New York CIty Council Member Ben Kallos

Gothamist Vacant Storefronts Proliferate in NYC, And It’s No Easier To Identify Owners by Beth Fertig

Vacant Storefronts Proliferate in NYC, And It’s No Easier To Identify Owners

APRIL 14, 2021 5:01 A.M.



Vacant storefronts along Third Avenue, with a sign that says 'RETAIL SPACE AVAILABLE'

A vacant storefront on the Upper East Side BETH FERTIG / WNYC

Taking a walk along Third Avenue in the 80s and 90s near his home, City Councilman Ben Kallos points to one empty storefront after another and recalls some of his favorite Upper East Side shops and restaurants.

“This was an amazing steakhouse,” said the Manhattan native, referring to a place on the west side of the avenue. Across the street was a Modell’s Sporting Goods; he also sees a former taco place and a storefront with a red awning that used to be Pesce Pasta. “It was a great place for an Italian lunch and it's been vacant for a number of years,” he said.

Empty storefronts were a blight on the city long before the coronavirus pandemic forced so many restaurants and other businesses to close. Now, with thousands more businesses shuttered for good, including big chains, Kallos has introduced new legislation aimed at pressuring anonymous building owners to accept new tenants by naming them. His bill would also enable the city to collect tens of millions of dollars in unpaid fines.

Kallos is focusing on LLC’s, or limited liability companies, which own many of these buildings. An LLC allows someone to start their own business while protecting them, personally, if the company ever runs into debt. But the owners of an LLC don’t always have to list their names, just a business contact. Kallos said that anonymity can go too far.

“Something we've actually seen here in New York City, more than anywhere else, is it's actually been used by people from other countries who have money that they've gotten illegally, and they put that money into an LLC in order to hide their identity, in order to launder that money,” Kallos explained.

Vacant storefronts along Third Avenue, with City Council member Ben Kallos gesturing in front of them

City Councilmember Ben Kallos BETH FERTIG / WNYC

The New York Times exposed some of the secretive foreign shell companies buying luxury Manhattan apartments. And there are examples of people in former President Donald Trump’s orbit using LLC’s to hide their money, notably former Trump campaign chairman Paul Manafort.

Kallos’s legislation would require anyone who owns more than 5% of an LLC to disclose their name when the company files for a certificate of occupancy or another permit with the Department of Buildings. Building owners would have to update this information whenever it changes. Failure to do so would result in a fine of up to $2,500.

By knowing who owns the buildings, Kallos said community leaders could work with landlords to identify potential new tenants that can serve the neighborhood. “In my experience, it is a lot easier to deal with another human being than a faceless corporation,” he explained.

“We might want to work with the different building owners here to try to bring in a 3-K or Pre-K for some of the city needs,” he added.

Kallos also said small businesses are key to the city’s recovery, “And right now they're being crushed by greedy landlords who would rather leave their stores vacant.”

The councilman gave an example of how hard it can be to locate an LLC owner. He said he tried researching the vacant site on Third Avenue that used to be Pesce Pasta. The red paint looks like it’s peeling, and there are still signs of smoke damage from a fire about five years ago. 

Multiple vacant storefronts along Third Avenue

A vacant storefront on the Upper East Side BETH FERTIG / WNYC

He started by entering the address on a city registry of property records called ACRIS. That led him to Koscal Freeport, LLC. He then went to the state’s Department of State website to look up corporations and saw an address for Koscal Freeport at 346 E. 54th Street, which doesn’t physically exist. No name was given for a registered agent, or business contact.

However, when Gothamist/WNYC called the number on a For Rent sign in the building’s window we got the rest of the story.

A man named Tony Zachariadis said he and his family owned both the realty company advertised on the sign as well as Koscal Freeport. “You can get our information,” he said, noting that his name is listed on another website run by HPD, the city’s Department of Housing Preservation and Development. 

The HPD site plainly shows Zachariadis as the managing agent for Koscal Freeport, LLC and the company’s correct address is given on East 59th Street, not 54th Street, which he guessed was a mistake on the state website. He said the Third Avenue building has been owned by his family for decades and always had a few apartments upstairs and a restaurant downstairs.

Vacant storefronts along Third Avenue, with a sign "AVAILABLE FOR RENT"

A vacant storefront on the Upper East Side BETH FERTIG / WNYC

Kallos said his legislation requiring owners of LLCs to register their names with the Department of Buildings will make them easier for anyone to find. Unlike Zachariadis, who has a low-rise building with rental units, the LLC’s who own many of the luxury buildings in the city don’t have to register their names with HPD.

But it’s not clear whether greater transparency will help fill more of these empty storefronts. 

When asked why his place is still vacant, Zachariadis said the city wouldn't allow him to have any occupants right after the restaurant fire. Then, he said, construction on a big building next door scared away potential new tenants and the pandemic made the situation worse.

“I think there’s a misconception with owners and managers during this pandemic,” he said, referring to complaints that greedy landlords are holding out for higher rents. He said he’d already reduced his asking monthly rent to $16,000. “Before the pandemic these stores were bringing in well over $24,000 a month,” he added.

Meanwhile, he said his own costs haven’t gone down, “whether it’s debt on the building, water, electric, taxes, repairs.” He said he’d welcome any help finding new tenants, so long as he can make his payments.

A new federal Corporate Transparency Act will require LLCs to disclose the names of those who own at least 25 percent, by 2022. It will also give investigators powerful new tools to detect money laundering and other financial crimes

Kallos’s legislation would require even more disclosure at the city level for building owners. But there’s little research showing additional transparency will help or hurt efforts to increase occupancy outcomes, said Sam Chandan, Silverstein Chair and Academic Dean of the NYU Schack Institute of Real Estate.

Vacant storefronts along Third Avenue, with a "FOR RENT" sign

A vacant storefront on the Upper East Side BETH FERTIG / WNYC

“Ultimately, whether or not there's a demand for the space depends on the customer demand,” Chandan explained. “Our best approach to enhancing occupancy at this point is to put in place measures that are, you know, very business friendly that are going to see more people walking by the storefronts, that are going to encourage a greater level of activity” in key corridors. 

Chandan said the reopening of theaters, and the return of tourists, will all make the city more attractive to retail. Until then, he said, occupancy may increase as owners reduce their asking rents and work out deals with tenants. 

The Real Estate Board of New York said there’s already evidence rents are falling. It also said ailing landlords don’t need another layer of bureaucracy, as Kallos has proposed by requiring them to register with the Department of Buildings.

“This bill goes in the wrong direction in penalizing good faith actors without, you know, really finding a solution to the problem he's outlining,” said Ryan Monell, REBNY's director of city legislative affairs.

So far, Kallos’s legislation has no co-sponsors. He acknowledged it may face an uphill challenge without support from the real estate industry, adding, “I've never taken real estate money, and that allows me to be incredibly independent.” He’s currently running for Manhattan Borough President. He also claims his requirement could help solve another problem: collecting revenue anonymous landlords owe the city.

According to city records, Kallos said LLC’s owe almost $40 million worth of fines for violations like failing to pick up trash or neglecting a property. But, he said, the city can’t find the owners. “Ultimately, it would be great to get that $40 million that would pay for 3-K, pay for child care,” he said. “It would pay for homeless services.”

Vacant storefronts along Third Avenue with a "store for rent sign"

A vacant storefront on the Upper East Side BETH FERTIG / WNYC

Manhattan Borough President Gale Brewer, who’s been waging a fight against empty storefronts for decades, agrees too many LLC’s are impossible to pin down—from building owners to moving companies who put up sticky fliers that won’t come down.

“It always comes back uncollectable, even though it's millions of dollars. So, yes, maybe this [legislation] would help in terms of collection of fines,” she said, referring to Kallos’s proposal.

In a survey her office conducted last year, Brewer’s office found a 78 percent increase in vacancies along the entire length of Broadway in Manhattan since 2017. She said she understands why midtown is empty, since office workers haven’t yet come back, but other sites have been vacant for years. She has long supported more transparency around ownership. 

Two years ago, the city council passed legislation requiring the city to create a registry of empty storefronts. Owners who fail to register could be fined one thousand dollars a week. The database was supposed to have been posted by now but was delayed by the pandemic. 

Brewer said she hopes the city will figure out more ideas for filling vacant spaces once the data is released, adding, “I'm crazed on this topic.”


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