Sanford Nelson sounds like bad news for Eastern Market

[robtandersen]

He bought the building. He needs to keep it fixed. Kudos to Russell Street Deli. They will leave [[unfortunately), Nelson will need to pay for repairs anyway. Sanford is a schmuck! [[Maybe he should burn it down! - isn't that the Nelson playbook?)

https://www.freep.com/story/entertai...it/3540974002/

[Richard]

It does not make sense,they had to close for the day and reported that they lost $3000.

They had no food or employee costs for the closed day so they lost $3000 in profit.

So one days profit pays the anticipated rise in monthly rent.

Or on a 30 day month 90,000 in profit.

If thier dish sink was leaking for a long time and they choose not to repair the leak as it damaged the floor,it should be on them to pay for fixing the damages.

It does not matter if the building is 500 years old if you were negligent in fixing a water leak that destroyed or damaged a floor you are responsible weather you move or not.

The health department must be different up there,here you cannot have a permeable floor for sanitation reasons in the food or dish areas,a restaurant dish sink leaking enough through a broken flooring barrier long enough to soften the supporting floor has to have some nasty funk going on there.

It is a biased article because it does not state the terms of the lease,most restaurant leases are triple net,which means that the buisness owner is responsible for all repairs and taxes.

triple net lease

A lease in which the lessee pays rent to the lessor, as well as all taxes, insurance, and maintenance expenses that arise from the use of the property.

From Detroit’s bankruptcy and forward every time a property sells,odds are it will never sell at that price again,so anybody buying property at the increased price will adjust the lease terms accordingly in order to pay the note.

As cheap as buildings were in Detroit any buisness making 90,000 per month in profit that does not purchase a building is nuts.

Include a copy of the lease or otherwise it is just he said she said and of no value.


But from the link provided

Per the lease they agreed to in 2007, which remains in effect until 2021, these repairs are their responsibility.


To me anyways they were more so looking to break the lease in order to move on to this,the floor was just the excuse.

In 2013, Hall started a packaged soup company that is poised to expand its distribution this summer to 60 Whole Foods locations around the Midwest.

If you sign a lease knowing full well that you are required to perform any maintenance required it would be on you to shut down and do the repairs and not the landlord.

In this case the landlord has offered to front the $50,000 on a payment plan added to the monthly lease,he can say it is all on you either you fix it as you agreed to in the lease or your lease is terminated for failure to hold up to your end of the contract and will be sued for damages.

It would seem even though the new or old landlord is not responsible for the damages,the new landlord in the interest of maintaining his new investment is going the extra mile to keep the tenant by loaning them the $50,000.

But the new landlord is the bad guy?

[Maof]

Just read this article as well. Another forum already started on this guy.

https://www.detroityes.com/mb/showthread.php?23868-Farmers-Restaurant-Eastern-Market

Nelson, also has a "lil" IMDb page.

[Detroitdave]

Sanford Nelson comes off as a ahole He's the new Matty Moroun or Chris Illitch

[Danny]

Sanford Nelson is one those Dennis Kellifinos slumlords. No one wants of his pig sty properties.

[Packman41]

Sanford Nelson - like father, like son. Dad taught him all about real estate investing.

Like the $19.05 million the Nelsons lost for the State of Michigan Retirement System on the Raleigh Movie Studio in Pontiac. https://www.metrotimes.com/news-hits...pontiac-studio

Junior attended the Cannes Film Festival one year and told his dad that Michigan's film incentive program was the talk of the industry's mover and shakers. So, somehow, dad got the State Pension Fund to guarantee the bond financing to the tune of $18 million. Trouble was that dad and his pals never made a debt service payment on the bonds, so the State had to pay all the interest payments and principal payment when the bonds defaulted.

Their reputation of screwing over people is well known. Just ask the state pension fund.

But not to worry, you taxpayers will kick in more to make up for what he stole.

[Honky Tonk]

Sanford Nelson - like father, like son. Dad taught him all about real estate investing.

Like the $19.05 million the Nelsons lost for the State of Michigan Retirement System on the Raleigh Movie Studio in Pontiac. https://www.metrotimes.com/news-hits...pontiac-studio

Junior attended the Cannes Film Festival one year and told his dad that Michigan's film incentive program was the talk of the industry's mover and shakers. So, somehow, dad got the State Pension Fund to guarantee the bond financing to the tune of $18 million. Trouble was that dad and his pals never made a debt service payment on the bonds, so the State had to pay all the interest payments and principal payment when the bonds defaulted.

Their reputation of screwing over people is well known. Just ask the state pension fund.

But not to worry, you taxpayers will kick in more to make up for what he stole.

Well I don't think he stole it alone. Why would the State back an industry they knew was going to be shut down, or why would Snyder shut down an industry he new the State was backing? Something doesn't seem right.

[Richard]

That was a Game Of Thrones Michigan style.

Think about what was happening at the time in the bigger picture,at a time that Detroit was unaware that is was headed to bankruptcy the stage was already being set.

Snyder takes office,Ann Arbor investors start buying up Woodward and other properties along a proposed street car line that did not exist.Yet

Immediately after taking office he kills all incentives,movie,historic,any property development,MEDC gets put on hold which in turn shuts down any and all future development across the state and even more so in the city of Detroit.

Even Wayne county development goes into a hold status unable to make commitments,the only person that could take advantage of the system at that time was one that happened to be flush with over 200 million in order to buy properties in the city of Detroit,now that it was guaranteed nobody else would.

When Snyder took office they knew at that time Detroit was going into bankruptcy,everything that was done,was done in anticipation of and preparing for that day.

The movie industry was collateral damage along with so many other things,the 18 million was nothing in the bigger picture of billions and there was a bankruptcy to engineer and tend to,there was no time for the movies.

The objective at the time was to erase all hope of future development in the city of Detroit,if projects had been announced people would start to question the need for a bankruptcy,if one looks back at that time the common word was,never,nobody is never going to invest in the city,nobody will never buy those buildings and rehabilitate them tear them down,the city will never be able to afford to maintain Belle Island,Detroit is to far gone it will never recover,all based on that moment in time.

8 years later and all of those never's seem to have floated away.

[archfan]

Well I don't think he stole it alone. Why would the State back an industry they knew was going to be shut down, or why would Snyder shut down an industry he new the State was backing? Something doesn't seem right.

It mostly sounds like they were ticked the state cancelled film credits they were counting on to attract movies. They knew they weren't on the hook, so they stopped paying.

[archfan]

That was a Game Of Thrones Michigan style.
...

You're giving folks too much credit, and watching too much TV.

[Danny]

Word from the ghetto is the Mr. Nelson is having Detroit building code issues with the slipping down 128 year old cedar floor. And he needs about $50,000 to get it repaired. So he about to raise the rent and the owner of the Russell St Deli refused. So the owner is forced to close to deli for good.

It's a sad day for Eastern Market. When owners want to rehabbed their 100 year old buildings and beg business owners to chip in more for forget it.

[Maof]

Here's article from July 2018.

Our biggest thing is our commitment to maintaining what Eastern Market is all about," said Nelson, whose company is called Firm Real Estate LLC, based in Detroit.
"It can't become like some of the other food districts in this country like the Meat Packing District in New York or the Fulton District in Chicago, where it has been redeveloped to the point where the food industry really no longer even exists there. That cannot happen and will not happen in Eastern Market.

"https://www.crainsdetroit.com/articl...rkets-identity

[sirrealone]

If you have a 128 year old floor, it will need to be replaced sooner rather than later. That would be on the owner. However, if the tenant accelerated that process, then they should be liable for a portion of the cost.

It sounds as if there should have been some split of the costs. Too bad that they couldn't come up with some sort of reasonable compromise.

[Packman41]

Well I don't think he stole it alone. Why would the State back an industry they knew was going to be shut down, or why would Snyder shut down an industry he new the State was backing? Something doesn't seem right.

Nothing was going right with the deal.

If you noticed in the MT article, Louis Schimmel [[then Pontiac’s emergency manager) and a former municipal bond analyst, told MT pension funds should only invest in conservative deals — not in "fly-by-the-night" opportunities, "of which the film industry has to be one of the worst."

This same loan guarantee scheme cost the two City of Detroit pension funds a combined $24 million when their guarantees on the Book Cadillac loans went sour – an amount they can never recover.

In answer to these screw-ups the state amended [[in 2014) to amend existing law and prohibit Michigan public pension funds from making such guarantees.

[Hypestyles]

the golden rule= he who has the gold, makes the rules. ah well. best of luck to the employees.

[swingline]

The Freep's Mr. Kurlyandchik is a fine restaurant and food journalist but this is a business dispute story and his reporting failed to get to the core of the issues. Did he ask Mr. Hall why he allowed the damage to occur to the building? $50,000 means that the water issues lingered for a very long time and caused serious structural damage. Did he ask Mr. Hall why he believes that he should not have to pay for the repair even though he is supposed to under the terms of the lease? It just seems like he gave Mr. Hall a pass on his victimhood claim when many of the facts don't support that narrative.

[poobert]

Restratanteurs and landlords. Don't want to paint with too broad of a brush but never too wonderful a group of people in my experience.

[Honky Tonk]

the golden rule= he who has the gold, makes the rules. ah well. best of luck to the employees.

Another good rule is to read the contract, and don't sign if you either can't hold up your end of it, or have no intention of doing so. Nelson might be a POS, but seriously, you let water keep running to cause $50k worth of damage? Hall claims to have lost $3k closing for one day, has he thought about how much he stands to lose closing, moving, rehabbing, opening, and hoping he can build his customer base back up to where it was? He was offered a payment plan, it might be in his best interest to take it, and also his employees best interest.

[MrMichigan]

Sanford Nelson does sound like bad news. This restaurant was under an existing lease, so the only way for him to raise rent was to create this payment plan. And according to sources, an “anonymous” tip was made to the city that the floor was unsound. Hmm

[DeLemur]

It does not make sense,they had to close for the day and reported that they lost $3000.

They had no food or employee costs for the closed day so they lost $3000 in profit.

So one days profit pays the anticipated rise in monthly rent.

Or on a 30 day month 90,000 in profit.

If thier dish sink was leaking for a long time and they choose not to repair the leak as it damaged the floor,it should be on them to pay for fixing the damages.

It does not matter if the building is 500 years old if you were negligent in fixing a water leak that destroyed or damaged a floor you are responsible weather you move or not.

The health department must be different up there,here you cannot have a permeable floor for sanitation reasons in the food or dish areas,a restaurant dish sink leaking enough through a broken flooring barrier long enough to soften the supporting floor has to have some nasty funk going on there.

It is a biased article because it does not state the terms of the lease,most restaurant leases are triple net,which means that the buisness owner is responsible for all repairs and taxes.

triple net lease

A lease in which the lessee pays rent to the lessor, as well as all taxes, insurance, and maintenance expenses that arise from the use of the property.

From Detroit’s bankruptcy and forward every time a property sells,odds are it will never sell at that price again,so anybody buying property at the increased price will adjust the lease terms accordingly in order to pay the note.

As cheap as buildings were in Detroit any buisness making 90,000 per month in profit that does not purchase a building is nuts.

Include a copy of the lease or otherwise it is just he said she said and of no value.


But from the link provided

Per the lease they agreed to in 2007, which remains in effect until 2021, these repairs are their responsibility.


To me anyways they were more so looking to break the lease in order to move on to this,the floor was just the excuse.

In 2013, Hall started a packaged soup company that is poised to expand its distribution this summer to 60 Whole Foods locations around the Midwest.

If you sign a lease knowing full well that you are required to perform any maintenance required it would be on you to shut down and do the repairs and not the landlord.

In this case the landlord has offered to front the $50,000 on a payment plan added to the monthly lease,he can say it is all on you either you fix it as you agreed to in the lease or your lease is terminated for failure to hold up to your end of the contract and will be sued for damages.

It would seem even though the new or old landlord is not responsible for the damages,the new landlord in the interest of maintaining his new investment is going the extra mile to keep the tenant by loaning them the $50,000.

But the new landlord is the bad guy?

That's $3,000 in lost revenue - not profit. That's a big difference and makes me not want to read the rest of your argument.

The Nelson's have a bad reputation around town. Something tells me its for a reason. This doesn't look like Detroit "progress" to me.

[Richard]

That's $3,000 in lost revenue - not profit. That's a big difference and makes me not want to read the rest of your argument.

The Nelson's have a bad reputation around town. Something tells me its for a reason. This doesn't look like Detroit "progress" to me.

Maybe if you read the rest you would understand basic buisness.

He said the $3000 loss devastated him,he is claiming the $3000 as lost revenue.

You shut the doors for the day,product stays in the cooler you did not sell it or incorporate it into a meal.

Shut the doors for the day and the only costs that carry forward are your fixed costs.Does it cost him $3000 a day in fixed costs?

I own,service,consult and build restaurants and have for many years,nobody shuts down for the day for contractor estimates.

His lease stated that the tenant was responsible for building maintenance,the previous landlord did not check up and make sure that the space was being properly maintained and just offered cheap rents.

The deal was tenant maintained the space,that is in a legal document,the tenant choose to not maintain the space and not fix a leak to prevent further damage,so the previous landlords complacency trickled down to the tenant.

The difference in the end is the landlord did not care,he got paid for the sale and why should he care because it was on the tenant in the first place.

In reading the comments online and here there is a pretty common theme.

People seem to want the city to change,fix the roads,fix the street lights,stop the crime etc.

We know it all needs to be paid for but we just do not want to have all of these rich people buying our buildings and improve it them in order to increase the tax base.

The simple solution would have been for the restaurant owner to just buy the property himself.

It was like the other interview,the store owner reported that she was not looking to make a profit,just provide cheap space for others.

That is fine,go buy a building and have at it,why expect a property owner to give you something cheap so you can be the nice guy at somebody else’s expense?

Its an old building that has had millions in deferred maintenance for many years,fix it all like brand new so I can have a cheap space.

Name one city in the country that offers commercial space like that for $350 per month.

[Richard]

Word from the ghetto is the Mr. Nelson is having Detroit building code issues with the slipping down 128 year old cedar floor. And he needs about $50,000 to get it repaired. So he about to raise the rent and the owner of the Russell St Deli refused. So the owner is forced to close to deli for good.

It's a sad day for Eastern Market. When owners want to rehabbed their 100 year old buildings and beg business owners to chip in more for forget it.

It says it right in the link,tenant was responsible for maintenance,tenant did not have the funds to fix what they agreed to fix in the first place.

Landlord offered to cover the cost of repairs and to pay them back over the term of the lease by adding an additional amount to the lease.

The deli has an obligation,the other route would be to go borrow the money or arrange to have the repairs done themself.

Legally the tenant is in default of the terms of the lease,if the landlord wanted to be an ass his option would be to evict the tenant and sue them for damages occurred while in possession of the property.

If he did not want them to stay there he would have never offered the $50,000 loan and payment terms.

Anyway you look at it the building owner still has to come up with $50,000 upfront for a liability that was not attached in the first place.

Now you see why you never buy a building with tenants in place,anyway you look at it you will be an ass,so it is better to have everybody evicted before the sale.

[DeLemur]

Maybe if you read the rest you would understand basic buisness.

He said the $3000 loss devastated him,he is claiming the $3000 as lost revenue.

You shut the doors for the day,product stays in the cooler you did not sell it or incorporate it into a meal.

Shut the doors for the day and the only costs that carry forward are your fixed costs.Does it cost him $3000 a day in fixed costs?

I own,service,consult and build restaurants and have for many years,nobody shuts down for the day for contractor estimates.

His lease stated that the tenant was responsible for building maintenance,the previous landlord did not check up and make sure that the space was being properly maintained and just offered cheap rents.

The deal was tenant maintained the space,that is in a legal document,the tenant choose to not maintain the space and not fix a leak to prevent further damage,so the previous landlords complacency trickled down to the tenant.

The difference in the end is the landlord did not care,he got paid for the sale and why should he care because it was on the tenant in the first place.

In reading the comments online and here there is a pretty common theme.

People seem to want the city to change,fix the roads,fix the street lights,stop the crime etc.

We know it all needs to be paid for but we just do not want to have all of these rich people buying our buildings and improve it them in order to increase the tax base.

The simple solution would have been for the restaurant owner to just buy the property himself.

It was like the other interview,the store owner reported that she was not looking to make a profit,just provide cheap space for others.

That is fine,go buy a building and have at it,why expect a property owner to give you something cheap so you can be the nice guy at somebody else’s expense?

Its an old building that has had millions in deferred maintenance for many years,fix it all like brand new so I can have a cheap space.

Name one city in the country that offers commercial space like that for $350 per month.

Ok sure, losing one day shouldn't kill his business, but it was revenue not profit. His rent is pretty low at 1700 a month. But how the hell is he supposed to jump to 6000 a month or 3700? No one can double or triple their rent payment and expect that to be rational, kind or a deal. It kills the business. And this is a well liked, quality business.

[Honky Tonk]

Ok sure, losing one day shouldn't kill his business, but it was revenue not profit. His rent is pretty low at 1700 a month. But how the hell is he supposed to jump to 6000 a month or 3700? No one can double or triple their rent payment and expect that to be rational, kind or a deal. It kills the business. And this is a well liked, quality business.

I haven't seen or read the contract, but if Hall is on the hook for the $50k, he owes it whether or not he's operating from the building in Eastern Mark-up or somewhere else. I got the impression from the article the increase was until the loan was paid off. The only way out of this for Hall is to file bankruptcy. If he's got a $3k daily cash flow, he's not doing too badly.

[Richard]

Read this carefully

Hall said he had a very agreeable lease from the building's previous owners and currently pays $1,700 a month through 2021, but is guaranteed rent of less than $2,000 until 2026. He said Nelson offered to roll the estimated $50,000 it would cost to repair the floor into the monthly rent for a year, bringing the monthly total to $6,000. Nelson's other offer was a new five-year lease that would raise the rent to $3,704 a month, a 118% increase.

$6000 a month for a year in order to pay back the loaned $50,000 then it goes back to $2000 until 2026

Okay he said closing one day cost him $3000 in revenue which by his own accord would total $84,000 a month based on a 28 day average.

I will give the new landlord $6000 a month for the place if I can turn $84,000 a month in revenue.

The current tenant started working there in 1996 so was well aware of the condition of the building.

He took over the lease in 2007 knowing full well,or should have that the tenant was responsible for repairs.

The repairs or upkeep was not performed and now is time to pay it 12 years later.

So his choices are

Leave and be sued for the $50,000 in repairs that is currently known about.

Borrow the $50,000 or have the repairs made as it is his responsibility.

Stretch the loan payment out over 5 years by paying $3704 a month.

Or make the income from the buisness pay the note and write it off as a loss on the taxes for that year.

His rent is not increasing at all,the landlord is loaning him 50,000 and adding the payment to the rent.

He is guaranteed a rent of $2000 a month until 2026 6 more years.

The $1700 to $2000 is a standard costs increase on commercial rent.

But as you can see the whole story is not there he claims a loss of $3000 for the day out of a monthly total of $84,000 but then claims the $3000 loss devastated him and he can not recover.

Here is my thinking.

He started the other contract with Whole Foods and wants to break his lease at the deli so he can devote all of his time to the Whole Foods contract,which is what it is going to take.

The cost of breaking the lease is

$50,000 in repairs,that we know of.
$34,000 left at the $1700 per month terms of the lease.

If he were to walk away tomorrow he would owe $84,000

I have leased varied commercial triple net properties for over 40 years and have never had a building owner say hey here’s $50,000 to help in Finianceing the repairs that you are obligated to make.

The new owner may be considered an ass,but in this case and based on the information provided,he is doing everything to keep the guy in there.

No rent increase,it only revolves around the $50,000 repair bill.

So why is everybody claiming that he is jacking up the rent when he is clearly not?

He is using not only the floor but also public opinion as a ruse in order to get out of paying the debt.

Who is actually being dishonest and not holding up thier end of the deal?

Piece of friendly advice.

If you are going to enter into a commercial triple net lease and even more so on a 100 year old building,pay a building inspector his $300 and document the existing condition and do not allow maintenance that you are responsible for to defer.

Rough numbers based on his stated $3000 per day

$84,000 per month x 12 months = $1,008,000 per year

Rent at $1700 x 12 = $20,400
Rent plus loan repayment at $6000 per month = $72,000 for one year
Rent plus loan repayment spread out over 5 years $3704 x 12= $44,448


Let’s be honest even at the $72,000 in rent that leaves over $900,000 for bills,labor and food costs,if they are not making it on that then they are in the wrong buisness.

If his stated numbers are correct,without all of the drama of playing games with people,he could have sold the buisness for $100,000,paid the $50,000 debt for the repair and transferred the lease,walking away debt free with $50,000.