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# Promenade restaurant owner sues to find out fair market rent
- URL: https://www.smdp.com/promenade-restaurant-owner-sues-to-find-out-fair-market-rent/
- Published: 2002-03-28T16:00:00.000Z
- Updated: 2026-10-23T00:11:11.000Z
- Author: Andrew Fixmer
- Tags: Business, Promenade, #archive-import

*Restaurant owners say they can’t compete with retail*

The owner of the Reel Inn on the Third Street Promenade is suing his landlord so a judge can determine the fair market rent for restaurants along the popular shopping corridor.

And while one local real estate expert said there’s technically no difference between rent for retail stores and rent for restaurants, an ordinance recently passed by the Santa Monica City Council says otherwise.

“(Landlord David Goldstein) remains convinced the value of the space is worth substantially more than what I can figure it,” said Reel Inn owner Andy Leonard, who described the restaurant’s building as run-down and in need of repairs.

Calls to Goldstein for comment were not returned Wednesday.

When Leonard negotiated his lease five years ago rent at his restaurant at 1220 Third Street was set at $4 a square foot. Now he said Goldstein is asking for $6.50 — more than a 60 percent increase.

Leonard wants the court to rule that three independent surveys must be taken of what market rate rents on the Promenade are. He said he would pay the average of the two highest survey findings.

Rents on the Promenade currently are between $8-$10 a square foot, while locations just off the shopping corridor go for roughly half that amount, one real estate expert said.

“A restaurant may be a couple bucks (a square foot) below that, but it depends on the size of their place,” said Rob York, a real estate and retail consultant for The Bayside District Corporation. “But on average you’re going to find retail can pay more.”

According to several local real estate experts, Goldstein didn’t want to renew the Reel Inn’s lease because Apple Computers Inc., wanted the space for a store selling the company’s products.

But the city council passed a temporary moratorium, forbidding landlords from renting spaces currently occupied by restaurants to new retail stores has a loophole, Leonard said. City and business officials are currently studying how much retail and restaurant space should be on the Promenade.

That loophole states that only 5 percent of the existing restaurant square footage on each block of the four-block Promenade can be converted to retail space while the moratorium is in effect. The 5 percentage change can occur only once.

The council passed the measure because it feared all restaurants along the Promenade would soon be squeezed out because of increasing rents thanks to an influx of large, nationwide retail stores.

Restaurant owners have said they can’t compete with the going rents.

“Virtually every restaurant on The Promenade had to bid against retail to get their space,” Leonard said. “That’s why all the new restaurants are off the Promenade on Wilshire or Second or Fourth where the rents are much lower.”

> “...All the new restaurants are off the Promenade on Wilshire or Second or Fourth where the rents are much lower.” — —ANDY LEONARD Reel Inn owner

Goldstein wanted to convert part of the space currently occupied by the Reel Inn into an Apple Computer store so the percentage change on the 1200 block of Third Street would have been below the five percent threshold, Leonard said.

Local officials agreed that the five percent “flexibility clause” in the ordinance could be used to convert some restaurants into retail stores, although they did not believe it would have a huge effect.

“In some cases there is enough to allow a restaurant to still be converted into a retail use,” York said. “But for the most part it won’t be happening all over the marketplace.”

The deal with Apple fell through in the end because the computer company needed more space than Goldstein could give them and still stay under the five percent threshold, local business leaders said.

“There has been a couple of deals floated that won’t be pursued or happen because of the moratorium,” York said. “It was the primary sticking point to why the Apple deal didn’t go through.”

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*Originally published in the Santa Monica Daily Press print edition on March 28, 2002.* [Read the original PDF.](https://s3.us-east-1.amazonaws.com/smdp%5Fbackissues/032802.pdf?ref=smdp.com)