The Comeback of Retail & Restaurants | The Stoler Report-New York's Business Report

The Comeback of Retail & Restaurants | The Stoler Report-New York's Business Report

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♪ [Theme Music] ♪ ♪ [Theme Music] ♪ >>> Michael: So, what's happening in the restaurant business? What's happening in retail? 70% of the people in New York City have been vaccinated, also in New York State. So, people are going to restaurants, people are signing leases. Landlords are doing different things. So today with help of my executive producer James Famularo, we have this group of owners, lawyers, restaurateurs together to talk about a comeback of the restaurant business. My guests

today includes Sean Lefkovits, also known as Lefko, who is the principal of Davean Holdings. Our attorney over here, Andreas Koutsoudakis, who is the managing partner of KI Legal and also the owner of Tribeca Kitchen. Our final restaurateur, a man has been in the restaurant since he was a child, at 19, probably working in a Greek diner somewhere originally, we have Stratis Morfogen, who is the owner principal of so many restaurants that I can't even announce everything. But it's called the Brooklyn Chop House and the Brooklyn Dumpling Store. And then in addition, he's an author, he's a writer. So today

we have a great group. And last but not least, the producer, James Famularo, who is the president Meridian Retail Leasing. So, James, why did you bring these four, these three other people to the show today? What are they doing in the restaurant business, besides paying a commission to you? >>> James: Besides paying commission, it's a well-rounded group and they all seem to be optimistic about the future in New York City. Sean Lefkovits is an investor, and he's feels bullish about the market. Stratis Morfogen feels bullish and he did, all the way through the pandemic, and he took advantage of those situations by being incredibly creative in -- -- deals and we'll get into that later. And Andreas can, can talk about his, he's got two fronts. He's a lawyer by day and a

restaurateur by night and, and he feels incredibly bullish because he just renovated his entire restaurant and he's gearing up for a successful future. >>> Michael: So Lefko, let's talk about what you did with Stratis, I believe, he's your tenant. >>> Sean: Yeah, Stratis is my tenant -- actually Stratis and I were connected through the -- so it's no wonder we're all here together. We were connected ‘cause I bought a building last year, literally in the heart of COVID, on MacDougal Street, 103-105 MacDougal Street, which is a 72 unit building, with a massive ground floor retail states, -- blocks and retail space, used to be a ponchos restaurant. And listen, I took a chance in the middle of COVID. I made the deal back in June or

July of last year. It was amazing pricing. The key question was, how long would it take to lease out a space for what rent? Could we make it work? I literally saw this space right next to NYU. I said, you know what? There's gotta be one guy out there, one crazy guy out there. We could see the vision and can see that, hey, you know, this goes all the way through the Minetta Street. We have double occupancy because of the, the double -- -- in the front and the back. We don't have it anywhere near NYU and we'll take advantage of the foot traffic from NYU. So, I think within the first week or two, I hired Jim

Famularo, you know James is the king of restaurants. He came highly recommended from a few different people and James and I hit it off in two seconds. He brought Stratis I think within one or two weeks. And Stratis and I meet -- Stratis saw the

vision there. He's almost up and running there in, in MacDougal, probably a month or two away. And frankly, I think he's going to absolutely crush it with the -- NYU. >>> Michael: With regard to that, it's a, it's a large restaurant. It's 14,000 square feet. 14,000 square feet is a lot of food you've got to sell, a lot of liquor. So, let's talk about the Brooklyn Chop House, which is, it's like a combination going back to your father when he had the Chelsea Chop House, correct? >>> Stratis: Yeah, very good. My dad had to chop houses. I grew

up on chop houses, but when I -- I've owned Chinese restaurants for the last 15 years. And at the same time, my wife and I would love to go to the traditional high-end steakhouses, but she only eats fish and vegetables. So, she'd be there with a creamed spinach, baked potato and a shrimp cocktail and I, I really saw the opportunity of -- salt and pepper, ginger lobster, that dry aged beautiful porterhouse, by Pat LaFrieda, 35 days and, and marry that with Peking -- duck to make a long story short on the menu, we combined those two cultures together, and I believe we created the ultimate surf and turf. And then we started it with pastrami dumplings and

bacon cheeseburgers dumplings. Again, mix and marry the two cultures and that's how Brooklyn Chop House was created down in -- >>> Michael: Are you open or when are you planning to open? >>> Stratis: Well with Sean we're opening my grandfather's Greek restaurant. So, my grandfather was the first Greek restaurant in New York in 1910. There was no Pappous. And he had

it from 1910 to 1975. And after it closed, a lot of people hijacked the name Pappous. So together with Sean, we had some really great dinners and we discussed, you know, I saw the Penn Cheetos location and it's absolutely stunning. The bones

of the location, the bones of the space was a perfect fit to bring my grandfather's restaurant back. And that restaurant, we call it the Original Pappous. Now, like Sean said, we're slated to open in the next couple of months. >>> James: The food traffic that we saw in the middle of the pandemic on MacDougal Street -- >>> Stratis: It was, it was, it was exciting and also frightening. I mean, it was like, you know, when we, when we did the deal in 2020, you know, that area was still packed. And I think the only area in New York City, because you'd go to Times Square and there'd be no one there, but, but MacDougal Street in Greenwich Village was like an open-ended flea market. It was packed. And, and it was

alarming. It was, it was exciting and alarming, because this was very early on the pandemic. And NYU is pretty much empty. It was just, you know, that street is just got a lot of energy and even the pandemic couldn't crush it. >>> Michael: Andreas, what happened to you? What, what have you been doing? I know you lost your dad last March to COVID. But what in your legal practice, what have you been doing with regard to the restaurant business? >>> Andreas: When I, when I graduated law school, it was the first crisis that I experienced, at least as a professional 2008 market tanked, you know, top of my class graduated early, all that good stuff. And it was, everybody was getting fired. You

had thousands of attorneys getting fired daily. And so, it was a horrible market. And so, the first thing that happens whenever the economy tanks is you see a lot of litigation happening, right? So, I have nothing to lose. I don't care how long I've known my employer. I'm filing an action and I'm moving back to my hometown, wherever that is, whatever country that is, whatever state that is. And so, I walked into work then in 2009 with my uncles, you know, U.S.

department of labor, wage, and hour audit. And that was really the beginning of a major, major change in the types of cases that are filed against restaurants. It's now the number one most filed case in both federal courts, southern district of New York and eastern district, just to show you these just sheer volume of those types of cases. So, it started out as

that, and ultimately there was more and more things that happen. So fast forward to today, you have another major crisis and instantly you see a major uptick in these cases, especially with the restaurant and vitalization fund, plaintiff's lawyers, knowing that you have a lot of businesses that are getting, you know, a massive check potentially. And they're just filing actions left and right. So, you know, that's what I saw. Again, my father died last year. I'm in a unique situation. I built a law firm around

representing restaurants, just full service, you know, many big firms, if you will. And you know, now here I am, I'm representing a ton of restaurants. My dad dies. I'm an only child. I have to take over the business. Not only am I

representing them, I'm living in their shoes, literally, kind of like the ultimate case study, if you will. So, you know, I didn't, I just went all in and the reason why I went all in is, New York is really, really, really special. There's a reason why this was the one industry that the state, the federal, the city government just shut it down. They didn't shut down cleaners. They didn't shut down delis. They shut down restaurants, because one industry, one, one consolidated group on off, the people that travel here for tourism reasons, for vacation, they're gone. They're not coming. The people

who say I'm moving from my beautiful hometown in middle America, nice peace and quiet to come to this bustling city. They're not coming. They don't want to work here. They don't want to live here. And the people that live here don't want

to stay here. ‘Cause it's boring now. There's nothing to do and they all left. So, on off switch, you shut down this industry, they're all gone. And that was the basis of really going after this industry, that's a much longer conversation. But for that same reason, that is why this industry will always be great, because it is a magnet. It is

the reason why this city is so special. It is the reason why you have so many creative professionals in this industry here. It's because you have the world potentially to coming into your business and you can do things, like the Brooklyn Chop House, and you can do innovative creative things, because there's so many, so much diversity where you can really test with certainty. It's almost the, the ultimate survey pool. Right? So, this place, this city will always do great. My dad doubled down in 9/11. Everybody ran for the hills. He took over the next two stores that gave him up. All restaurants, diners, so many

left, but he doubled down. I'm not doing anything for the next 9 months, I might as well expand and renovate. It's crazy, but he did it and he stayed around and he did well. Ultimately here we are check back his kitchen now next door. ‘Cause he was there. Neighborhood was dead, but he invested and the neighborhood exploded over the next 10 years after 9/11. >>> Michael: Stratis, have you been able to get money from the restaurant revitalization act that came at March? >>> Stratis: No. So, what happened early on at Brooklyn

Chop House, we had a $12 million a year business and we went down to about a million. We started donating product and we started donating over 8,400 meals to 16 hospitals, three police departments and nursing home on Mother's Day. And that was really our mission from March 2020 to June 2020. And that really felt good. And that gave us a purpose during these devastating times. With that said, we got about 400 grand in May and that's when I started hiring my old team back. And my

-- was really great at the time. They still, you know, still great, but he really worked with us. And like I said, when you go from 12 million to 1 million, you know, that's like a debt debt meal, but when we got the, we got some money and we expanded to a hundred seats outside, we had a very strong summer, when, when they opened up the summer, in July 2020. So, yeah, so we, we, we survived and I got to tell you, the highlight of my, of my career will be donating to all our healthcare heroes. >>> Michael: James, where do you see the market today, or restaurants continuing to sign new leases? >>> James: So, today's a pivotal day. I think New York just reached the 70% mark of full, fully vaccinated people. You

know, that was a, always a benchmark because that I think begins the process of, of herd immunity. Now, because we're crossing this threshold, all the restrictions are being removed. So, we'll finally fully open and, and we've been seeing an increase, a steady increase. I think this year we're on track to sign 260 leases. So, and it's beyond our expectations or projections. So, we, we just see great things in the future. I agree with everything Andreas said, Stratis said, about the, the future being prosperous and New York City is something special about Manhattan specifically, but all of New York. And it's just getting better and better and better.

>>> Michael: Lefko, when you signed the lease with Stratis, how'd your bank take it? Because banks have not been always overjoyed with restaurants, especially during pandemics and other conditions. >>> James: Now, the requirement's is anybody with a pulse. >>> Sean: I mean, first of all, I think the narrative has completely shifted right now. I'm very optimistic and bullish where this market is going. Frankly, none of my retail tenants right now giving them any concessions. I had to make

concessions back six months ago and 12 months ago. Right now, I have restaurants that are booming. I have a restaurant, Cafe Select on Lafayette Street, pretty famous restaurant, and I have to give them six months of concession. Right now, I think he's doing better than he was doing before pre-COVID. He has outdoor seating outside. And I think that there's just an

optimism right now. And there's just a sense of why don't I -- want to be in New York right now. There's all these young, you know, young students, young professionals, singles that have been locked up for a year, two years and right now, they're just coming out with a vengeance. I mean, I'm seeing it

even on my rentals, you know, forget the restaurants and rentals right now, you know, I'll give you one example, a MacDougal Street. I was projecting $3,300, this one-bedrooms, I'm getting $3,900 right now, for the same one-bedroom apartment. People just want to be in Manhattan. And when they want to be in Manhattan, that means that the neighborhood retail spaces, they should all be thriving. So, I agree with Andreas. I think Times Square, it might take a little bit longer to recover things. -- tourists that don't want to be in New York Right now. I think crime is really a

big issue right now that we need to hone in on. But when you're talking about the local submarkets, you're talking about here in NYU, you're talking about Cobble Hill and parts of Brooklyn right now are absolutely thriving. Like, they're doing really well. When it came to, you know, when it came to the lease with Stratis, I mean, I actually closed in that building with a bridge loan, but we're in the middle of the refinance right now and it, listen, they love Stratis' business plan. I showed him exactly what he was doing and how long it would take for them to get there. They know Stratis

has got a recognizable name in the industry and they're all in on it as are we, so I fully believe in the business plan. I think he's got a partner -- -- >>> Andreas: The banks, they love the business plan, right? So, this is for me as looking at the clients, I said, they always complain and they never had the time to get in compliance to make the changes. Well, you had a lot of time in this past year and businesses that took the time to clean house are going to come back and the banks will love them. We represent a bunch of banks. They will give loans, because if you have a business plan as an independent restaurant, guess what? You're the exception. Most don't and they just run into it. And this past year, you had a lot of time to prepare all of your things and get your house in order. and that's what you should have been

doing. So, you know, that's who will survive and come out of this. If you did nothing but just complain and wait for someone to turn the lights on whenever that happened, well, you're not the person who's going to survive. You always need to be innovating. You always need to be improving in this city. >>> Michael: You know, Lefko brings up, brought up Times Square. I want to bring up Times Square, because James and

Stratis talk about the lease that you did recently on Times Square, the other, the Buffalo Wild Wing, which you're changing to a Brooklyn Chop House. Correct? >>> Stratis: I'm actually extremely bullish on Times Square. I think the fourth, fourth quarter, I've been saying it since May 2020 on my Instagram, I've been saying that September 21 is the start of the roaring twenties. And I do believe very strongly that this fourth quarter in Times Square is going to be bigger than we've ever seen. And I do believe when it comes posted to new year's, I don't believe there'll be a table reservation, an airline ticket or a hotel room available. I think there'll be like third world war is over and

we were victorious and it's going to be a massive celebration. Just last Thursday, I went to a bar for the first time in over a year and a half and it was packed and it was really good to actually see the cathedral, you know, mark factors spot, it was packed and it felt so good to be back. I just think that's going to be tenfold in Times Square. And when James brought me the deal from the Freeland, so I was really happy that there were the landlords, they wanted Brooklyn Chop House and the Buffalo Wild Wings. And they were amazing because you know, those deals are not meant for small guys like me. They're meant for, you know, public companies, they're

meant for, you know, companies I can guarantee millions and millions of dollars a -- And they gave us a couple of months good guy clause. They gave us TIA and they gave us a $15 million build-out. That was basically five years old. And we actually can use about 13 million of it. And that was, that was a big score. And I just think Times Square is going to be on fire this fourth quarter for the next nine years. >>> Michael: As my friend, Shelley Fireman said, and then I'll let James, he took a number of years to go to Times Square, but he loves Times Square and he's going to love it again, that it's reopening. And I think the only problem that we have in

Times Square and we have in certain parts of the city is the safety question. >>> Stratis: I think the crime will diminish quickly when people start coming back. Friend of mine just said to me, that lives by the building in -- and he says, I'm grateful that you guys are open. I'm grateful that you have outdoor seating,

because when my 15 year old, my daughter walks by, I know she's safe. And I think that's really what it's about is when you allow everybody to have a mask on and go into a bank with a piece of paper and get a withdrawal of cash, I mean, anyone that has a pension with a mask on it just exacerbates it, that we're in -- I don't think that's all going to stop in the next three months. >>> James: So just to be clear, when Straits said that he got $15 million worth of bills out, he didn't get a check for $15 million, he inherited $15 million worth of the build-out. And just to give you a sense of -- >>> Michael: Who took the jumbotron? >>> James: Stratis got in charge of the jumbotron. So, just to give you an idea of the scale of the project, it's about 25,000 square feet. Stratis said the PA is for approximately 600 people

-- correct? >>> Stratis: Yeah. It's 600 people and Michael, for your birthday, I'm going to put a big happy birthday on these -- [laughs] >>> James: He's got a roof deck. He's got a patio on the back. He's got a special VIP section, double high ceilings on the ground floor with a mezzanine surrounding it. I mean, it is an amazing space and the previous [honking in the background] is an amazing build-out, including an elevator and, you know, everything is so beautiful. And Straits is going to take it the rest of the way and build a beautiful chop house there. And

I agree with Stratis. I think he's going to have a waiting list a month long. >>> Michael: Stratis is giving you a little more credit on the Brooklyn Dumpling and the automat. Tell us a little bit about that, because that's an innovation in, in restaurant business. >>> Stratis: Thanks. So, I was a big fan of -- -- I went there

when I was 10 years old, my dad and I always had at the back of my mind as the most cost-effective efficient way to distribute a product. So, I realized when the dumplings became so big at Brooklyn Chop House, I actually wanted to do a one and a half ounce sandwich shop. And that to me is a dumpling. It's a one and a half ounce sandwich. And so, I started creating things like pastrami, bacon cheeseburger, the reuben, the lamb gyro, even peanut butter and jelly. And they became really big at Brooklyn Chop House. And then from there, we pivoted to Brooklyn Dumpling Shop. With

Brooklyn Dumpling Shop, I re-imagined the automat, I partnered with Panasonic, and this was actually six months before COVID. I did it for just economic and efficiency reasons. Not for safety. And the goal is to bring the industry normal payroll, which is around 25 to 30% down to 15 and this way we're going to save jobs. People say, what do you mean save jobs? You're actually taking jobs away. I say no. Seven out of ten

restaurants fail within the first three years. Number one reason is excessive payroll. If we could turn around and get payroll from 30% to 15%, I believe seven out of ten restaurants will not just succeed, they'll thrive. And

this way we'll be saving jobs. We are the first restaurant that has sold over 139 franchises before we even opened store one. We have 60 in development, just in the tri-state area alone. >>> Wow.

>>> Michael: Now what size footage do you need? >>> Stratis: Connecticut at UConn, we have, we have all the college towns opening up in September. They range from 400 square feet to a thousand square feet. And we've done about 20 deals like that in the tri-state area where the landlord basically put up the TIA for it. >>> Michael: So, since we have

the landlord over here, Lefko, are you going to put up any money for the Brooklyn Dumpling? >>> Sean: I mean, I'd be happy to look back. I'm looking to buy buildings with Stratis, my tenant there. Yeah. We're, we're looking at a couple of places in Brooklyn right now, so sure. -- >>> Michael: Andreas. So, you

seen young restaurateurs, chefs looking to open up more restaurants today? >>> Andreas: I do. I think this is the, this past year was the perfect time for the next generation, the son, the daughter to take over, right? The dads, the moms, they didn't really know what to do with this. You know, I remember talking to my dad the week before he passed and he would say, I really don't know what to say with this one. This one is different. This thing is different. You know, I don't know how this is going to play out. And my dad was definitely

ahead of the curve, you know, came here 14, but he was doing Excel spreadsheets, you know, before he passed. He didn't have education. So, but still, how do you hand that over? It's very difficult and you have a very resistant, you know, first-generation. So at a moment like this, it's really like a

perfect opportunity for the next generation to say, okay, let's reset everything. Let's see what we can do to come out of this, we're not doing anything. It's a perfect moment where the customer is not going to be confused why you made changes. They're not going to say what you were doing wasn't working and that's why you changed. It was we're not doing anything. And so now I'm restarting and here is the new version, and here's the compliant version, and here's the innovative version. And now I've handed it over to my son to take it over,

or my daughter to take it over for the next 30 years. So, I absolutely think that anyone who stays in this business in New York, better turn up the game, because there's a lot of really smart, compliant, legitimate operators that are taken over are coming in. And if you're not, there's no way you can survive. This is a business and you better be on the top of your

game. >>> Michael: With one minute left, James, what other retailers are coming into the market today? What are you seeing? >>> James: So, we're seeing a lot of ghost kitchens more than ever before. We're seeing a hybrid concepts where they mix two different uses, like a coffee shop, florist, you know, different, different types. But mostly of all the categories, more restaurants, more bars, more cafés, because so many closed during the pandemic everybody's looking to reopen, and this seemed to be a rush to open with this new legislation that the SLA is trying to pass. >>> Michael: It is great that our executive producer James brought his friends and we learned a little bit more about what's happening in the restaurant business. I'd like to

thank Sean AKA Lefko, Andreas, Stratis and James, and I'll see you next week. Thanks for being here. >>> Andreas: Thank you for having us Mike. ♪ [Theme Music] ♪

2021-07-20 10:06

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