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Survival of Neighborhood Markets Under Threat by Huge Rent Increases; Residents Seeking to Put Brakes on this Trend

BREAKING NEWS: The Washington Post reports today (the 12th) that Metro K Market’s lease has not been renewed and it will close on the 30th as was feared by Adams Morgan residents.

Accompanying images can be viewed starting on page 1 of the November 2018 issue pdf

By Larry Ray*

“Developers nearly always win despite what neighbors and residents think. And I think Adams Morgan has plenty of restaurants already, some of them struggling. The Metro K Supermarket should survive purely on the basis of its convenience,” nearby neighbor Byron told The InTowner.

“We happen to be people who sort of depend on this short walk destination for emergency groceries. Also, [has]] the cheapest lemons and limes in the city!,” says neighbor Glenn.

“There is a special place for you (Metro K) in my heart. I will still buy things from your store when I can. In your defense, it is awesome that you actually carry kimchi and Salvadorean cheese. [You] don’t quite fit in, but that’s what makes you so special,” neighbor George posted on Yelp.

Most neighbors love Adams Morgan’s Metro K Supermarket, a compact corner neighborhood market. But it is threatened with closing because of a 30% commercial lease rent increase and $150,000 interior renovation costs. Over 1,400 residents have signed a petition to try to save this long-time business. According to the DC Office of Tax and Revenue, this property, located at 1864 Columbia Road at the corner of Belmont Road, is owned by Rita Childs and Catherine A. Van Sickler and managed for them by the Borger Management Company. Built in 1937, this small building’s present-day estimated property taxes are between $22,500 and $25,000. The current lease expires on November 30th.

Denis James, president of the Kalorama Citizens Association (KCA) describes the situation this way:

“It is a full service grocery store with fresh fruits and vegetables, a full line of dairy and meat, canned goods, cereals and baked goods and frozen foods as well as household items. The residents of the western part of Adams Morgan rely heavily on the market for its convenience near major bus routes, its walkability, and its friendly, helpful staff. It’s not fancy, just regular.

“We understand that restaurant operators have visited the space with an eye to replace the market with another restaurant. Adams Morgan has 70 ABC-licensed restaurants and over 20 non-ABC ones, including fast food, various sandwich shops and a mix of ethnic eateries. The feeling is that we don’t need another restaurant.

“Over 1,400 neighbors have signed an in-store, paper petition in support of keeping the current market in place. A few weeks ago, the petition was mailed to the ownership, with no response to date.”

Commercial Leases

In DC and many other jurisdictions, there are very few government restrictions imposed on commercial leasing and rents charged. Generally this commercial relationship is governed by market values as well as the lease provisions. Many landlords attach the rent increases to the Consumer Price Index (CPI) or inflation rates. Some write leases that contain long-term provisions and dispute resolution provisions. Some jurisdictions do require a 30-day notice before rent increases can take effect.

In response to our query whether DC government will be addressing the problems of commercial rents seemingly unstoppable increases pushing out neighborhood businesses, Public Mekdy Alemayehu, spokesperson for the Department of Small and Local Business Development (DCLBD), responded as follows:

“Thank you for your interest in an issue that many small businesses are facing in our city. There are currently no government restrictions on commercial rent increases; however, this is one of DSLBD’s areas of focus for this fiscal year. We will be exploring how the government can best support small businesses that are vulnerable to rising commercial rent rates. Our commitment continues to be making sure we are providing small businesses across the District with the right resources and unique partnerships to help them thrive.”

Signed with Management Company on September 17, 2013, the Metro K lease on behalf of Hottel Tenants in Common (Roy Daniel Hottel of Stevensville, Maryland and Ho Sang Cho), took effect two-and-a-half months later on, December 1st. The lease contains no dispute resolution clause, nor does it provide an option to renew.

Trends and Countertrends

As we previously reported, the closing of small grocery stores in DC is a trend. As part of this trend is the opening of more large grocers such as Trader Joe’s the one at 14th and T Streets, NW and the Harris Teeter on Kalorama Road in Adams Morgan. Soon there will be a new, 45,000 square-foot Whole Foods four blocks north of U Street in the 900 block of Florida Avenue.

Another example of a beloved small neighborhood grocery closing was the Fairfax Market just west of Dupont Circle, in the 2100 block of P Street. As the then owner tells the story, his landlord arrived one day to inform him that the rent was going to be increased by 50%. His response was that if that was to happen he would be unable to afford continuing operating this one of his three locations and would close within 24 hours — and so he did.

Similarly, the immigrant-owned (married couple Young Suk Pak and In Suk Pak) and popular Best World Supermarket in the heart of Mt. Pleasant’s neighborhood shopping strip, was faced with the expiration of its lease last March and the owner of the property, Michael Choi, deciding to sell the building, possibly to CVS which is considering the location for yet another store.

It remains to be seen if the efforts of the 2,500 who have signed an on-line petition seeking to save the store and the on-going fundraising with the goal of purchasing the building. Additionally, the organizing group is seeking assistance from the from the Mayor’s Office of Asian and Pacific Islander Affairs.

On the other hand, there are examples of a bucking of this trend. Long-time Columbia Heights business Arthur’s Grocery at 11th and Lamont Streets closed after decades. Much to the delight of neighbors, a specialty store called Odd replaced it, selling wine, beer, homemade soups and sandwiches.

Similarly, Dupont North’s one-time Townhouse Safeway at 20th and S Streets, after having been closed for a time, was replaced by the highly popular specialty Glen’s Garden Market.

Another example was the 2011 closing of the long-time Griffin Market at the corner of 28th and P Streets. The space is now occupied by Stachowski’s where Chef Jamie Stachowski creates huge sandwiches in his charcuterie.

Also in Georgetown, a unique situation. The Scheele family decided to sell the building which housed its 120 year-old market at 1331 29th Street. Because the building had a residential apartment above the store, DC’s rent control law allowed for the tenants exercise their right of first refusal to purchase. Neighbors organized and came up with a creative plan whereby the community would assist financially and guarantee that the market would stay a market for 25 years if financially viable.

In 2016, Donguk Kim from South Korea took over the market. Patrons enjoy the fresh deli sandwiches, beer and wine. One half of the sales are from groceries.

Stores like these might represent a countertrend — new corner specialty markets featuring wine, cheese, soups, “healthful” foods geared towards a younger demographic including new arrivals and Millennials.

Conclusion

DC has become a dynamic city over the past 20 years. But this has contributed to pressures on traditional neighborhood businesses. Commercial leases have few governmental restrictions so landlords are free to do what they want to do. Regrettably, in many of these situations when leases that would govern the landlord-tenant relationships were negotiated,

Ward 1 Councilmember Brianne K. Nadeau’s Deputy Chief of Staff and Communications Director Tom Fazzini told The InTowner that the council member “has heard from many neighbors about how they’d like a grocer to remain in the location and is pleased at reports that the landlord has executed a lease with a grocer. While it’s disappointing that Metro K will not be continuing in the space, the Councilmember would like to work with the new owner to hire existing Metro K staff at the new market.”

Larry Ray is a former ANC Commissioner of Dupont Circle and Columbia Heights. He is a Senior Adjunct at The George Washington University School of Law and arbitrator for the (Financial Industries Regulatory Authority, Inc.

Copyright © 2018 InTowner Publishing Corp. & Larry Ray. All rights reserved. Reproduction in whole or in part without permission is prohibited, except as provided by 17 U.S.C. §§107 & 108 (“fair use”).