Cigar Aficionado magazine; it closed after 10 years.

Cigar bars may be a win-win for landlords because they attract generally more affluent clientele who won’t disturb the neighbors at 3 a.m.

For Velvet Cigars, the pitch to the owner of the mostly residential building centered on convincing her of the benefits of being hip to a growing and refined scene, says David Femia, whose Kings Court Realty brokered Alvator’s lease. “We approached her,” he said, “like this: ‘Be on the cusp of what’s changing in the East Village.’”

Alvator said he now pays $1,700 a month for Velvet Cigars’ 250-square-foot street-level space. And, while it’s in the heart of the East Village, he says some of his best regular customers journey from well beyond the neighborhood’s ever-hipper fringes cops, law professors, construction workers, for instance, from the Upper West Side, Murray Hill, and the Upper East Side.

“We get a bizarre mix of clientele,” Alvator said. “I always thought I’d have a young clientele, and that’s not how it turned out.”

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