Hotel Chelsea’s new guest

Famed lodge may finally have a retail tenant that works with neighbor’s sweetheart deal

From left: the Hotel Chelsea on West 23rd Street and El Quijote, which now occupies one of its retail spaces

The landmark Hotel Chelsea may have finally found a tenant for two long-vacant and contiguous storefronts on the ground floor, totaling 3,529 square feet.

“There’s not really a lot to say because we are [negotiating a lease],” said broker Lori Shabtai of Winick Realty, who declined to comment further on the pending deal beyond stating the asking price of $140 per foot annually.

Part of the reason that the two spaces have been empty for so long has been the neighboring El Quijote restaurant’s own sweetheart lease.

Not only does the long-standing Spanish eatery benefit from a below-market rent (currently $9,000 per month, according to lease documents on file with the city) for a vast space encompassing three dining rooms, a bar, kitchen and basement, it also enjoys certain protections from competitors.

To wit: When BD NY Hotels took over operations of the legendary West 23rd Street lodge in 2007, the Richard Born and Ira Drukier-led management team tried to rent the empty retail spaces to a number of other restaurateurs, including the prolific Jean-Georges Vongerichten.

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“The problem,” according to court papers filed in 2008 concerning a dispute between BD NY and the building’s owners, “has been that the existing lease with El Quixote [sic] negotiated by the prior management contains a covenant prohibiting any other restaurant in the building.”

Indeed, the deal with El Quijote, initially signed in 1988 and twice modified in 1989 and 2001, specifically states: “The Landlord agrees not to rent space in the building to a third party for operation of a restaurant in competition with the Tenant; however, the Landlord may operate a coffee shop.”

The issue of El Quijote’s lucrative leasehold has long been a point of contention among the hotel’s owners.

Marlene Krauss, president of the hotel’s board of directors, once complained to this reporter, “They have a 40-year lease. Nobody has a 40-year lease!” (In fact, the deal includes multiple renewal options through 2048.)

“They run a nice, clean operation and times were so hard years and years ago in this city, and they stayed and they put in their own money to stay,” explained former hotel manager Stanley Bard, also a co-owner.

Current hotel general manager David Elder declined comment. But he’s already exploring creative ways to circumvent the food restriction. In January, the hotel leased another space to a donut shop, which also serves … coffee.