Cake Shop Takes Its Fundraising Campaign To The People
On a recent evening, Queens resident Linda Ann Jordan sat around a candlelit table with three of her friends at the Lower East Side coffee bar/venue/record store Cake Shop. The first show by her band, Good Sports, would take place downstairs later that evening. Gesturing to a friend across the table, she said, "We were just talking about how every band we've ever been in, its first show was at Cake Shop." A willingness to book unknown bands has always been a point of pride at the venue, but if things don't turn around for Cake Shop soon, Good Sports' gig could be one of the last first shows Cake Shop hosts.
Verbunkos/Flickr Cake Shop, ca. 2009.
Last week, Cake Shop was the latest to join the melancholy brotherhood of financially troubled venues. They put up a project page on the community-funding site PledgeMusic.com seeking an unspecified amount of money to cover nebulously-described " financial hurdles," including "one-time fines and legal fees." It's possible to read the entire project description, which maintains an upbeat outlook, and come away not exactly understanding what the big deal is. Is this even that serious of a situation? As it turns out, it is. "Without the support," says Nick Bodor, one of the venue's three co-owners, "Cake Shop is not going to be open in two months." Cake Shop owes money to various entitiesto the city, to its lawyers, and most of all, to its landlordand would need to make roughly 250% of its goal to pay off all of its debts. The goal has only been set so low so as to guarantee that cash can be withdrawn in the next 60 days.
SOTC spoke to Bodor over the phone this past weekend, and in a wide-ranging discussion, he outlined how a confluence of financial and legal problems, involving players from the Mayor's office to the venue's own lawyers, have come together to stick Cake Shop with a very hefty bill while making it much harder for them to pay it off.
Bodor has been operating coffee shops and bars (alt.coffee, The Library Bar) in the East Village since 1995. "Does that make me a Wharton MBA? No," Bodor says, describing his business model as "setting up places that I think should exist, and then working really hard to keep them open as long as I can." Which, while noble, can leave some holes in financial planning.
The problems with Cake Shop began six years ago, when the venue signed its original lease. It included a real estate tax abatement, an agreement that leads to reduced property taxes for a period of time. These abatements gradually expire, leading taxes to jump dramatically in a lease's final years. Cake Shop knew this bill was coming throughout their entire existence; the owners just didn't know how much it would be.
When the landlords (149-151 Essex Street Associates LLC) finally passed along Cake Shop's new tax bill in mid-2011, Bodor says, everyone at Cake Shop was shocked: The venue owed an eye-popping $33,000 on top of increased rent. While Cake Shop was negotiating a payment plan, the bill for the next year came in, and that added an additional $25,000. Through some negotiating, they were able to cap the entire sum at $55,000still a high figure for a venue like Cake Shop, which, as Bodor puts it, has "always operated on this very slim margin where we make a little bit of money and our salary, but we've never banked money and we don't have any kind of buffer or emergency fund." Currently, the venue is under a court-ordered payment plan where it has to pay $16,000 per month until its debts are paid. (The court also agreed to cap tax payments for the lease's seventh through 10th years at $25,000 per year.)
The above account is roughly confirmed by a source close to the landlord with knowledge both of this specific case and real estate laws generally, who requested anonymity because they are not authorized to speak publicly on the matter. The source confirms the payments as outlined abovehowever, the source disputes the amount of the tax increase, saying it is lower than Cake Shop claims. (The landlords themselves were not available to speak on the record by the time this piece was published.)