In this episode of Brokers Angle, Hal Coopersmith sits down with Alex Turboff, Executive Vice President and Head of Food & Beverage at Mona. With more than two decades of experience in restaurant real estate, Alex shares insights on the unique challenges of New York’s F&B market, from rising construction costs and liquor license delays to the critical role of due diligence in site selection.

Transcript

Hal Coopersmith: Welcome to Brokers Angle. I’m Hal Coopersmith. We are speaking to Alex Turboff, the executive Vice President and head of Food and Beverage at Mona. Welcome Alex.

Alex Turboff: Thank you Hal, for having me.

Hal Coopersmith: So you are a broker specializing in food and beverage, food and beverage. Great place to be. It’s certainly a very New York thing. People love going to restaurants, love food concepts. How did you get into this?

Alex Turboff: Well, thank you. I started in this business, in this field, specifically about 24 years ago. I started a firm called BCD Branded Concept Development. It was a full service, brokerage and project management firm. We worked with concepts all the way from concept to concrete. Meaning, everything from working with an operator to flesh out their concept, figure out the requirements, finding the space, doing the due diligence, and building their restaurant or food and beverage space for them. I learned a lot over those 24 years, working with architects, project managers, expeditors, and was really able to translate all of that knowledge that I gained from other professionals in the industry into being able to add value to the brokerage side of the business for those tenants. There really is a lot of due diligence that really needs to be performed earlier on in the process, before a deal gets to lease. And before a tenant even has an architect or an engineer come through a space, and I think that’s where I and my team really can add value from a broker’s perspective to those tenants.

Hal Coopersmith: So that is very interesting. Talking about the due diligence, what are some of the things that you do before a professional from the tenant comes through?

Alex Turboff: It starts from the very first call or inquiry that you make about a space. You know, what I think I and the other brokers on my team, pride ourselves on is really understanding, taking time to understand our client’s requirements, and putting ourselves in their shoes to understand and work with them to figure out what the non-starters are. That can be anything from understanding their venting and whether they need type one or type two. If the PRECIPITATOR or PCU is going to be required to address because of potential odor issues. It’s understanding egresses and requirements for a particular tenant based on perhaps their occupancy, how many seats they’re going to need or want, will dictate what sort of egresses they will require. And being able to look at spaces through that lens, before you even go and visit it. So getting set of plans from the broker early in the process, asking the right questions on that initial phone call. You know it’s a skill that you can learn by way of having exposure to those issues. Right? So over time when I initially started in this business, I don’t think that I had as good of a grasp of the intricacies of how all of the logistics will affect the tenant’s ability to operate within the space successfully. Because there are going to be a lot of challenges that most brokers when they go through a space, may not necessarily have the sensitivity to, they may not understand Well it is a big issue if there’s no place to take deliveries other than the front door, if there’s no place to have garbage be removed other than the front door and so understanding those things and really taking the time to learn from your clients. What’s important to them, and work with them to help them understand what may or may not be possible in New York, dealing with 100, 200 year old buildings.

Hal Coopersmith: And what are some challenges that are happening in the f and b scene right now? What is the f and b scene in New York like right now?

Alex Turboff: Well, the market right now is incredibly tight from an f and b perspective. They’re not as many vacancies right now and so given that lack of spaces it becomes, there’s more of a premium assigned to spaces that are second generation, that already have infrastructure in place. So it’s a competitive landscape for f and b operators right now. Conversely, you know, with spaces that are not already second gen or do not have the infrastructure for restaurants, you know, they oftentimes can be converted for f and b use. Not always, but the cost to build right now is so high, whether it’s supply chain issues or potential tariffs and how that will affect the cost of goods and the cost of steel and the cost of wood. And so all of those things are making it very challenging for restaurants right now. As they try to project what the cost may be to open a restaurant.

Hal Coopersmith: So cost’s certainly a big thing. We talked about how f and b, it’s certainly a very New York thing. When developers are building buildings, a lot of times they’ll see f and b and operators as an amenity. Without naming names or anything like that, what do developers get right when they’re trying to attract f and b, and what do they get wrong?

Alex Turboff: It’s interesting that you say that f and B is viewed as an amenity because that was not always the case when I started in this business it was more often the not, the response that, ‘oh, I don’t want f and b, garbage, odors, rodent rodents’. Yeah. All of that stuff. They were not interested. Liquor license issues, I don’t want to give a contingency. And so the tables have turned a bit and I think that, especially, my experience is mostly in New York.

you know, any major redevelopment project, any new construction, f and b is a key component of that now. And it is seen as an amenity. If you have an office tenant you need to have attractive, QSRs, attractive restaurant concepts at the base of your building, which actually can help you drive, helps them, the owners drive the rents upstairs up. So it’s definitely an integral part. Now of, the real estate landscape in terms of it not being the stepchild, you know, the unwanted stepchild, where, you know, there wasn’t a lot of desire for it previously. So, what do I see them doing right and doing wrong?

I think that many developers are not designing the retail spaces with the operator’s, concerns in mind, the ones that I mentioned earlier, whether it be egresses, garbage removal, loading issues, ceiling heights on both the ground and the lower level, understanding flow, understanding how restaurants operate, you know, connecting ground and lower level. If the lower level is in the front of the space, that’s where your dining room is. So it can be very difficult to have connectivity and utilize the space functionally for an operator, depending upon how it’s configured. so, you know, I think that landlords that do employ architects and space designers that have a better understanding of what f and b operators will need, will serve to benefit them in the long run. Because then those spaces are well designed for the operators to take and will drive higher rents because they’re not as clergy of spaces.

Hal Coopersmith: And so when there are white box spaces, some of the things that I hear about from some of our clients, is that it’s a bit of a challenge in terms of the build out that a developer may provide a large tenant improvement allowance, but that doesn’t necessarily translate into a successful opportunity, because of the build out costs, and then after that the rent increases.

Alex Turboff: You know, the cost to build right now for many restaurants is probably between $700 and $1,200 per square foot, depending upon a lot of factors. But that’s higher than it’s ever been. And I don’t know if I’m seeing landlords, some of the institutional landlords, yes, but most landlords don’t either have the capital or don’t have the stomach, to write a check for, you know, call it 50% or more of that number, whatever the CapEx cost is. Which that’s provided a lot of challenge right now that Delta and who is going to pay, who is responsible for the cost to convert for a restaurant use? Because a white box is not a restaurant space. A white box, may just mean level floors, demising walls, utilities, stubbed. And then that’s kind of it. Which for a dry use retailer can be great. You know, their cost to build is much lower. But for f and b, you have floor drains. You have, you know, fire alarm and sprinklers.

You have a lot of these things that are specific to having higher occupancy within the space. And cooking, and food and all of these things that if the floor, you know, for example, if the floors are poured already but the tenant has to run drains and water and the floors are already poured, then that has to then be broken up and, you know, the piping has to be put down again and then reported. And so those are cost that if a landlord knows that they want to do f and b, it can be more efficient and cost efficient, time efficient, all of those things if the conversation with a specific operator is happening earlier on in the process. And so what we see a lot of the times is the space is built and done and in a new construction and you say, well, it’s great that you did that, but that doesn’t really work. We have to, you know, we have to tear it up, tear it all up and redo it. And that could be storefronts as well. That could be, you know, a lot of operators want operable storefronts nowadays.

They want to have the ability to have indoor, outdoor, and a lot of new construction. They order the storefronts 12 months in advance and put them in. And then the tenants, prospective tenants come in and they say, well, this doesn’t really, this is not ideal. So I think owners having those conversations either with brokers that can advise them of what the requirements may be, or preferences as it may be, or architects that also do a lot of work in that space.

Hal Coopersmith: So you mentioned operators briefly. One of the unique things about f and b, you certainly have a lot of different operators and operators spinning off. How do you devote your time in terms of an operator and bringing a concept to life that there could be a first time operator or repeat? And how are you attracting those clients to you?

Alex Turboff: Well, I’ve been very lucky in that I think. We spend a lot of time building relationships with our clients that are meant to last. So some clients I’ve been working with for 10, 15 years, for example, corner table restaurants, the operator of Smith and Parla. I’ve been working with them for many, many years and, I think they are one of many clients that I’ve retained and I think that long-term relationship lends itself to referrals. It lends itself to other operators that are out there that. You know, they all know each other. The restaurant industry is a very connected business. And so, we do get a lot of inbound contact, from operators inquiring with us about whether we can assist them because they heard we did this or we heard they did that or somebody referred us. We also do get a lot of references and referrals from architects and attorneys with whom we work because I think they know that it’s not a one and done with us. We are focused on holding the client’s hand through the process. It’s not just, let me find you space, lease it and move on. Which, they value.

Hal Coopersmith: Speaking of holding the client’s hand, there’s a lot. We talked about the moving pieces in terms of a structure and the space. What are some things, you know, I can certainly talk about it, but, in the lease and the business wise that are important for an f and b operator?

Alex Turboff: Well specific to kind of the circumstances now, the state of the market, I think, it’s really important to get the proper free rent period, rent commencement language, as it pertains to having enough time both for plan preparation, filings, and then construction, as well as liquor license. Liquor license timing right now is longer than it’s ever been, for a permanent license, and I’m sure that you have opinions on this, it’s between seven and 10 months for most operators to get a liquor license. You can get a temporary license in some circumstances, but not all. And so having that time for operators is very important. It doesn’t make sense to start paying rent before you can obtain your liquor license and operate fully. I think assignment rights are very important, and most tenants need certain assignment provisions that are non-negotiable. We can work through the language, but the rights and their ability to get out if the restaurant space isn’t working for them in a way that doesn’t sink their entire company is crucial.

Hal Coopersmith: That is a critical thing. We see that all the time. The Good Guy Guaranty and structuring the business is so important. And if you’re not thinking about that from your first location, then that can really jeopardize the future of your business. And unfortunately we’ve seen problems with that.

Just in terms of your experience and your journey within the industry, you talked about you can see a space, you look for plans, maybe it makes sense. Talk about how you gained that experience, maybe from your first deal working through that until now and how you’re able to provide that insight to your clients.

Alex Turboff: Well, you learn through error, right? So there were many deals I think that I, you know, earlier on in my career, I didn’t necessarily know all of the right questions to ask. And you learn through the process, through going through it. I don’t think there’s really any shortcut to it. For junior brokers that are coming in now, I think you can really learn a lot from senior brokers that have had those experiences, not that they know everything. I learn things every day. I was on a call yesterday with, attorneys and an expeditor and trying to work through a CO issue that I had not. Encountered, on a building, and understanding CO. Co is certificate of occupancy. And so what, having the right certificate of occupancy for an f and B is non-negotiable.

It’s crucial. If you don’t have the right CO you can’t operate a restaurant. And so, the process, there’s no shortcut. You have to, you do have to go through and hopefully for younger people starting, they can get good advice and counsel from not only brokers, from architects and from GCs, you know, they know their business. It’s good to take, take direction from and pick their brains because they are a huge resource. I was very lucky in that during my career at BCD, I had a colleague that headed up the project management department. And she was employee number one and I was employee number two. And, we worked together 19 years and she is the most knowledgeable person that I’ve ever met in terms of understanding New York City codes, processes, all of it. And she learned by doing so take the information where you can find it.

Hal Coopersmith: Well, that is a wonderful note to end things on. Alex Turboff. Thank you for being a part of Broker’s Angle.

Alex Turboff: Thank you very much.