What’s up, Seaport? Business up, as lower-rent shops move Downtown


By Julie Shapiro

The mall on Pier 17 does not have the air of a doomed building.

New shops and restaurants are opening, sales are up and the crowds keep coming.

“Every year since 9/11 has gotten better,” said Janell Vaughan, senior general manager at General Growth Properties, which owns the mall.

Shops reported brisk business this summer, possibly because of visitors coming to the pier to see Olafur Eliasson’s Waterfalls art installation and possibly because the European tourists are taking advantage of the weak dollar, Vaughan said.

But the mall’s financial success does not erase the fact that General Growth hopes to demolish it within several years as part of the company’s redevelopment of the Seaport. General Growth hopes to build a 495-foot condo and hotel tower just north of Pier 17, along with lower-rise retail, a boutique hotel and a large plaza on the pier itself. The project is still in the early planning stages and requires approval from city, state and federal agencies before it can move forward.

Since the possible demolition of the mall is so far off, General Growth is inviting new tenants in to fill the spaces of businesses evicted for not paying rent and businesses whose leases G.G.P. decided not to renew.

“Our goal is always to keep the property full and vibrant,” Vaughan said, adding that the mall and uplands buildings have a 90 percent occupancy rate.

While chains like Express and Victoria’s Secret are still going strong at the mall, the newer businesses tend toward less expensive fare: There are stores with $10 T-shirts, stores devoted to socks and scarves and stores with discounted suits.

The new tenants have different leases than the ones who have been at the mall for years. All are short-term, and the rents are much lower for the new tenants, said Faith Hope Consolo, chairperson of the retail leasing and sales division at Prudential Douglas Elliman. Several tenants also said the new leases have clauses that allow General Growth to evict them with 30 days notice.

“You’re in a different environment than a few years ago,” Consolo said, referring to General Growth’s recently announced plans to demolish the mall. “It’s destination retail in an area that’s in flux.”

Dave Nerahoo, vice president of sales for As Seen on TV Stores L.L.C., which has a new T-Mobile store in the Pier 17 mall, said “I love it here.” He hopes General Growth does not proceed with plans to demolish the pier building.

Gerry Nally, who owned Seaport Watch Company in the mall from 1991 until G.G.P. decided not to renew his lease last year, created a chart showing the change in rents between 1995 and 2006. When the same business stayed in the same space between those years, its rent roughly doubled, according to Nally. When a new business entered, its rent was generally much lower or was based entirely on a percentage of the business’s sales, rather than being fixed. Nally got his data from lease documents and conversations with current tenants. In 2004, he and 17 other businesses sued General Growth and the Rouse Company, which previously owned the mall. The lawsuit is still pending.

Vaughan confirmed that the new leases are short-term, but she would not say whether they were lower or higher than 1995. General Growth has been transparent about their plans to demolish the mall, she said. Vaughan said nearly all the numbers in Nally’s 2006 survey are incorrect.

Consolo said the new short-term, low-rent arrangements are not unusual in malls. Grand Central Terminal offered low rents to temporary tenants while they redid their shopping concourse, and then if those tenants performed well, they got a space in the final project, she said.

Erika Delgado, a manager at the Seaport mall’s Victoria’s Secret for two years, said she thinks General Growth will give her store a space in the new retail they’re planning for the pier.

Vaughan said that while General Growth is talking to tenants about the new Seaport, “It’s premature for us to make any deals.”

Even if Victoria’s Secret were guaranteed a spot in the new Seaport, Delgado still does not want to see the mall store close.

“It’s gonna be a little sad,” she said. “It’s sad that everybody is going to be separated — it won’t feel like a family here.”

Consolo said retailers have asked her whether they thought it was worth investing in the mall, even though it will likely be demolished, and she advised them to do it.

“It’s a win-win situation for both sides,” Consolo said. General Growth benefits by filling space in the mall without having long-term leases on their hands, and the tenants benefit by paying low rents or largely percent-sale rents, she said. The community also benefits, Consolo said, by not having vacant storefronts.

The people who are not benefiting, though, are the longtime tenants who say they had to leave the mall after General Growth decided not to renew their substantially higher leases. These tenants, who are part of Nally’s lawsuit, are upset because they say that new businesses are paying a fraction of what they paid — and that’s after the longtime businesses weathered the tough sales climate after 9/11.

Ed Shapiro, a tenant in Nally’s lawsuit, owned hamburger, salad and cheese steak restaurants in the mall, along with four food or drink carts on the pier. Before that, his pizza restaurant was one of the first tenants in the Fulton Market building in 1983. He and other business owners said they were losing money after 9/11 but they kept their doors open by going into debt. They looked forward to reaping the eventual benefits of Lower Manhattan’s revitalization.

However, when Shapiro’s lease was up in 2007, General Growth did not renew it. Shapiro and other tenants resent that they stuck with the Seaport during lean times and then the Seaport ousted them when the Seaport’s foot traffic returned. Shapiro was left with more than $100,000 of debt.

General Growth’s Vaughan, who also worked for Rouse at the Seaport, said she would not comment on why G.G.P. chooses not to renew specific leases, and she declined to comment on what the Rouse Company did after 9/11.

As old businesses leave, new ones are filling in — and they lack the grievances and longtime investments of the old ones.

One of these new businesses belongs to Dave Nerahoo, vice president of sales for As Seen on TV Stores L.L.C., which owns a Choice Portables T-Mobile store in the mall, along with an As Seen on TV store. He opened the T-Mobile store three months ago.

“We’re here until the whole project is finished,” Nerahoo said. He said he didn’t sign a long-term lease and said that, like many other small businesses, General Growth can ask him to leave with 30 days notice. It’s only “the big boys” that get long-term leases, he said.

“I love it here,” Nerahoo added. “I love tourists. I feel like I’m on vacation every day.” He particularly likes getting to meet people from all over the world, which he said is the biggest perk of his job.

As for the new plans for the Seaport, Nerahoo had one message for General Growth: “Don’t do it,” he said.

Like Nerahoo, most current mall employees who spoke to Downtown Express don’t want to see their stores demolished.

“I think it’s pretty good the way it is now,” said Chris Weeden, manager and artist at The Graffiti Shop, which personalizes merchandise. “I think the mall itself is really good for the area.” Weeden does not think the overhaul of the pier is necessary.

“I say leave it as it is,” agreed Phillip Forman, assistant manager at Foot Locker.

Jessica, a manager at Bath & Body Works who did not want to give her last name, said she found out about the new plans for the Seaport from a flyer General Growth sent to all the businesses.

“I think it’s good,” she said of the new design, “but this is also a New York City landmark.”

The most recent additions to the mall are Anna Maria’s Pizza and Shake ‘n Burger, owned by Joe Oliva, which moved in about a month ago.

“We’re very busy,” Oliva said as his workers served a mid-afternoon crowd in the third-floor food court. He said he has been pleasantly surprised by how much business he has done in his first month.

Oliva would not disclose his lease agreement with General Growth. Asked how long he would be able to stay in business at the Pier 17 mall, he said, “Nobody knows. I hope long term, at least a couple of years…. We’ll be here [until] construction starts.”

Across the food court, Vincent Mello was chatting with some patrons of Vino’s, the bar he has owned for the past two years.

“I think it’s a great thing,” he said of General Growth’s plans for the Seaport.

His business’s current success does not make Mello upset about losing his space in the mall if General Growth demolishes it.

“They know exactly what they’re doing,” Mello said of General Growth. “Anything for a better Seaport is very good.”

As for whether G.G.P. will give Mello a space in the new Seaport, “That’s not up to me to ask,” Mello said.

Nicole Dng, who has worked at Jewelry Mine for three years, also wasn’t fazed by the mall’s possible demolition.

“You can get a job anywhere,” she said, shrugging.