Crisis Resolved After Grand Central Vendors, Citing the Economy, Withheld Rents
by Richard Guzman Los Angeles Downtown News March 2, 2009
Downtown Los Angeles - A tenants' mutiny at Grand Central Market was resolved last week after a group of merchants who had withheld their February rents came to an agreement with the landlord and paid up.
As part of the resolution with landlord The Yellin Company, rents will be lowered and advertising fees charged to the tenants will be eliminated.
The fracas, which resulted in many rents being paid two weeks or more late, is yet another sign of the financial hardships stemming from the national recession. Although most visitors to the Downtown Los Angeles landmark were unaware of the situation, several tenants said their future survival is in question.
Adele Yellin, president of the Yellin Company, said that the move will lower costs for the 40 merchants.
"We do understand the pressure that our tenants are under in these times and we've taken steps to reduce their rent by eliminating the advertising budget," Yellin said.
The situation had been bubbling for months, and began to come to a head in late January. That is when Ralph Leech, an attorney representing some of the Grand Central Market tenants, sent a letter to the Yellin Company citing the deteriorating economy and asking for a 30% reduction in rents and a discontinuation of the monthly publicity charge that pays for advertising the market.
Leech would not comment on the situation. However, his letter, sent by a market tenant to Los Angeles Downtown News, stated that "the continuous downward spiral of the economy has made it harder for my clients to stay afloat.... It is for that reason that they need to take action in order to maintain their livelihood and small business."
"Beginning February 1st, the tenants are in agreement to discontinue publicity," the letter read.
The crisis quickly escalated, as most of the tenants withheld the rents that
were due Feb. 1. That led the Yellin Company to send notices to those who had not paid, threatening eviction.
Last week, both sides said they had reached a tentative agreement that should alleviate some of the financial woes.
"At this point we negotiated with 34 of the tenants and we're following up with the remaining tenants," Yellin said. She added that she expected meetings with all tenants to be held by the end of last week, after Downtown News went to press.
The Compromise
Yellin and tenants who spoke with Downtown News said there will not be an-across-the-board 30% reduction, but instead the landlord will deal with each tenant individually. The monthly publicity fee paid by the merchants, which can vary from a few hundred to more than $1,000 a month, was removed from their lease requirements.
"The businesses are very slow. People are using lines of credit to pay rent. It's a bad situation, but hopefully we'll survive. We just need help," said Robina Sookasya, owner of Kabab and More, a Mediterranean food vendor.
Sookasya said she paid her February rent last week and was waiting to meet with the landlord to negotiate a reduction in her lease.
"We don't know what kind of discount we're going to get, but at least we're going to get some discount," she said.
It is an unexpected situation at the historic market, housed on the ground floor of the Homer Laughlin and Lyon Buildings, with entrances on Hill Street and Broadway between Third and Fourth streets.
The Grand Central Market has been a Downtown landmark since its opening in 1917. However, as the business community migrated west from Downtown over the decades, it deteriorated.
In the 1980s, the building's owner, the late Ira Yellin, launched an extensive renovation of the market, with architectural and restoration work overseen by architect Brenda Levin. That project, known as Grand Central Square, also created 121 apartments in the building above the market.
Today the market is home to a vibrant mix of vendors who sell everything from produce to dried foods and spices to food from all over the world.
However, business took a big hit in 2001 following the fatal accident that shut down Angels Flight, the railway that connected the market with Bunker Hill. The closure of the funicular forced office tower workers to walk up and down the 153 steps, and reduced the market's lunch-time clientele.
The recession has made things worse, tenants said. Some merchants have left the market in recent years, and today there are about 10 stalls empty, from 100-1,000 square feet, according to the market's website. Some current merchants say business has dropped by 30% or more.
In normal economic times, strong-arm tactics such as withholding rent are uncommon, said Stan Yoshihara, managing director in the Downtown office of real estate firm CB Richard Ellis.
"You're going to get a lot more of this in this economy," he said. "Many tenants right now are asking for rental relief."
Yellin warned that there could be a future downside, as cutting the publicity charge likely means Grand Central Market will no longer advertise.
"There's going to be some hurt," Yoshihara said, noting that is what happens if you "don't get the word out."
More Help
While the situation appears to be resolved, not all the tenants are resting easy.
Fernando Lopez's family has owned AB Coffee, a dried goods and spices stand at the market, for about 40 years. He's been through hard times, but this is as bad as he's seen it. He said his business is down by as much as 60% from last year.
"There are fewer and fewer people coming here. A lot of places have had to let people go. I even had to fire two people," he said in Spanish.
Lopez said he pays about $3,500 a month for his stall and a storage room. As part of the new deal, his $350 monthly publicity fee was eliminated and his rent was reduced by $50. However, he said that may not be enough to help him weather the recession.
"I would have liked maybe a 5-10% discount," he said, referring to his rent.
Lopez said he hopes to sit back down and try to re-negotiate with the landlord for more help.
"If things keep getting worse, it's something we may have to revisit in the future," he said.
Yellin is hopeful that the market and its tenants will be able to ride out the recession, although a lot of it depends on at least one thing that is out of their hands.
"Once Angels Flight opens, more business will come to Grand Central Market," she said.
No opening date has been set for that project, which has seen multiple reopening delays since it closed eight years ago. Still, Yellin expressed confidence that the 92-year-old landmark will keep going.
"The market has thrived and survived through a lot of downturn, so it'll come back," Yellin said.
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