From left: Assembly member Gary Pretlow, OTB at 42 West 48th Street, OTB at 2901 Avenue U and Newmark Knight Frank’s Paul BerkmanLike a bad day at the track, the losses have piled up quickly in the wake of the New York City Off Track Betting Corporation’s bankruptcy and closure.
Landlords rarely receive much sympathy in New York City, but dozens will join nearly 1,000 newly unemployed workers and the state’s tax coffers as the big losers in the OTB debacle. The state-controlled corporation stopped paying rent in December with next to no warning. Landlords are waiting to get the keys back to their properties so they can troll for new tenants.
“There are no assets,” said Assembly member Gary Pretlow, a Westchester Democrat who chairs the Racing and Wagering Committee. Pretlow said a bankruptcy judge may decide to cancel all the leases, given the corporation’s financial destitution.
The state has taken the position that a judge will do just that.
“All leases have been rejected,” Jessica Bassett, a spokesperson for Governor David Paterson, wrote in an e-mail. “December rent payments were not made and no future rent payments will be made as NYC OTB is bankrupt and out of cash. Landlords are free to pursue other tenants.”
That’s not quite true, according to more than one landlord. ELO Realty owns one of the choice OTB spots in Manhattan, at 42 West 48th Street. A company representative, who declined to give his name, said they haven’t been given possession of the store yet, and he didn’t sound optimistic about quickly finding a new tenant. “It’s not easy to lease up in today’s economy,” he said. “It’s going to take time. Today, you can’t even get market value.”
The Midtown betting parlor commanded one of the higher rent figures from OTB, as previously reported by The Real Deal. At the 2008 rate of $194 per foot, the 6,000-square-foot space earned ELO Realty well over $1 million annually.
The broken leases likely will result in claims against OTB, but any actions may be futile, said Harvey Strickon, a bankruptcy attorney with Paul Hastings. “Landlords in New York state, they can’t grab the personal property on the premises and hold it for rent,” Strickon said. He doesn’t see landlords getting any settlements, “because there’s nothing to pay them.”
Some landlords had the good fortune of seeing their leases expire with the bankruptcy. Paul Berkman, a senior managing director at Newmark Knight Frank, represents the landlord for 200 Varick Street and is close to landing an OTB replacement tenant. While declining to name names, he did say that the asking rent was around $100 per foot.
Landlords in the outer boroughs may not be so lucky.
Vincent Fontana manages the property at 2901 Avenue U in Sheepshead Bay, Brooklyn, owned by his family since 1992. A year and a half ago, they terminated a lease they had with Sleepy’s the Mattress Professionals to provide more space to OTB. The abandoned OTB lease, which paid about $25,000 per month, has more than 13 years left, according to Fontana.
“They were doing $300,000 in business a week. How do you close a store like that? How could you not pay the rent?” said Fontana. He questioned why he should have to pay his real estate taxes, when the government can simply stop paying the rent. “They make all the rules. They get to be worse than the mafia.”