The Real Deal New York

How it feels to lease a landmark

Erosion of New York City institutions expected to slow with the economy

February 01, 2009
By Barbara Thau

Many still mourn the loss of the Second Avenue Deli to a Chase bank branch, including this writer, who counts it as a childhood favorite.

I had just stopped short of laying it on thick and telling Andrew Mandell, a broker with Ripco Real Estate, about how my father used to give me half of his matzo ball every time we went to the East Village staple, when Mandell gently interrupted.

“I did that deal,” Mandell said.

It is one he doesn’t like to advertise.

While the broker community is indirectly complicit in the displacement of New York City institutions — from the Second Avenue Deli to CBGB, the fabled punk club that shuttered in 2006 — brokers themselves have mixed feelings about negotiating deals that replace icons with things like chain stores, banks and luxury buildings, often as a result of steep rent increases.

Brokers argue that they have not created the conditions that have made New York one of the most expensive cities in the world. And indeed, it’s the landlords who set the asking rents.

But some brokers still shy away from deals that result in the ouster of a venerable spot — or at least try to come up with alternative solutions.

For one, brokers concede that the loss of New York’s landmarks has dulled the city’s character. And several brokers, native Yorkers themselves, miss the old New York.

As a result, even though their business has been hurt by the economic crisis that has spread to the New York City real estate industry, some brokers voiced a hope that the downturn would have an unintended benefit: The Big Apple just might feel a little more like its old, less-polished, gritty self again.

A deli’s departure

Andrew Mandell has generally kept hush-hush about brokering the lease for the Chase branch that displaced the Second Avenue Deli from its home on Second Avenue and 10th Street in 2006.

“I always said I would never take the credit or the criticism for it,” he said.

The restaurant reopened last year in Murray Hill in a building it purchased.

The air in the original space in the East Village, which opened in 1954, was always thick with nostalgia. The Second Avenue Deli sat in the heart of a neighborhood with strong Jewish-immigrant roots, and was a nod to the old Yiddish theater that once defined the area.

A “Walk of Fame” outside the restaurant paid tribute to 58 stars of the Yiddish stage. The restaurant later took on the aura of a shrine when owner Abe Lebewohl was murdered in 1996 and the neighborhood mourned his death.

So when the news came that the rent would soar when the lease came due and the restaurant would leave its longtime home, neighbors mourned once again.

Mandell kept a low profile on the deal to replace the deli with a Chase. His office didn’t issue a press release. Mandell told a colleague that when the press got word of the deal, he would direct all phone calls to him.

“I was afraid of the backlash,” Mandell said.

“It definitely is difficult,” he added. “You’re trying to earn a living, and at the same time, you have an appreciation for tenants who have been somewhere a long time and have served the neighborhood.

“I’m a New Yorker. I grew up here. I have the same [warm] feeling about the local tenants, and I was a customer of the Second Avenue Deli.”

He added, “The city has changed river to river.”

But if Mandell had opted not to broker a new lease for the spot, there would have been a line of brokers more than happy to fill his place, he said.

Mandell said the Second Avenue Deli could have remained in the East Village and still made money. Because they had such a loyal following, “they probably felt they could operate out of a less high-profile, and less expensive, location,” he said. “The rent was bumped up to where the market was.”

The asking rent at the time in the neighborhood was $200 a square foot, likely twice what the restaurant would have been paying had they signed a lease a decade before, Mandell said.

Building owners now also tend to prefer bigger, credit-worthy tenants, such as banks and drug chains, to smaller businesses because they figure “my asset is worth more; my access to capital is greater,” said Mandell.


For many of punk’s disciples, CBGB, formerly at 315 Bowery on Bleecker Street, was the music scene’s seminal club. Founded in 1973 by Hilly Kristal, CB’s, as regulars called it, was home to bands such as the Ramones, Blondie and the Talking Heads.

The club sat on an avenue synonymous with flophouses in a neighborhood infamously dubbed “skid row.”

So when CBGB was slated to close after a dispute between Kristal and the landlord, fans and musicians alike protested, picketed and lamented.

Even Mayor Bloomberg tried to find a home for the club on Essex Street, but Kristal said the cost to move would have been prohibitive, according to the New York Times.

Jonathan Krieger, senior director at Robert K. Futterman, brokered the lease to replace CBGB with a boutique from menswear designer John Varvatos.

Brokers estimate the rent was $125 a square foot.

Krieger said he can hold his head up high about that deal, because the space was replaced by a tenant who went to great pains to pay homage to the pantheon of punk music.

“It’s not like we put a Duane Reade there,” Krieger said. “John [Varvatos] went unnecessarily out of his way to preserve the history.”

Taking an unconventional tack, the boutique on the Bowery — where flophouses have given way to luxury condos — seems like a ghost of CBGB’s past.

The designer fashioned his store to be a cultural experience for rock music lovers. The walls in the store remain untouched from its club days and are still inscribed with graffiti and plastered with original concert fliers.

The store also hosts concerts for up-and-coming artists.

As for Krieger’s take on the deal, “I didn’t have mixed feelings,” he said. “The [building] owner, to his credit, was more concerned about the type of tenant than the money and the rent. He turned down a lot of offers from different drugstores and banks for higher rents.”

And the feelings toward the old CBGB’s were not all warm and fuzzy, Krieger said.

While he conceded that the club’s loyalists were beside themselves, “I met a lot of tenants — people who have lived in the neighborhood and are now restaurant and bar owners — who said, ‘I performed in this place and never got paid once,'” Krieger said. “A lot of people said, ‘to hell with it.'”

‘Blood on your hands’

If he can help it, David Firestein, president of Northwest Atlantic, shies away from deals that ditch an icon.

“Even if they’re going away, I just don’t want to be a part of it,” he said. “It’s like having blood on your hands.”

Landmark sportswear store Morris Brothers was an Upper West Side fixture for over half a century.

When its lease was coming due a few years ago, prospective tenants including Starbucks eyed the space, said Firestein, who is also the retailer’s broker.

Firestein discouraged Starbucks from setting up shop in the Morris Brothers location. He said he told them, “There will be negative PR from the community.”

“It was an institution. An added kicker was that I knew the owners personally,” Firestein said.

The store closed in September 2007, as the rent was about to more than double, brokers said.

The irony is that a year later, the space is still vacant.

“There are places that are unique to New York: Katz’s, H&H Bagels,” Firestein said. “They are an important part of the culture. That’s why we need to preserve them.”

Catering to the affluent

It’s not only the physical loss of New York institutions that has changed the city.

A residential market that caters to affluent residents has chipped away at New York’s socio-economic and ethnic diversity — a fact that was not lost on one broker.

Douglas Heddings, senior vice president of the Heddings Property Group, a division of Prudential Douglas Elliman, expressed mixed feelings about the units in Stuyvesant Town and Peter Cooper Village, one of the last bastions of middle-income housing, becoming market-priced in recent years.

Tishman Speyer Properties purchased the 101-building development of rent-stabilized apartments in Downtown Manhattan for a record $5.4 billion in 2006.

The postwar residential enclave had been where teachers, secretaries and police officers raised families.

An enclosed community peppered with parks and playgrounds, it was the closest thing to growing up in the suburbs for a New York City kid.

Heddings admitted that he looked forward to reaping the residual benefits of the sale; yet he was also a bit queasy about that idea.

In his 2006 True Gotham blog, Heddings wrote, “The sale would only add to the seismic cultural shifts already under way in New York City and especially in Manhattan, where soaring housing costs have made the borough increasingly inhospitable to working-class and middle-class residents.”

But he added: “I also must say that … the development of such a large-scale project as this is quite exciting for me as a real estate broker.”

When contacted, Heddings told The Real Deal that he is not cleared to talk to the press.

A silver lining

The city’s economic crisis could slow the erosion of New York City’s character, brokers said.

Tenants long considered a sure bet to landlords, such as banks and national chains, are not such a sure bet anymore, as the crisis on Wall Street has changed everything, brokers said.

“Many publicly traded companies are struggling. Local businesses have been unable to expand over the last many years — now there’s more opportunity for them,” Mandell said.

Mark Finkelstein, president of Retail Strategies, agreed. “Look at how many vacancies there are,” he said.

The economic crisis will “take everything down a notch: the pretentiousness, the urge toward excess,” he said. “Enough is enough.”

Then there are the New York institutions that will never fall prey to soaring rents, brokers said — such as Zabar’s, the gourmet food store; J&R, the music store; and Paragon Sports, which all own their own real estate.

So unless those merchants grow tired of the city, they’re not going anywhere, brokers noted.

On a personal note, friends gave me a gift certificate to the new Second Avenue Deli. It took me nine months to use it.

My father and I ventured to its new digs in Midtown. The pastrami was terrific — the tables were even set with the same familiar paper placemats with the painted street scene of the 10th Street spot.

But it wasn’t the same.

You can’t go home again.