More News

For the past 13 years, Janet Yu's Hollywood East Café was a popular spot in Wheaton for Chinese cuisine. And for much of 2009, Eddie Velasquez's DeJaBel Café coffee shop had been a favorite place for neighbors to stop by, socialize and sip cappuccinos.

When both shops closed during the past year, with Yu filing for bankruptcy and Velasquez saying he'll likely follow suit, Wheaton lost two of its most beloved establishments.

Yu and Velasquez have more in common than bolted doors and financial troubles — both are among about a dozen Greenhill Capital Corp. tenants who blame the real-estate company for shuttering their businesses and shattering their dreams.

Some of these disgruntled tenants accuse the company's owner, Leonard Greenberg, of charging large maintenance and penalty fees on top of their rent and then refusing to work with them as they struggle to pay, instead filing lawsuits when they become delinquent.

"I lost everything I had," Yu said. "I don't know why anybody would want to lease from him."

One former tenant, longtime Wheaton carpet store owner Bob Maloo, accused the company in a lawsuit of breaking its own strict rules by reducing Maloo's storefront's size, prompting Maloo to move his business to Rockville. The lawsuit was thrown out of court Monday on procedural grounds.

Greenhill, based in Bethesda, is a real-estate company that develops, owns and manages commercial and residential properties throughout the area. Greenhill owns 41 of about 150 downtown Wheaton properties, according to the company's Web site, making it one of Wheaton's biggest landowners.

Greenberg said the complaints and perceptions about his longtime business aren't taking into account the whole picture of the real-estate business or factoring in the reality of a dismal economy.

"We have tens of millions of dollars invested in Wheaton," he said. Greenhill has created jobs, boosted the economy and cleaned up many of Wheaton's storefronts, all while empowering small-business owners, he said.

"I'm a believer in the small businessman," Greenberg said. " ... Nothing gives me greater pleasure than to see somebody who can make it."

But some in Wheaton don't agree.

"[Greenhill doesn't] do things that are criminal, but they take advantage of people," claims Maloo's lawyer, Mark Hessel. "No landlord is required to give an inch to a tenant. You can't lambaste them for that, but you don't have to appreciate it either."

Revitalizing Wheaton

The dispute between tenants and a landlord is playing out as county planners take steps to revitalize Wheaton's business core.

Planners are looking for a team of private developers to renovate more than 10 acres of public land in the downtown area as they struggle to find a balance between big-box stores and the ethnic shops that characterize the town.

County officials and real-estate brokers point out that landlords such as Greenberg might play hardball because they have as many bills to pay as their tenants.

"What people forget is when these businesses go under, the landlord never recovers any of the money. And in this marketplace, it's very hard to replace the tenants," said Steve Silverman, the director of the county's Department of Economic Development.

Greenberg said he doesn't just have two tenants to worry about; he has about 200.

"We don't get up in the morning and say, ‘Who can we get rid of today?' " he said. "We're in the business of being entrepreneurs and running a business. We have lots of employees and lots of obligations."

The time for a tenant to negotiate the terms of a commercial lease is before it's signed, not after, said attorney Douglas Bregman, who works extensively with commercial lawsuits as a partner in a Bethesda law firm.

"The lease in the commercial world is the Bible," said Bregman, who is not a part of any cases involving Greenhill.

In the absence of explicit state laws governing commercial contracts, Bregman said it's perfectly acceptable — and even expected — for a landlord and prospective tenant to negotiate the lease.

"Every lease between the landlord and the tenant in the commercial world is hand-tailored to their particular arrangement," Bregman said.

Greenberg said he encourages immigrant and small-business owners — the majority of his clientele in Wheaton — to hire a lawyer to review the lease. And many times he said the lease comes back with changes he's willing to consider. He added his company has helped enhance the cultural fabric of Wheaton by giving equal opportunities to all people who want to start a business.

However, the area's state senator, Richard Madaleno, said he's heard frequent complaints from community activists and business officials throughout the years that Greenberg is a landlord unwilling to negotiate.

"There's a sense he doesn't have a commitment to the community," said Madaleno (D-Dist. 18) of Kensington.

Manuel Hidalgo is the director of the Latino Economic Development Corp., a Wheaton-based microloan nonprofit that has loaned $40,000 for start-up costs to three small Wheaton businesses leasing from Greenhill.

Of the eight Wheaton businesses to which LEDC had loans out in 2009, only one — a Greenhill tenant — has defaulted on a loan. Two others — both of the other Greenhill tenants who received money from LEDC —have restructured their loans, Hidalgo said.

With loans to Greenhill tenants making up 34 percent of all $118,000 of LEDC's loans to county businesses, Hidalgo said Greenhill's tactics are threatening the success of his nonprofit, as well as small-business growth in Wheaton in general.

"He's not interested in win-win," Hidalgo said of Greenberg. In many cases, Hidalgo said, "he'd rather sue somebody than come up with a compromise."

But Greenberg said that's nonsense.

The landlord said Wheaton's stagnant growth and his business have nothing to do with each other. To the contrary, Greenhill said he has provided a vehicle for new businesses as one of the main developers in downtown Wheaton.

One shop's brewing trouble

Greenberg said he's also willing to help out a struggling tenant whose business model still shows promise.

But Velasquez said he didn't fully grasp the terms of his Greenhill lease until it was too late. The owner of DeJaBel signed his lease in 2007 for a spot in Georgia Crossing at the Anchor Inn, a shopping center that Greenhill opened in 2008 at the prime crossroads of Georgia Avenue and University Boulevard.

Velasquez said he wasn't aware when he signed the lease that he had agreed to buy a sign for his café that cost $7,500. Later, Velasquez, who said he did not have a lawyer review his lease beforehand, said Greenberg rejected his suggestion to buy a cheaper sign.

Velasquez said he also knew he was taking a big risk signing up for a center that had not yet been built, but he banked that it would fill up fast and drive foot traffic into his café.

He opened in 2008 and quickly won a loyal following, but it was never quite enough. Throughout his year in Wheaton, Velasquez continually struggled to meet loan payments, rent and maintenance-fee charges.

By 2010, only four of the 25 stores available for rent in Georgia Crossing were leased, the economy had declined and Velasquez hadn't made his $5,500-monthly rent in several months.

Other tenants in Georgia Crossing include the popular Peruvian chicken shop, El Pollo Rico; the year-old bakery, Samantha's Diner and Bakery; and The Yarn Spot, a shop that opened in November.

Greenberg said the center is filling up slowly because it opened its doors shortly before the economic crash. But "it's waking up now," he said, adding he just signed the convenience store 7-Eleven and Hermosa, a local Latino women's jean store, to the center.

Operating a small business always has been risky. Since 2000, seven out of 10 small businesses that opened up stayed in business for at least two years, and five out of 10 lasted longer than five years, according to numbers compiled by the U.S. Small Business Administration. Brian Headd, an economist with the federal agency, said the 2008 economic downfall hasn't changed too many of those numbers.

"A lot of factors to people starting and stopping businesses wind up being personal," Headd said, such as owners retiring, selling their business or having disputes with their landlords.

Facing a deadline to pay his rent in early 2009, Velasquez said he asked Greenberg for an extension and was refused. The day that he fell three months behind on his rent, Velasquez said, a sheriff's deputy walked into the café and handed him an eviction notice that said he had 10 days to come up with the $18,000 he owed Greenhill in rent and late fees or get out.

Greenberg said he gives all his tenants a 10-day grace period after the first of the month to pay rent. And in the first year, depending on the nature of the business and how long it takes to open, he'll give 60 or more days of free rent, which he said he details in the lease the tenant signs.

In Velasquez's case, Greenberg said he declined to strike a deal because he didn't think Velasquez had made the best business decisions: His coffee shop wasn't open early enough, didn't stay open late enough and many of Velasquez's efforts to start marketing were too little, too late.

For example, Greenberg said he suggested Velasquez obtain a beer and wine license and even offered to pay for it, but the landlord said it took Velasquez all summer before the coffee-shop owner even submitted an application to the county, thereby missing the prime outdoor season to sell alcohol.

Panicked, Velasquez sold the green, worn-in couch that anchored his coffee shop, several paintings off its pumpkin-colored walls and his personal cell phone. He even offered customers a chance to buy DeJaBel memberships, exchanging free daily coffee for $100- and $300-dollar payments.

In the midst of the crisis, Velasquez argued that his rent, which included utility and maintenance charges, was too high.

The coffee-shop owner was paying $45 per square foot, according to the lease. Real-estate broker Nathan Pealer said that although there is a wide range of rents along Georgia Avenue, the average is about $35 a square foot.

Velasquez said he asked Greenberg to temporarily cut his rent and allow him to pay it back later, but Greenberg refused.

"Eddie was really well-intentioned, but he believed we should be subsidizing him and it was our responsibility [to fund his business]," Greenberg said.

Velasquez closed DeJaBel in February and said he plans to file for bankruptcy soon to avoid almost $30,000 of penalties and back rent he still owes Greenhill.

There wasn't much else Velasquez could have done in that situation, say observers.

There is no legal obligation requiring commercial landlords to agree to a temporary break in rent, said attorney Bregman. And rent at Georgia Crossing could go much higher than the $35-per-square-foot average, Pealer said.

"A lot of mom-and-pop tenants probably aren't going to cut it at those rent levels. It's a really prime spot," Pealer said.

Hanging by a thread

Maloo of Interior Solutions Masterworks Inc. had been selling carpet in Wheaton for seven years before Greenhill became his landlord. In 2004, Greenberg bought the building stretching along the 11400 block of Georgia Avenue that contained Maloo's store. Maloo said that in 2008, Greenberg informed him he would be remodeling the store's façade to match the new Georgia Crossing shopping center, an act that Maloo feared would reduce his storefront size and damage the entryway.

Maloo sued, arguing in Montgomery County Circuit Court the construction would hurt his business.

But a judge ruled in April 2008 that Maloo's business would not be harmed by the construction and allowed the project to continue, according to court documents.

In June 2008, Maloo claimed in court that the ensuing construction — a bridge directly over his entrance that stayed there for four months — caused chaos. Maloo said foot traffic declined so much during construction that he moved his business to Rockville last year. Then he took Greenhill to court again, claiming that the lease did not allow Greenhill to reduce the size of his building.

The case was scheduled this week for a jury trial in Montgomery County Circuit Court, where Hessel had planned to argue Greenhill violated the lease by reducing Maloo's storefront and destroying his business in the process. But the case was dismissed Monday because Hessel failed to include a claim for financial damages.

Hessel said he is barred from trying to re-file the case.

Greenberg said his actions were perfectly in his right as a landlord, especially because Greenhill inherited the lease from Maloo's previous landlord.

"A lot of the things he was complaining about were things we had nothing to do with," Greenberg said. "The lease was already in place."

And the lease did permit a reduction of the storefront if rent also was proportionally reduced, Greenberg said. His company spent $300,000 to make the store more modern, after paying $70,000 to fix Maloo's leaky roof.

"We want to protect the asset and the tenants," Greenberg said.

Hollywood East

Yu said her battle with Greenberg about the Hollywood East Café lease began when she asked during hard times last year for an extension to pay her $9,000-monthly rent on her Chinese restaurant, which consisted of three 900-plus-square-foot spaces on Price Avenue.

But when Greenberg asked for her home as collateral, Yu backed off her request because she said she thought Greenberg's offer was unfair.

Just as banks ask for collateral on a loan, Greenberg said he had every right to demand collateral on Yu's lease.

"We are no different than a bank. A bank rents money, we rent space," Greenberg said.

That's perfectly legal, said attorney Bregman, who said a commercial lease should be thought of as a business transaction.

Instead of risking losing her home, Yu instead decided to break her five-year lease with Greenhill, according to court documents. She said she found another tenant to ride out the last six months of the lease but said Greenhill required her to co-sign with the new tenant for another five years.

That, too, complies with state laws about commercial leases, Bregman said. Under Maryland law, Yu is financially responsible for all of the months she agreed to lease from Greenberg.

When Yu refused to sign with the new tenant, she said, Greenhill evicted her in December 2008.

Greenhill sued Yu and her husband, Alan Yu, for $108,000, which included the $40,000 in rent, penalties for breaching her contract and attorney fees, according to a complaint Greenhill's lawyers filed in Montgomery County Circuit Court.

Yu said her monthly revenue from the restaurant had dwindled from $70,000 in its heyday to $25,000 in 2008, a dip she attributed to the sour economy. But Greenberg said it's more likely her Price Avenue business suffered when she opened another Hollywood East, this time up the road on University Boulevard.

"She essentially diluted her business," Greenberg said. The space was tripled, the parking was reduced and her customers had to choose between two identical restaurants several blocks away from each other.

Yu filed for bankruptcy in January and claims she is leaving the restaurant business altogether. She signed over the new Hollywood East Café, which opened this month in the Westfield Wheaton Shopping Center, to her children, because she can't take out any more loans to run the business.

But Greenhill's lawyer representing the company against Yu, Rockville-based Todd P. Forster, is skeptical Yu is eligible for bankruptcy. He said he thinks she is active in the new Hollywood East restaurant.

"I have questions as to whether the business is truly owned by Janet Yu or her sons," Forster said.

Forster also said he doesn't believe Yu's financial problems are a direct result of her dispute with Greenhill.

According to court records, her bank sought to foreclose on her Silver Spring home in 1998 and in June 2008 and February 2009.

Yu said she now owes about $100,000 more on her house than it is worth and that she started falling behind on her mortgage in January of this year. She and her husband also are in debt more than $500,000; about $300,000 of which is business debt, according to bankruptcy records.

Forster said the foreclosure filings "cast doubt as to whether or not her financial problems stem solely from Greenhill."

But Yu reiterated that she wouldn't be filing for bankruptcy court protection and closing her shop if Greenberg weren't suing her.

"He's always going to charge you for something," she said.

Countywide issues in leasing

Greenhill also manages tenants outside of Wheaton.

Some of Greenhill's tenants, such as Wallied Sanie, who rents space on the first floor of Greenhill's Bethesda office for his Blackfinn Restaurant and Saloon, say the company is just doing its job.

Sanie said Greenhill is efficient and no-nonsense: If the paint is chipped on your door or the plumbing isn't up to par, Greenhill's property managers will offer the name of a painter or plumber along with a deadline to fix it.

"It's like any landlord. They take the proper steps of procedure," he said.

Mekalia Girma, owner of Addis Hair Salon on Grandview Avenue in Wheaton, says in the two years she's been cutting hair under a Greenhill roof, her monthly maintenance fees have risen from $265 to $800 to pay for nearby Georgia Crossing's maintenance.

Greenberg said the erratic fees stem from erratic taxes, electricity and weather-related maintenance bills.

"It's just the cost of running property," Greenberg said.

The dispute about what's fair and what's not has reached its way into the county government.

Although some of Greenhill's tenants have complained to half-a-dozen state and county officials, most of the officials have simply listened patiently to their stories without taking action, business owners say.

Just before Velasquez closed DeJaBel, Montgomery County Council member George Leventhal (D-At-Large) of Takoma Park said he "expressed hope" to Greenberg that he could negotiate with his tenants who have fallen on hard times. Leventhal said it's not up to the county to settle disputes between landlords and tenants, but he can encourage them to work together.

"Economic times are tough, and the county can't pay everybody's rent," he said.

Councilwoman Valerie Ervin (D-Dist. 5) of Silver Spring, who represents Wheaton, said she has empathy for both the business owners and Greenhill but that Greenberg is in his legal right.

"The guy's a private landowner. He has every right to manage his properties the way that he sees fit," Ervin said. "When people don't pay their rent, there are consequences to that."

Madaleno, the state senator, agreed with both county officials that there's not much the government can do to regulate private-property contracts.

But Velasquez disagrees. He said he thinks only a community effort that involves the county and state government can save other small businesses that rent from Greenhill from closing down as he did.

"What does it take for somebody to step up to this guy and say, ‘You're not the king here?' " he said.

To view court records from former Wheaton business owner Bob Maloo's lawsuit against Bethesda-based landlord Leonard Greenberg and Greenberg's $100,000 lawsuit against former Wheaton business owner Janet Yu, visit www.gazette.net/links.