Auctioning off the kitchen sink
Struggling NYC restaurants and retailers sell equipment, furniture to pay rent
From left: Michael Amodeo of Michael Amodeo & Co.; Café Colonial on Elizabeth Street, which recently sold off its wares; Amodeo’s auction house at 6 West 24th Street.
Struggling New York City restaurants and retailers have created booming conditions for auctioneers who are helping them sell off everything from meat slicers to video games, and working with landlords to deal with problem tenants.
In some cases, retailers use auctions to sell off a few items to scrounge up enough money to stay in their space. More often, however, auctioneers are winding down troubled retail or restaurant operations. Business owners benefit by getting top dollar for their fixtures and equipment so they can pay their rent and other bills.
“With the economy being where it is, [restaurateurs and retailers] can’t get credit, and they go the auction route,” said Herb Mauthner, president of Manhattan-based Mountain Auctioneers, who estimated that his business has increased about 10 percent since the economic downturn began.
He said most of his clients are restaurants and retailers that are going out of business.
Indeed, after a modest improvement in early 2010 from the downturn, restaurant activity has tanked again, while restaurant operators’ optimism has plunged to a five-month low, according to the National Restaurant Association’s latest survey. Meanwhile, a poor retail sales report last month showed that jittery consumers across the country continue to cut back on discretionary spending.
Mauthner — who charges 10 percent of the gross proceeds of each sale — said he’s also seen a major increase in calls from landlords with tenants that are having trouble paying their rent and won’t be able to afford an increase when a lease comes up for renewal. Spaces range from 1,000 to 30,000 square feet, with the majority under 3,000 square feet.
Often, a landlord with a tenant that cannot afford to stay will notify Mauthner that the lease is coming due and work to move the tenant out quickly. In a best-case scenario for the landlord, he or she will line up a new tenant by the time of the auction. If not, the auction will result in a clean space that can be put back on the market.
One metro-area landlord, who asked to remain anonymous, hired Mauthner earlier this year after his restaurant tenant stopped paying rent. After evicting the tenant, the landlord was stuck with equipment and fixtures he was unable to unload.
The landlord received more than double the money he was expecting, and is now marketing the space to office users.
“People are stuck with stuff and you might as well get rid of it at the best price you can,” the landlord told The Real Deal.
Michael Amodeo, who runs an eponymous Manhattan auction firm, said he is running “almost twice as many auctions as [he] was three years ago.” In one week alone last month, his company ran sales for a gourmet deli, café and caterer, a fast-food eatery, a pizzeria, an ice cream and yogurt store, and a Quiznos sandwich shop. Locations included Brooklyn, the Bronx, Manhattan and Long Island.
When The Real Deal met up with him, he was auctioning off the equipment at the now-defunct Ottimo Restaurant, which served Neapolitan fare at 6 West 24th Street in Manhattan. It went under in July.
Local auctioneers have sold many other items, too, from apparel to electronics to medical supplies. Last month, Mauthner held an auction for a retailer that sold DVDs, videos and gaming equipment, including PlayStations and Nintendo Xboxes, at a New York City store hit hard by the rise of Netflix and streaming video. Earlier this year, he auctioned off the contents of a clothing store that sold swanky evening and prom dresses. For that business, he sold gowns, racks, fixtures, registers and security cameras — emptying the premises down to the bare walls.
The auctions are attracting both retail brokers and entrepreneurs who are looking to open new restaurants in New York and to score discounted fixtures and equipment at a time when pinching pennies is in vogue. Amodeo said many of those looking to start restaurants and delis have been let go from other jobs. He said the equipment they can pick up at an auction can be discounted by 50 to 75 percent.
Spencer Levy, director of hospitality real estate at Robert K. Futterman & Associates, said the auctions provide good leads for future clients. He said he scours the classified ads every weekend for notices of upcoming auctions to attend.
“I see who’s looking to buy equipment and I figure they’re looking for a space,” said Levy. “I also find out what spaces are about to become available.”
In May, Mauthner handled the sale of Lower East Side eatery Café Colonial, which closed up shop after 15 years at 276 Elizabeth Street at the corner of East Houston Street. An inexpensive, gritty area when the café debuted, this neighborhood has been gentrifying in recent years with luxury condos and a Whole Foods one block away.
Once renowned for its brunch menu with banana-stuffed French toast and glamorous young patrons like Leonardo DiCaprio, the café could not keep pace with rising rents when the lease came up for renewal.
Mauthner handled the auction, which drew 25 people. Another restaurateur bought and carted off the custom U-shaped wooden bar, sawing it into pieces to get it out the door. Others bid for the convection oven, kitchen equipment, and tables and chairs.
The space has since been rented to designer clothing brand Rag & Bone. The café’s owners could not be reached.
In rare cases, Mauthner is able to sell an eatery in its entirety — meaning that it continues to operate but with a new owner.
That happened earlier this year with a bagel shop on Long Island. Before the recession hit, the owner did brisk sales of wholesale platters to nearby businesses for meetings and receptions. When that dried up, the owner decided to close. Then Mauthner offered the shop for sale and another bagel store owner snapped it up.
“It’s a bittersweet situation,” Mauthner said. “Every day you can continue to keep losing money, or you can just sell it off in bulk and put it behind you, like a divorce.”