Hibernating Restaurants Wake To Loosened Restrictions, Federal Aid, Rent Breaks

Restaurateurs who made the decision to temporarily close for the winter are emerging from their hibernation to a familiar spring feeling: hope.

Boston-area restaurants are hoping the frigid New England weather, strict dining restrictions and rising Covid-19 cases are behind them as they emerge from hibernation, with more eateries pledging spring reopenings. 

“We believe that there’s been over 500 restaurants that have hibernated this season and we expect almost all, if not all, to re-emerge here in the next 30 to 45 days,” Massachusetts Restaurant Association President Bob Luz told Bisnow this week.

With vaccinations picking up, capacity limits eased, warmer weather and dedicated federal aid, industry experts believe pent-up customer demand is coming. Some landlords have also agreed to rent deferral, rent abatement and percentage-rent deals with tenants in the hopes that businesses will be able to return to full strength.

The $1.9 trillion stimulus package, expected to hit President Joe Biden’s desk soon, includes $28.6B in aid for restaurants and bars promising debt-free support. The grants, part of the larger deal pending approval by the U.S. House of Representatives Tuesday, can be used for expenses including mortgage payments, rent, personal protective equipment, outdoor seating construction and payroll.

The aid comes on top of a second draw of Paycheck Protection Program loans for eligible restaurants after the December stimulus, which some have already received.

Approximately 118,000 companies were approved for more than $14B combined PPP loans in Massachusetts as of December, according to the Small Business Administration, including five restaurant groups that received some of the few $10M loans.

“I have received a second draw on the PPP, which has enabled me to reopen with less risk,” Cambridge Brewing Co. owner Phil Bannatyne said. “Those funds will essentially be used to pay for payroll. That program has absolutely saved jobs and has helped us enormously to remain open in the fall and get back open this February.”

The brewery received a $300K PPP loan, which was used to save 35 jobs, according to SBA records. Bannatyne said his staff was able to return after the restaurant’s seven-week “nap” between December and February.

The Kendall Square business saw sales decline 50% before Bannatyne decided to shut down in December when he saw the state’s positive Covid-19 test rate approach 8%, he said. Customers have since returned to the restaurant and its spacious covered patio, Bannatyne said.

The brewery also secured an agreement with its landlord, Alexandria Real Estate Equities, to temporarily alter the terms of its lease to reduce its rent payment until the summer. Bannatyne declined to give specifics, citing a confidentiality agreement. Alexandria declined to comment.

Restaurants, limited by the state to just 25% seating capacity in late December and now capped at 40%, will be free of capacity restrictions statewide beginning March 22. The news bodes well for restaurants, which can struggle to turn a profit even at 80% capacity, Boston Urban Partners Director of Hospitality and restaurateur Sean Griffing said.

Griffing’s two restaurants, Trade and Porto, are hibernating; Porto has an expected April 1 opening, the day when temporary outdoor eating permits in Boston resume.

“Staying closed does not come without costs,” Griffing said. “Even if all the staff have been laid off, and your landlord has agreed to charge a percentage of rent, there’s still carrying costs — utility costs, insurance costs, there are a number of costs.”

Some restaurants avoided hibernating to retain staff despite operating losses, Griffing said. The reopening process, including getting systems up and running, hiring available staff back and training new members can resemble an opening of a new restaurant, he added. 

The coronavirus pandemic had wiped out 3,400 Massachusetts restaurants as of December, Boston Mayor Marty Walsh said. Hibernations turned into permanent shutdowns for one popular Cambridge bar and three prominent Boston eateries at Fenway’s Hotel Commonwealth. The restaurants had long-running disputes with landlord UrbanMeritage, the Boston Globe reported. 

But vacant restaurant spaces are gaining attention for their near-turnkey qualities, Boston Realty Advisors Managing Director and partner Whitney Gallivan said. Liquor licenses dropped by closing restaurants and held by landlords in bankruptcy and other specific scenarios are also going for almost half of their peak price of $475K, she said. 

“Now these operators are able to get in there, get a license as part of the deal, get a reduced rent for a couple of years, or pay a percent of sales,” Gallivan said. “There are some situations where they’re getting free rent or getting some tenant allowance from the landlords.”

A Newbury Street coffee shop, Caffe Nero, which closed in October, won a court battle last month against UrbanMeritage over a pandemic rent dispute. The ruling was cited as a victory for tenants by industry experts.

Jose Luis Centeio, an attorney with Nathanson & Goldberg LLP who represents landlords in and around Boston, said at the time of the ruling the deal signals to landlords and tenants to work out deals. 

“I’ve done a lot of forbearance agreements to state that the rent during the restaurant shutdown can be forgiven if the tenant can remain on the premises,” Centeio told Bisnow.

Industry experts largely declined to discuss financial details of their landlord dealings. Some have disclosed their abatement and deferral deals in public messages to customers. Retail experts told Bisnow rent arrangements vary greatly, and factors depend on the size and pockets of landlords.

“Smaller landlords [who are] highly leveraged, whose sole income comes from restaurant and retail, may not have been as generous,” Griffing said. “It may have little to do with their goodwill but strictly their finances.”

Centeio said questions of landlord mortgage obligations and adjusted property taxes in lost rent cases were not addressed in the Caffe Nero case and are likely to come up in future litigation. Federal court battles against insurers over pandemic rent claims have been unsuccessful for eateries, with the iconic Legal Sea Foods losing a case last week.

Dozens of Boston-area restaurants remain in hibernation, according to an updated list by Eater Boston, while others have posted on their websites vague announcements of reopenings in the spring. The Lansdowne Pub near Fenway Park has announced a grand opening Saturday with a virtual concert. Boston’s reopening guidelines allow for live music to return with the lack of capacity requirements.

The industry is also watching growing vaccination rates closely and preparing for a bump in business with spring weather, which is anticipated to bring temperatures 60 degrees or higher as soon as Thursday.

Luz also anticipates foot traffic to increase as offices prepare for returning employees and Boston’s tourism season approaches. Bannatyne expects customer volume in the spring and summer to return to pre-Covid levels. 

“There are fewer restaurants than there were two years ago,” Bannatyne said. “Hopefully there’ll be more business for the ones that reopen. I feel terrible for the ones that can’t and aren’t able to. I feel very fortunate.”