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Michael Dorf on Real Estate in New York City

Michael Dorf on Real Estate in New York City

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Dorf opened more Knitting Factorys around the country, and, in 2008, launched City Winery in Manhattan. It now has offshoots nationwide, including in Atlanta, Boston, Chicago and Nashville. But, after moving his original Manhattan venue from Varick Street to Pier 57 this year, COVID scuttled his grand opening plans, placing the new venue in a sort of limbo.

Dorf spoke to Commercial Observer about the history of City Winery, the particulars of the move, and how he’s dealing with COVID’s intrusion.

Commercial Observer: How did the idea for City Winery come about, and what were you looking for in a space?

Michael Dorf: In 2008, I was excited about the area around the Holland Tunnel just north of Canal Street, because there was no residential traffic. I worked hard to define the space, and then cut a deal with Trinity Church [which owns the land], and we got this 20,000-square-foot space right on Varick, where nobody would complain about noise. I had identified the need for 300 seats. I wanted a downtown Carnegie Hall with a great wine list, and the space on Varick seemed perfect.

How did you arrive at the 300-seat figure?

For one thing, it’s well under the radar of [live music industry behemoths] Live Nation and AEG. Their [limit], then and pretty much now, is 1,000 capacity: Irving Plaza, Gramercy Theater and up. I knew I could get older artists, singer/songwriters that could do multiple nights, and 300 would allow me to hit scale with someone like David Crosby or Suzanne Vega. We were giving them most of the ticket money, around 75 to 80 percent. My focus was going to be food and beverage.

That’s always been the axiom of live entertainment: the profits are in the popcorn. In this case, we were making wine. The other reason 300 was important is, when you get beyond this, to like 600 or 700, you lose the intimacy between the person on the stage and the back of the room.

You opened City Winery just as the great financial crisis was setting in. How did that affect it?

That was a financial sock in the stomach, because I hadn’t fully funded with investors. Opening in October of 2008, our first grapes showed up the same week that Lehman Brothers declared bankruptcy. We weren’t sure if we were going to have the money to get it built. I started raising smaller amounts of money and took some very tough loans.

A lot of people were interested in the wine program. Pre-Lehman bankruptcy, we were selling barrels to financially well-off people at $12,000, $13,000 a barrel. There’s 300 bottles in a barrel, so it ends up being about $40 a bottle with high-end, premium grapes. When October hit, 90 percent of those sales went away.

So, in the spring of ’09, that’s when the biggest desperation set in, because we had made this huge investment in our wine, which was sitting in barrels on Varick Street. If you’re making wine to go in a bottle, you might not put it on the market for three or four years. And here, we had several million dollars, a big portion of our investment in the business, sitting in kegs and barrels in our cellar.

So, we started putting wine on tap and selling it by the glass. That was a huge pivot in the business at the time, and our tap wine became a big piece of our wine strategy.

Jumping ahead, talk about finding out you were going to have to move City Winery.

In August of 2018, the word came out that Disney had done a 99-year, triple-net lease, and that we were going to have a year to vacate. It came faster than we thought.

When you began looking for a new location, was it with the intent of recreating the original, or were you taking this as an opportunity to improve?

Absolutely the latter. Since opening on Varick Street, I built City Winery in Chicago, which was so much better than Varick Street. It was the 2.0 of all these improvements of design and thought about how it should operate.

What were you able to improve?

The most important thing was putting the kitchen smack dab in the middle of the space. When we opened on Varick Street, we found some space that became a separate restaurant called the Barrel Room, but the kitchen was in the basement. You had the food come upstairs and go through the venue into our cold barrel room storage at 54 degrees, before then going into the Barrel Room.

I’m certain that Danny Meyer would say, “You don’t take hot food from the kitchen and walk it through a refrigerator on your way to the customer.” So that’s one example.

The other one that is obvious, in retrospect, was that the front door opened right into the room. We needed a central receiving area for customers to point them in the right direction, because we have so many different things going on. Those were two super obvious things that we improved on.

Was it challenging to find a new location that would allow you to do all this?

I looked at no less than a hundred properties. The great news of trying to do this now is that our brand is well-known. And, frankly, underneath the suits of the financial community and the real estate world are tie-dyed T-shirts of the Allman Brothers or the Grateful Dead. And they loved our place.

So, I had no problem having people really want to have City Winery in their building in 2019. One of our patrons reached out to me and said, “I have a building in the Times Square area. It’s exactly the square footage you need, between 30,000 and 40,000 square feet. I want to give it to you in a partnership and let’s do something.”

Unfortunately, I just didn’t think Times Square was the right neighborhood.

Can you reveal who reached out to you?

No. I had several patrons reach out to me with property. I got at least one call every day in 2019 from building people, real estate agents, what have you. I looked at multiple spaces in Hudson Yards. They were really eager to have us there. I just didn’t think it was the right fit for us.

I wanted to be downtown. I was, ultimately, in-between a few interesting locations, but I wanted to find something that was column-free. That was the number one physical attribute that made me fall in love with the new space. Every other venue I’ve done, I’ve had to take out columns. It costs me $350,000 to remove one column.

Where were you on the new location when COVID hit?

In February, we were six weeks away. Our opening show was going to be March 25. It was a stellar lineup with Brandi Carlile, Mumford & Sons and Mavis Staples. So, we were going overboard, paying accelerated, double-shift fees in the construction, basically starting in January. It was seven-figure extra money. But because we were getting such amazing attention and starting April 1, we booked a lineup [for] 30 nights and almost everything sold out right away.

But then, came the middle of February, as artists were starting to not feel comfortable traveling you knew something was coming. We were barreling forward, and then, all of a sudden, we had to postpone every show.

So, what is the current status?

We’re done [and open]. Like every indoor restaurant, 25 percent of our capacity is legal. Our total capacity at 34,000 square feet is 980 patrons. Twenty-five percent of that is in the low 200s.

But at the same time, we’re not allowed to have any ticketed concerts. No music is allowed if you ticket it or market it. The only live music you’re allowed to have is incidental music background music. You can have Bruce Springsteen or Billy Joel onstage; you just can’t announce it or sell a ticket. The only way they could get paid would be if they pass a hat, which would be pretty funny.

The flaw with the current law is that, if we’re allowed to have 25 percent indoor dining in our venue, what would be the difference if an artist, who hasn’t been able to make a penny performing live in New York, is onstage and people paid $10, $20, $30? The same people that are there to eat legally and safely give that money to the artist.

There’s a way to do this safely. In our facility, for a ticketed live show, people would be farther apart than when they go to Walgreens or Whole Foods, or most places in the city. Right now, it’s a very discriminatory policy against live music and comedy.

Have you spoken with anyone on the political side to advocate for this?

I have. I’ve spent a lot of money with a lobbyist. I’ve tried to be very clear that seated live music in a non-theater setting, where you can space out tables and chairs, is very different from a standing concert or club. It really is about seated versus standing.

Have you had any hope that there might be a change soon?

I’ve been in dialogue with the governor’s office for three months. They’ve liked my ideas for live music, but I haven’t seen any movement. If you’re asking if I am anticipating some new guidance standards that will adapt my smart and safe way to open New York, I’m a little more cynical.

Have you been having incidental live music at City Winery?

We have been asking some of our musician friends to jump onstage unannounced. They’re not making any money. Some of them are putting cards on the table saying, ‘If you like the music, you can Venmo to this account.’

Who have you had?

We had Jill Hennessy, who was fantastic. Dave Broza was onstage recently. We did a Steve Earle streaming performance the other day. It was so wonderful to hear someone like Steve say, ‘You built the best room I’ve ever played, and the stage and the sound are amazing.’ He almost had tears in his eyes telling me that, and I had tears in my eyes listening to it, because that’s what we aspired to create.

It sounds super ostentatious, but we did build the greatest live music room I’ve ever seen anywhere. And yet, we can’t do shows.

What is it about the venue physically that you think makes it the greatest place to see live music?

There are no columns. For the acoustical design, anywhere you are in this space, you’re not more than 30 to 40 feet from the front of the stage. We also used a lot of barrel staves reclaimed wooden barrels with the patina look of French Oak with wine stains, with acoustical panels hidden behind the staves. You also have a view into the winery on one side, and a view of the Hudson River on the other.

You just spent years and millions of dollars on this, and now, you’re open at reduced capacity with no scheduled acts. How concerned are you about the long-term viability of the club?

I’m going to give credit to our landlord in New York, RXR Realty. They like what we’re doing and have been somewhat flexible, in terms of our lease, our tenant improvement allowance, and the loan to us on the construction.

In February, we had 1,400 employees between all 11 locations. And then, we cut down to 70 we furloughed 1,300 people and now, we’re back up to about 450. So, we’re climbing back, but we’re far from where we were.

We did get PPP in the beginning, and we are hopeful that we’re going to get a next tranche of PPP. But, also, we own properties in Chicago, Nashville and the Hudson Valley, and those assets have increased in value. So, we’ve been able to get some additional loans, and we’ve become highly leveraged in order to stay alive.

We also have several purely outdoor facilities. We have City Vineyard in Tribeca, and our outdoor wine garden at Rockefeller Center. We have the same thing in Boston and Chicago.

So, while sales are 30 to 50 percent of what they were, we still had a decent summer because of wine sales, including from our winery. We put a lot into bottles, and we’ve been trying to sell wine more traditionally over the last six, seven months. All of these things have combined to give us a bit more room than many of our colleagues that are on the precipice of going out of business.

How concerned are you about the long-term health and viability of live entertainment in New York?

I’m very worried. I’m worried that with the policies of targeting live entertainment versus everything else, many musicians who were already leaving New York because of real estate are going to go to Nashville, or Atlanta, or across the country even New Jersey or Connecticut where they are allowing live music and some degree of ticketed shows [so musicians can] earn a living.

If we lose our supply of talent, it’s going to be very hard for venues to continue. But I do think we’ll get to an understanding that New York is built on culture: museums, food and live entertainment. There’s going to need to be some attention to supporting that, whether that’s subsidies and grants, or lower interest loans.

There’s a bunch of different acts out there, the Save Our Stages Act and what NIVA (the National Independent Venue Association) is doing, that understand the importance of this, and hopefully will get the attention it deserves and there’ll be some support. But without it, it’s going to be very hard for even Lincoln Center, and Carnegie Hall, and some of these A-list venues to be able to do what they were doing pre-pandemic.

What is your move now in the immediate future?

We’re open in every one of our cities right now. I’m going to keep pushing hard on live music being presented in a safe way. And I’m still looking at other markets where our business could work. I’m talking to real estate people who need our concept even more now, because they have more empty space. Come springtime next year, you might see a few new locations around the country.

Can you give me a sneak preview of where you’ve been looking?

The only thing I’m going to say at the moment is it’s within long, car drives east of the Mississippi.

This content was originally published here.

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