San Francisco restaurateur Matthew Guelke can’t get evicted in this town — and at this point he’d prefer it.
Getting the boot would be better, Guelke says, than the current predicament. He and his business partner are trapped in an expensive lease on Steiner Street in the Marina district, for a cafe shuttered by COVID that they can neither reopen, legally abandon, nor even be kicked out of. And now, because of hundreds of thousands of dollars in rent debts, their longtime landlord has slapped them with a lawsuit.
It’s a baffling set of circumstances that could only have happened in 2020. “The restaurant business in SF was hard anyway,” Guelke tells The Frisc, adding that he’s betting on a last-ditch crowdfunding campaign to keep business afloat.
In March, Guelke had five SF locations for his nearly 15-year-old eatery, The Plant Cafe Organic, dishing out locally grown veggies spiced with trendy phrases like “detoxing” and “food sustainability,” even expanding in recent years to a prime franchised spot in SFO’s Terminal 2.
Then COVID-19 closed most of the locations. The final one on Third Street in Dogpatch is squeezing by on loans and take-out orders — you can still grab a $9 avocado toast — but Guelke says he’s as hard up as any restaurant owner in the city right now. “We had 70 staff members before, and now we have 15,” he says.
San Francisco’s unemployment rate was 8.4 percent at the end of September, down from the May peak of 12.7 percent, but still more than four times the pre-pandemic low. According to the Bureau of Labor Statistics, the number of SF’s leisure and hospitality jobs declined more than 50 percent year over year in May.
Blood from a stone
Most of Guelke’s landlords have either offered breaks on rent or stopped expecting it at all. “One of them has just said nothing, their whole building is vacant. Another one offered us a reduced rent,” Guelke says.
Then in July came a shock: The owner of The Plant Cafe’s Marina eatery on Steiner Street was suing for $73,600 in missed rent payments between April and July, a total that has doubled since then. While many people react to litigation with anger, Guelke mostly sounds flabbergasted, calling it an attempt to get blood from a stone. (He and his partner are still paying regular rent at the Dogpatch location, but have fallen behind there too.)
‘Businesses are trapped, with owners that gave personal guarantees and can be sued personally. It’s just a bad situation.’
— California state Senator Scott Wiener
Landlord Yasim Salma claims the cafe has abandoned the Marina locale. The partners have “removed most fixtures for operating a food service business at the location and ceased operations,” the complaint alleges, something that if true might qualify as voiding the lease at the cafe’s expense.
Salma says they “are obligated to pay all past and future rent,” on top of attorney fees. By “future rent,” Salma is asking for everything the cafe would owe between now and the expiration of the lease next year.
The Marina spot is The Plant Cafe’s original location. Via email, Salma confirms that he’s been its landlord for nearly 15 years and is indignant about the lapsed rent. “The Plant Cafe didn’t pay one dollar since April,” Salma tells The Frisc. He says that Guelke and partners received a federal emergency Paycheck Protection Program loan and other funds, which Salma believes “should have gone to employees and partial rents” on his building.
(Salma also denied suing Plant Cafe, which is technically true: The suit names cafe cofounder Mark Lewis as defendant, rather than the business itself. Lewis gave a personal guarantee when signing the lease.)
Salma has padlocked the door and placed prominent “For Lease” signs in the window and on the building’s facade. Guelke says they haven’t abandoned the cafe, it’s just closed due to the pandemic, and the missing equipment has been temporarily leased out. While The Plant Cafe had PPP money left over after paying employees, other expenses came first, including the rent on its only open location.
The real irony is that “we’d be OK to be evicted” from Steiner Street at this point, according to Guelke. But with the city’s temporary eviction moratorium, designed to protect businesses affected by COVID and now in place months beyond what anyone expected, there is no legal way for the cafe to vacate or even to be forced out.
It’s a truly bizarre conundrum, but it isn’t unique. “We have a couple of businesses who are in similar situations,” SF Chamber of Commerce spokesperson Jay Cheng tells The Frisc, although all declined to comment on the record. “This is something we thought might happen,” he adds. “The moratoriums just didn’t account for how commercial leases were actually structured.”
Wiener saw it coming
At least one person foresaw the problem. Earlier this year, California state Senator Scott Wiener, who represents San Francisco, introduced a bill (SB 939) that would have allowed some COVID-affected businesses to legally walk away from leases.
“It was actually about giving them leverage to stay,” Wiener tells The Frisc, but acknowledges that the legislation could also have been an escape for those in the worst straits. “There are businesses that are trapped, with owners that gave personal guarantees and can be sued personally. It’s just a bad situation,” he says.
Unsurprisingly, SB 939 proved unpopular with landlords, and the bill died in committee due to “enormous opposition from the real estate industry,” according to the senator. Wiener says there are no plans to resurrect it, as at this point it wouldn’t take effect until early 2022.
Wiener also says that while many SF landlords are accepting less than previous market-rate rent from tenants during the crisis, he has heard from constituents whose leaseholders refuse to make exceptions: “They think if they play hardball enough, they’ll somehow get the money.”
Ben Bleiman, SF Entertainment Commission member, owner of several bars, and founder of the SF Bar Owner Alliance, says his own landlords have proven flexible, but many other businesses are on the brink of insolvency over demands for back rent. Some were tempted to reopen indoor service during the few weeks the city permitted this, but that posed obvious health risks. “The problem is we just shouldn’t be open, in many cases,” Bleiman notes, but without government assistance, other income options remain limited.
Eviction moratoriums keep the ax from falling, but for businesses like The Plant Cafe, storefronts can become enormous albatrosses, piling up debt month after month with no way out. Wiener says everybody in Sacramento knows it’s a “slow-moving train wreck,” but there are no pending saves. “Wildfires, PG&E, unemployment, the pandemic — there’s just a lot happening” all at once.
Bleiman suggests that a new round of federal PPP would cure things. But “I think the Republicans [in Congress] fucked us. They can go fuck themselves.” (Bleiman stresses that his personal opinions do not reflect those of the city’s Entertainment Commission.)
The Plant Cafe has launched a GoFundMe campaign, hoping to appeal to the community with a $350,000 bid to keep afloat. It currently sits at less than $4,200. “Honestly it’s all quite scary,” Guelke adds via email, saying he hopes San Franciscans can somehow rally to small businesses. “We are simply [trying] to stay alive.”
Adam Brinklow has lived in and written about San Francisco for 13 years, covering local communities for outlets like Curbed SF, SFGate, San Francisco magazine, SF Weekly, and EDGE SF.