A dispute with the port threatens legendary waterfront SF companies

0

For more than three decades, SF Boatworks and the adjacent Restaurant Ramp have survived as a bastion of saltiness on a rapidly changing waterfront, a place to paint vessel bottoms, empty beer mugs and roast halibut just after reeling in the bay.

However, that 36-year run could be jeopardized by a lease dispute between the Port of San Francisco and Arvind Patel, who owns both the yard and the ramp.

On March 11, the Port of San Francisco sent Patel a 30-day “Notice to Cure Lease Loss” for the 100,000-square-foot property. It includes the city’s only working boatyard, as well as The Ramp, which over the years has transformed from a bait shop and hot dog stand into a free-roaming waterfront hangout known for its Latin dance bands and after-work get-togethers .

The port claims Patel owes them $779,151 under the terms of a lease that obliges him to pay a percentage of gross earnings from both the restaurant and the shipyard. It also claims that Patel’s operations are “currently not in good working order” due to noise violations and a restaurant refurbishment the operator said the operator has completed during the pandemic. Patel later received retrospective approvals for the work done.

Patel does not deny that the money is owed under the terms of the 16-year lease. Like other companies, it has suffered losses during the pandemic, arguing that the terms of the yard portion of the lease are nearly three times the market rate. He proposes a installment plan while negotiating a new deal.

In a statement, Randy Quezada, the port’s communications director, said the port is “currently in negotiations with Patel’s group” for a rent relief package as well as a lease extension.

“Since 2007, the Port has worked with them to resolve various permitting and compliance issues and offered to approximate their percentage rental rates to comparable retail tenants in the area,” he said. “However, as they have not addressed these issues, they are currently not in good standing and we have not been able to secure a new lease.”

The fight comes as pandemic-related losses have decimated the port’s budget, cutting revenue by 40% from $173 million to $104 million. The agency bears $30 million in unpaid rent and has deferred $40 million in capital expenditures.

While the port has offered rent relief packages, including rent deferral and rent waiver, to many tenants during the pandemic, it is also trying to reclaim revenue from businesses that are back in operation. The port is a self-sustaining corporate agency under its charter, which means that it should only spend what it collects in revenue.

In the case of the ramp and boatyard, the need to do more than just break even is sometimes at odds with the agency’s mission to preserve maritime uses, which may not generate as much revenue as other businesses but do for the city’s international reputation are essential as a picturesque town with a busy waterfront.

Since 1987, both companies have had a single monthly lease, with Patel paying the port 6.75% of revenue from the restaurant and 8.75% from the shipyard. Patel says he has no problem with the restaurant rent — which is common on the waterfront — but that the dockyard rent is more than double what it should be. Shipyards have margins of less than 10% and most on the West Coast pay less than 3% of sales, according to a study SF Boatworks conducted on shipyards.

“It’s a dying business. It’s difficult to find skilled labor and charge enough to survive,” he said. “Our margins are less than 10%. Paying 8.75% of that is unsustainable.”

Patel moved to San Francisco from London in 1972 and began sailing in the Bay. In 1990 he became a partner in the boatyard with the late Mike Denman, a friend of his.

“There’s something about this place, as unconventional as it is, that strikes a chord with people,” he said. “It’s a dive on the water. It is a meeting place for everyone. Lots of music and dancing. It’s an institution that, if it gets damaged or we lose it, loses a little bit of what makes San Francisco San Francisco.”

About 500 boats are chartered at SF Boatworks each year – fishing boats, police boats, fire boats and many recreational and cruising boats. Since a shipyard closed in Redwood City a few years ago, the 90,000-square-foot shipyard next to the ramp is the only place on the peninsula where you can put out to sea.

“You can’t have boats in San Francisco without a place to repair them,” Patel said. “It’s an absolutely essential service.”

In a letter to the port, Patel said current boatyard rents are “unsustainable and practically unreasonable,” noting that a much larger dry dock lease at Pier 70 required a rent of 3.3% of turnover. Patel said his group has overpaid the port “$2.4 million above market rates in percentage rent since 2006 to operate the shipyard, a tremendous real godsend for the port.”

Patel proposed paying about $182,000 in rent arrears and 6.7% revenue after January of this year. He said he would like to split the lease into two separate contracts, one for the restaurant and one for the shipyard. He said he has invested millions of dollars in improvements at both companies and would like to spend more to install a retractable tent that would allow the ramp to accommodate more guests during the winter.

Patel’s business has not paid rent since March 2020, other than a check for $2,000, according to the port. It reported sales of $6.7 million for March 2020 through January 2022.

When the ramp and shipyard opened the property, Seawall Lot 336 was on the outskirts. The Boatyard was a junkyard, and what is now the Ramp was a bait shop and hot dog stand. There was no UCSF Mission Bay Medical Center, no Chase Center, no biotech or luxury homes, or parks on Mission Creek.

Quezada, the port’s communications director, said the port hopes to retain both companies.

“The Ramp and SF Boatworks provide fine dining and essential maritime industry services to small recreational vessels throughout the Bay Area,” he said. “The port understands the significant challenges that the pandemic poses for our tenants, but must treat all tenants equally and cannot offer (the ramp and the shipyard) any more support than others.”

Boat restorer Allen Gross sees SF Boatworks as a historical treasure and an important business that must be preserved, even if it has to be subsidized by the city. Gross spent eight years at the shipyard restoring an 1889 cutter-rigged sloop called the Folly, the second oldest boat on the West Coast.

“The icons of tourism are the boats in the bay, Fisherman’s Wharf, the Maritime Museum on Hyde Street Pier,” Gross said. “That’s what people think of when they think of San Francisco. Without a shipyard, you have no way of taking care of the infrastructure of our image.”

Shipyards have closed up and down the west coast, he said. Another operator is unlikely to show up if Patel is put out of business.

“Here you have all these boats in the bay that need work on. They have fishing boats. They have pleasure boats. They have workboats that all need to be pulled out, inspected, measured and painted,” he said. “A fisherman who can barely make ends meet with his crab catch – where should he go? Do you want the crab boat at Fisherman’s Wharf or not?’

JK Dineen is a contributor to the San Francisco Chronicle. Email: [email protected]

Share.

Comments are closed.