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Restaurateurs are expanding in pandemic due to cheap rent

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Restaurateurs are expanding in pandemic due to cheap rent

The pandemic has been a bloodbath for most New York City restaurants, but some are expanding amid the carnage — and they can thank their hungry landlords.

Think discounts on rent and “percentage leases” based on revenue generated. Landlords are even giving out “free money” — writing checks for up to $1 million — so restaurateurs can renovate before moving in.

“There are deals happening that we would never have seen before COVID,” said Stratis Morfogen, founder of the Brooklyn Dumpling Shop, whose automated system of serving dinners through drawers in a wall has proven to be a good fit for the coronavirus era.

“All the biggest landlords in the world who would never have taken my calls are now calling me every day and trying to break down my door to do deals. It’s crazy. The landscape has shifted. Now tenants have the power. The take-it-or-leave-it mentality of landlords is long over,” said Morfogen.

He says he’s currently working on 11 new deals for “pennies on the dollar” and with “substantial tenant improvement” allowances.

“But,” he cautioned, “this window of opportunity for young entrepreneurs, especially ones with track records, is closing pretty fast.”

While Morfogen can’t talk about deals that are still being negotiated, he can reveal that a recent lease he signed for the Brooklyn Dumpling Shop in Hoboken, NJ, is like “30 cents on the dollar with substantial tenant improvement.”

James Beard award-winning chef JJ Johnson has meanwhile used the pandemic to expand his global rice concept, Fieldtrip. The flagship opened in Harlem in 2019. Last year, he added an outpost in Long Island City and this month opened a Rockefeller Center location. He now has his sights set on opening in Brooklyn and the Bronx.

“Landlords are realizing that restaurants are the backbone of communities. In the heart of [lockdown restaurant closings], they thought, it’s just a restaurant and a luxury and we’ll find something else,” Johnson said. “But they realized that the communities in the buildings and developments they built are asking, ‘Where are the restaurants?’ The restaurants keep away crime and keep people employed and the community safe.”

While Johnson won’t reveal details about his new deals, he said they included opening in spaces that are already set up with infrastructure so the costs of opening, which could run “from $500,000 to $1.5 million,” could be reduced to “cosmetic makeovers” that cost $150,000 to $300,000.

“That’s very appealing. The developer says, ‘You can take all the pots, pans and equipment as long as it works, it’s yours, and if it doesn’t, we’ll figure out something else together,’” Johnson said.

Itai Afek, founder of Wolfnights, which offers “gourmet wraps,” had two shops before lockdown began, on the Lower East Side and the West Village. Now he’s also opening on the Upper West Side, Hell’s Kitchen and Murray Hill.

“Everyone is trying to close deals and get things rolling — tenants and landlords,” Afek said.

Rent, Afek said, is 25 percent cheaper in prime locations that would be “impossible” to get before the pandemic.

Other creative restaurateurs have worked out profit-sharing deals with landlords known as percentage leases. These deals allow restaurateurs to pay below-market rent — at up to 75 percent off — or a specified percentage of sales — whatever works out to be higher.

Still others are getting hefty “tenant improvement” checks from their landlords to renovate spaces in addition to months of free rent.

Restaurateur Thomas Bonfiglio has also expanded — from three restaurants before the pandemic to 10, mainly on the Jersey Shore. Before the pandemic, Bonfiglio had Tommy’s Tavern + Tap, on Staten Island and in New Jersey. He’s now expanded his New Jersey footprint and developed a new concept, Tio Taco + Tequila Bar that he developed during the pandemic to work in smaller spaces.

“The best perks we received were percentage rent deals based on the permitted occupancy rates,” Bonfiglio said. “So if we had 25 percent occupancy inside, we paid 25 percent rent. But as soon as we are fully open, we will be back to market-rate deals. Another perk was rent deferral for a year payable in 36 months after the year.”

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United Airlines to pay $49.5M to settle mail contract probe

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United Airlines to pay $49.5M to settle mail contract probe

United Airlines agreed to pay $49.5 million to resolve criminal charges and civil claims relating to fraud on Postal Service contracts for transportation of international mail, the US Justice Department said Friday.

“United defrauded the US Postal Service by providing falsified parcel delivery information over a period of years and accepting millions of dollars of payments to which the company was not entitled,” the Justice Department’s acting criminal division chief Nicholas L. McQuaid said.

United did not immediately comment.

The Justice Department said between 2012 and 2015, United defrauded the US Postal Service (USPS) by submitting false delivery scan data. The government said United submitted automated delivery scans based on aspirational delivery times. The government said some individuals at United sought “to hide the automation practices included efforts to revise the falsified delivery times to make the automated scans appear less suspicious to USPS.”

United agreed to strengthen its compliance program and to submit yearly reports to the Justice Department detailing the status of remediation and implementation of United’s compliance program and internal controls.

The government cited United’s prior history, including a 2016 non-prosecution agreement relating to potential criminal bribery violations arising out of United’s establishment and operation of a non-stop route between NJ’s Newark Liberty International Airport and Columbia Metropolitan Airport in South Carolina.

In 2019, American Airlines, paid $22.1 million to settle claims it falsely reported the times it transferred possession of US mail to foreign postal administrations or other intended recipients, the Justice Department said.

USPS contracted with American to take possession of receptacles of US mail at six locations and then deliver it to numerous international and domestic destinations. The settlement resolves claims American Airlines falsely reported the times it transferred possession of the mail. American did not immediately comment.

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Cinemark ‘confident’ in box office rebound despite Q4 loss

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Cinemark 'confident' in box office rebound despite Q4 loss

Cinema giant Cinemark said Friday it sees the light at the end of the tunnel even as it swung to a quarterly loss as the coronavirus pandemic crushed movie attendance.

In the fourth quarter ended Dec. 31, Cinemark posted a loss of $239 million, or $2.03 a diluted share compared with a year-ago profit of $23 million, or 22 cents a share. Revenue fell to $98 million from $789 million a year ago. Wall Street expected a loss of $1.46 a share on revenue of $80 million.

Chief executive Mark Zorandi noted that the results were severely hampered by the pandemic, which shuttered its theaters or reduced its seating capacity since the last year.

“It is almost unfathomable that one year ago, we were reporting Cinemark’s fifth consecutive year of record results with the North American industry touting the second-highest-grossing box office of all-time,” he said.

As of the fourth quarter, the Plano, Texas-based company had 217 domestic and 129 international movie theaters open, all operating at limited hours and capacity, and showing mostly older movies.

Still, the nation’s third-largest movie theater chain with 533 theaters — 331 of which are in the US —said it sees hope on the horizon as moviegoing rises in regions where the virus has been contained.

“We remain highly confident in the rebound of our industry once the virus is more contained, as evidenced by recent box office results in China, Japan and Australia,” the CEO said. “Cinemark was well-positioned heading into the crisis, and we have adapted and evolved the way we operate to navigate the current environment, and to ensure we remain successful and further solidify our leadership position as theatrical moviegoing resurges.”

In the US, the early success of the vaccine, which has lowered COVID cases, has also been a cause for celebration among movie theater owners. New York City, one of the most lucrative box office markets, will reopen movie theaters at limited capacity in March, after a yearlong hiatus.

Zorandi said his company is well-positioned to weather the storm with $655 million in cash.

“While COVID-19 has caused significant distress to our industry and our company, Cinemark has maintained discipline and consistency, while demonstrating relentless perseverance and agility,” he added.

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DirecTV to become standalone company through $16B AT&T, TPG deal

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DirecTV to become standalone company through $16B AT&T, TPG deal

Telecom giant AT&T has inked a deal with private equity firm TPG that calls for struggling satellite TV provider DirecTV to become a standalone company.

The deal calls for AT&T to sell a 30 percent stake in DirecTV, AT&T TV and its U-Verse to TPG in exchange for $1.8 billion in cash.

The transaction values the satellite TV properties at $16.25 billion — a fraction of the $48.5 billion AT&T shelled out for it in 2015 under former chief executive Randall Stephenson. 

But it paves the way for the telecom and media giant to focus on its growing businesses, including 5G wireless and streaming video service HBO Max, said CEO John Stankey in announcing the deal.

The companies will form a new venture, aptly called DirecTV, that will own and operate the pay video services.

AT&T will also receive $7.8 billion from the new venture after the spinoff is complete, including the assumption of $200 million in debt. It will use the money to pay off debts, it said.

The company under Stankey has been under the directive to focus on core-assets, such as the company’s wireless business, in order to reduce its $149 billion debt load and grow its new streaming service HBO Max.

AT&T put the declining DirecTV on the block last year, but didn’t like the early offers, which came in at more than $15 billion, as The Post reported in December.

DirecTV has been pummeled by cord-cutting, bleeding subscribers and booking a $15.5 billion charge in AT&T’s fourth quarter earnings report last month.

In recent months, AT&T had focused on a divestiture of its stake to private equity groups to avoid regulatory concerns. 

AT&T said Thursday that by keeping a majority stake, DirecTV can still leverage its distribution reach. The telecom giant offered that the new DirecTV “will have a commercial agreement with AT&T to continue to offer bundled pay-TV service for AT&T’s wireless and internet customers. Additionally, AT&T and new DirecTV will have commercial agreements in place that will give new DirecTV video subscribers continued access to HBO Max.”

“This agreement aligns with our investment and operational focus on connectivity and content, and the strategic businesses that are key to growing our customer relationships across 5G wireless, fiber and HBO Max,” Stankey said.

He added: “TPG is the right partner for this transaction and creating a new entity is the right way to structure and manage the video business for optimum value creation.”

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