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Whether a restaurant survives the pandemic could depend on an uneasy dance with the landlord

By Phil Vettel And Ryan Ori, Chicago Tribune on

Published in Home and Consumer News

This has led to some creative solutions, including a recent deal with Nonnina restaurant, owned by Tony Priolo. In return for a partial ownership stake (unspecified), Friedman Properties is keeping the Italian restaurant afloat and even investing funds into new furniture and an air-purifying filtration system.

Other arrangements are less involved.

"We've worked out formulas that relate to a percentage of (the restaurant's) sales," Friedman said. "Sometimes it's a base against a percentage. But as long as you're willing to work with us, a quid pro quo, so there's something the landlord ultimately will get for kindness paid at this time - if you lose a tenant, do you think that's smart? That doesn't make sense."

For Howard Adelstein, vice president of Dynaprop Development Corp., the numbers are different. "We're not a big player," said Adelstein. "We have three properties. One of them has one restaurant tenant, another has two and the South Loop property (Pointe 1900) is heavily retail with five restaurants. This plays strongly into how we can manage issues. A property that's strictly restaurant space is difficult; having a building with other offices helps us weather it.

"We learned a lot from the last recession, about being well-capitalized and better prepared for a turndown or event," Adelstein said. "Fortunately, when this hit, we were in a better position than some guys were. Having said that, that only goes so far; expenses don't go away, real-estate taxes are a huge liability and they don't go down. And of course mortgage and interest expenses.

"Our initial thought was, 'everybody's gonna take a hit, everybody will have to suffer costs to a certain extent.' Those (restaurants) aren't in this for something they did wrong. This is something they didn't ask for."

 

Gino Battaglia has been in the restaurant business, as a manager, bar owner and landlord, for some 50 years, and owns more than two dozen properties in Chicago, with a concentration in Humboldt Park. He also owns Blue Chicago (which has been closed since the state shutdown) and is landlord to adjacent property Brindille restaurant; chef/partner Carrie Nahabedian credits Battaglia's flexibility as key to Brindille's ability to reopen.

When chef/restaurateurs Jason Vincent and Jason Hammel hosted the now-famous, invitation-only chefs summit on March 14, when dozens of chefs shared thoughts on how to survive the newly arrived pandemic, Battaglia was there.

"The first thing I recommended is that all of them start dialogues with your landlord," he said. "Work together. And that's what we did. We were completely transparent with our tenants - our mortgage obligations, taxes, insurance and maintenance costs. Real estate taxes are really, really high; the building where Brindille is, those taxes are $60,000 a year. My wife and I mortgaged our house to make up for shortfalls and meet our obligations. We're paying rent out of savings, paying employees out of savings."

A restaurant's location can make a big difference in its situation. Areas of Chicago facing the biggest disruption from coronavirus-related bar and restaurant closures are the Loop, River North and the Fulton Market district, real estate experts say. All are high-density, high-rent areas feeling the effects of other sectors of the economy that have been hit hard: offices, tourism, entertainment and shopping.

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