Editor’s note: If you’re a curious sort, you’ve probably walked past an abandoned building from time to time, and wondered, “what’s going on there?” This is exactly what happened to Lower East Side resident Ben Lerman, a comedian, writer and musician. Ben began doing some citizen sleuthing recently, and then pitched the following story to us.
Like a dead body in a park full of joggers, there comes a point when a vacant building in a vibrant neighborhood can no longer just sit there rotting. But when that time finally arrives depends on a lot factors. During decades of decline, the Lower East Side was not the worst place to bury a body, or to leave a building dormant. But for the last 15 years, property values have been rising and today the local real estate market has never been pricier. Yet, there are still forces at play that would keep a building empty. What is at the heart of this very unsexy mystery? In a place where real estate is extremely valuable and scarce, what keeps a commercial building completely vacant for nearly two decades? What is the tipping point in which a vacant building can no longer stand? Is it when that building can literally no longer stand?
In the early ‘00s, the second story of 341 Grand St. (Ludlow Street) wore a gigantic grand opening–style red, white and blue flag — the kind you have to file a permit for with the Department of Buildings. It screamed “PRIME CORNER FOR RENT!” in an apparent attempt to seduce the boutique and bar owners across Delancey Street. Over the next decade, this unrented “prime corner” received various Buildings Department complaints, including:
“Piece of an abandoned building fell onto sidewalk”
“Windows hanging from frame”
“Caller states gutters are falling from the building”
The Grand Dairy Restaurant was once a bright neighborhood hot spot. It opened in the 1940s at 341 Grand St. and was popular for decades. Its candle burned out in the late 80s, as the Lower East Side’s Jewish immigrant culture faded away. A couple of short-lived businesses (a fruit market, a hair salon) have since leased the three-story, commercial building, opposite the Seward Park High School campus, but the property has mostly remained vacant.
These days, it holds a small sign on one of the boarded-up windows that reads, “Building for lease,” followed by a Long Island-prefix telephone number. I have been wondering about this building for the last fifteen years that I’ve lived in the neighborhood. Why would this “PRIME CORNER” remain empty for so long?
Last month, my curiosity finally got the best of me and I called. At the other end of that Long Island phone number is a man named Burt who doesn’t want to give out information to just anyone. He wants to know who wants to know before he answers any questions at all. I said I was interested in opening a store. Monthly rent is $25,000 for the whole building, consisting of three commercial units. The first and second floor units are 1,600 square feet and the third floor is 1,000 square feet. Any and all work — maybe it could rent “as is” to a Thunderdome-themed OTB? — would be the responsibility of the tenant. Burt admits that the space is “very raw” and that the owners aren’t interested in selling the building. The lowest offer that they’d entertain is $10 million.
If I were going to spend $10 million on something — and for the record, I’m never going to spend $10 million on anything — I would do a little research first. So I checked that number with a real estate source. “Maybe,” my source says, “you’d find someone willing to pay $6,7, or even 8 million, but at $10 million, it doesn’t make sense. You’d be better off leaving your money in a savings account at 1% interest.”
What about air rights? “It’s a narrow lot.” The real estate agent shoots this one down. Developing the property into a few more stories of condos isn’t as attractive to investors as the owners might think. A small army of brokers has been trying to get the family to sell this building for a long time, but they haven’t budged.
My source confirms that the “Burt” I spoke with on the phone—the one who wouldn’t tell me his last name—is Burt Kohn, one of the owners of the property. Burt has taken more initiative than the previous generation to get the building rented, however he has “very unreasonable expectations.”
“The [$25,000 a month] rent number isn’t so crazy,” the agent says, meaning generally speaking. But for this particular property, he explained, it’s totally crazy. For one thing, the building is across the street from a school, “so you’re never going to get a liquor license in there for a café or bar, some of the highest-paying retail tenants.” Maybe an office? My source confirms that the interior would need extensive structural work before any build out, easily to the tune of a million bucks. So, twenty-five G’s isn’t so nuts if the landlord made some improvements on his own or made some other concessions. The Kohn family isn’t interested in doing that.
I had to remind myself that the owners do not have an obligation— at least not a legal one — to upcycle the eyesore in our midst. Yes, they should act as proper stewards of the land, but even Lord Grantham has occasionally abdicated his moral duties to the plebes of Yorkshire. The Kohns also have a responsibility to be stewards of their own financial holdings.
When I spoke with Burt, I asked him why the owners weren’t interested in selling. He said, “Where are you going to put the money?” I didn’t really have an answer for that one. If you put it in a mattress, you’d get no sleep. Very lumpy. If the current year’s tax assessment and tax rate remain the same for twenty years, the Kohns tax bill would total $479,900. Spending a half a million bucks to recoup $6 million in twenty years doesn’t sound like a bad investment.
So why don’t they collect rent while the value appreciates? It’s a risk. “If you put a bad tenant in a space,” my source explains, “it costs a lot of money.” If a tenant stops paying rent, it could take a year-long legal battle to evict with no guarantee of seeing a dime. This risk is one thing that drives up rents, which in turn drives up vacancies. Another risk is a tax reassessment, which occurs any time improvements are made. So the owners could get stuck with a bad tenant and a bigger tax bill.
The Kohns are in no hurry. The building is potentially worth a lot of money, and you don’t pay taxes on potential, at least not full potential. Who knows? Maybe some lunatic will decide to give them $10 million. This is New York. Stranger things have happened. But for now, 341 Grand St. remains a cadaver we’ll just have to jog around.