Russell Street Deli to close over dispute with new Eastern Market landlord

April 22, 2019, 8:09 PM by  Violet Ikonomova

Russell Street Deli says it's closing after 30 years. (Photo: Violet Ikonomova)

Russell Street Deli — an Eastern Market fixture — is the latest business to announce it will close under a new landlord whose property acquisitions in the historic district have touched off a flurry of change. Co-owner and chef Ben Hall says he plans to close the restaurant in September due to a proposed rent increase by landlord Sanford Nelson, whom he accuses of questionable business tactics.

At issue is a floor repair at the more than 100-year-old building that Nelson estimates will cost $50,000. Nelson wants Hall to cover it through a rent increase that would nearly double what he pays, from $1,770 to $3,500 per month. Hall wants Nelson to roll the cost into his renovation of the building.

“Obviously they want to get me out and they want more money,” says Hall. “We have a very old, very good lease where we pay a really small amount, and maybe that just infuriates them.”

Nelson says he doesn’t want the deli to close, but that the weak patch of floor in question presents a safety hazard.

A building inspection at the business this month identified no safety issues, a city official said. 

The building that houses the decades-old deli is one of about 20 snapped up last year by Nelson, the 30-year-old son of an Oakland County entrepreneur. He and an investment group have spent $25 million in the district, causing anxiety for some of the small business owners and artist tenants who’ve helped shape the food hub’s character.

Hall claims the stalemate over the floor repair has led Nelson to call inspectors on the business in a quiet effort to force it to close. Neon signage Hall will soon hang in the storefront shows how ugly things have gotten. One mock-up reads, “30 years and 20 jobs down the drain.” Another asks, “Where have all the good times gone?”

Sanford Nelson takes a selfie on a trip to Cuba. (Photo: Twitter)

In a statement, Nelson’s FIRM Real Estate wrote, “We want Russell Street Deli to stay where it is. The matter in question involves safety issues caused by the Deli's failure to address key maintenance matters over several years, creating a safety concern. Per the lease they agreed to in 2007, which remains in effect until 2021, these repairs are their responsibility. We care deeply about the security of anyone who enters our buildings and are committed to ensuring facilities are well-maintained and up to code for the safety and security of all.”

Both men say they've had lawyers review the lease, but Hall says the issue would be too expensive to litigate. Crain's on Monday quoted an expert who said the lease leaves unclear who should pay for the repair.

Nelson has made public promises to preserve Eastern Market’s character, but the task has been complicated by his greater goal of turning a profit. His firm paid top dollar for the buildings, but inherited tenants who enjoyed low-cost leases of as little as $5 per square foot.

Tensions first flared last summer, when Nelson tried to raise rent on some by as much as 150 percent within 30 days, before eventually backing off. Since then, a dozen artist-resident and business tenants in his buildings have left. Renters like Mootown and Eastern Market Antiques are the latest to either close or signal they plan to do so. The Farmer’s Restaurant, another fixture in the market, closed last month after the owners decided to sell to Nelson and retire.

Though Nelson says he wants the deli to remain, Hall charges the landlord has led a quiet, calculated effort to force it to close — an account that counters the generally positive image Nelson has thus far enjoyed. After an argument over the repair, Hall says a steady stream of inspectors — health, fire, and building — began showing up at the deli on anonymous tips. Photos of the damage supplied to one inspector and obtained by Deadline Detroit were identical to images Hall says Nelson presented him.

In early April, Hall says Nelson’s team unceremoniously shut down the restaurant for a day to have a property manager look at the area in need of repair, costing Hall several thousand dollars in business and preventing employees from working. Nelson, in a recording of an April 3 meeting provided by Hall to Deadline Detroit, blamed the closure on his property manager, who he called a “fucking idiot” that he would “probably … have to fire.” He also suggested Hall file an insurance claim to pay for the repair.

A spokeswoman for Nelson’s firm did not immediately respond to emails seeking comment on these points.

The staff of Russell Street Deli in August 2018. (Courtesy photo)

Russell Street Deli opened in 1989 and expanded several years ago with a line of packaged soups sold in stores across the state. Hall bought the business in 2007, after nearly a decade behind the counter.

Hall says the proposed rent increase would prevent him from continuing to provide employees fair wages and health care. Russell Street Deli is known for paying its workers a living wage — $16.50 per hour on average — and keeping prices low for those in need. A cup of soup at the restaurant has been $2.50 since it opened, and it sells soup at cost to Detroit and Hamtramck public schools.

Hall says he’s exploring the possibility of opening elsewhere. But he recently sold a building in Corktown that could have served as an alternative for $535,000, saying industry concerns made him abandon plans for another restaurant.

“Mostly I’m trying to hang on to these jobs,” he said. “Some people that work for me, it’s the only job they’ve ever had.”

Fears that Eastern Market may lose independent and community-oriented businesses like Russell Street are at the heart of anxiety about the area’s future. Nelson’s firm is one of several development groups that have spent millions buying property in the area in recent years.

“If we lose residential and we lose old businesses that are stable anchor businesses, then it's just going to create long-term turnover and turmoil,” said Hall. “[There will be] no cultural fabric and the things that actually made Detroit Detroit over the past 30 years. It'll end up being some version of New York where it's like, OK, you have a lot of CVSes … and Chase Banks and Duane Reades. But none of those businesses really have anything to do with that city or that place.”

Dan Carmody, head of the nonprofit Eastern Market Development Corporation, said rising rents pose a looming “threat to the district and most of the independent businesses, but it’s one we saw coming.” The EMDC has plans in place to eventually hold 25 percent of commercial rental space in the area at below market rate so small and independent businesses can remain. He said should Nelson and Hall resolve their dispute, the development group would consider pitching in if money is an issue.

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