The Daily Item, Sunbury, PA

Travel

October 14, 2013

Promenade Shops wants to boot out Pacifico, says restaurant owes $200K

The menu at chef Rafael Palomino's Pacifico restaurant in Center Valley offers tapas and generous portions of nuevo Latino staples like seviche, paella, even filet mignon empanadas. But its landlord, The Promenade Shops at Saucon Valley, claims in legal filings that Pacifico has been skimping on the rent.

It went to court late last year seeking to evict the restaurant and recover what is says is more than $200,000 in overdue payments.

The restaurateur has fired back that the shopping mall agreed to reduced rent payments and accepted those smaller payments during the time it says Pacifico fell behind, and has failed to provide adequate parking, effective marketing, reasonable utility rates and security at the mall.

Pacifico's owners also say, in legal documents, that mall management has repeatedly harassed Pacifico employees and has made "false and defamatory accusations against said employees."

"The essential issue in the case involves how long the rent-relief program was in place and the admitted failure on the part of Promenade to appropriately account for payments made by Pacifico," said attorney Theodore Zeller, of Norris McLaughlin and Marcus, Pacifico's law firm.

The two sides' attorneys are scheduled to fight it out Dec. 16 in Lehigh County Court before Judge Edward Reibman. Promenade Shops and its attorneys did not respond to requests for comment.

In court filings, Pacifico claims "All rent due and owing the plaintiff has been paid" and that it is not in default.

Rent disputes aren't unheard of in the restaurant business, said Steve Stallman, president of Stallman Marketing, a member of Food Consultants Group.

"There could be something more to it, but my guess is this could just be the old standard thing," Stallman said. "[Promenade] thinks they can get more money for that spot."

While the industry as a whole is coming back, "fast -casual" eateries such as Panera Bread and Chipotle have been the economic leaders, said Aaron Allen, an Orlando, Fla.-based restaurant consultant.

Restaurants' average profit margin is a slim 5 percent, he said, making it difficult to climb out of a financial hole. With food and labor absolute requirements for any eatery, rent and mortgage payments are often the first to suffer.

"I have seen this pattern kind of play out a few times before," Allen said. "They are expecting a higher output when they first get the restaurants open. They fall behind a little bit by little bit."

The disagreement in this case centers on a 2009 rent renegotiation.

Pacifico's problems meeting the rent began during the Great Recession, almost as soon as the restaurant and the mall opened in May 2008, according to court documents. In 2009, with the restaurant already owing $73,339, Promenade reduced the eatery's rent payments, dropping them to $10,000 a month during a "relief period" in which the restaurant committed to make up its overdue payments.

"Through no fault of the Promenade or Mr. Palomino, the Promenade Shops opened at a time that nobody could predict the financial stresses," Zeller said.

But by the end of 2012, the shopping center claims Pacifico was behind $200,151, and the Promenade sent the restaurant a notice of default warning its owners that if the overdue payments were not made immediately, they would turn the matter over to their attorneys.

In its own court filing, Pacifico claims that in January 2012, Palomino and partner Ahmed Gad traveled to Tennessee to meet with mall ownership over problems with the lease and that a representative of the company agreed verbally to extend the $10,000-a-month rate indefinitely.

Under its initial lease, Pacifico's minimum monthly rent was set at $11,569, scheduled to tick up to $12,424 in 2013. On top of that, the restaurant was to pay 5 percent of annual gross sales over $2.8 million, plus a portion of real estate taxes, marketing, operating and other costs.

That was changed in 2009 to a flat $10,000 a month plus 8 percent of sales over $1.7 million through 2010, with an acknowledgment by the owners that they owed the mall $73,000 in back rent and would repay it in monthly installments.

The restaurant is one of seven in New York, Connecticut and Pennsylvania that is operated by Palomino's restaurant company. Palomino also operates Tapas on Main in Bethlehem and Mesa Modern Mexican in Easton.

The Columbian-born chef grew up in Bogota and spent his early adulthood in New York's restaurant scene. He has written five cookbooks on Latin-inspired cooking, including Bistro Latino and Vida la Viva, according to his website.

"Mr. Palomino is a world-class chef and would prefer to concentrate his time and effort on his successful restaurants rather than fighting lawsuits," Zeller said.

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