It’s been called the “hardware store to the stars” and it has sold tools, doorknobs and light switches in Beverly Hills since 1926. Jimmy Stewart shopped there, as did Frank Sinatra and Dean Martin.
But the future of Pioneer Hardware is now in doubt. The city of Beverly Hills, which owns the land east of the Golden Triangle that the store sits on, is raising the rent. The city lowered the rent three years ago to compensate for a long-term street closure. The rate will go up Jan. 1 to the previous level plus inflation, an increase of 24 percent.
But store owner Jeff Tilem said a major chunk of his business that left during the street closure never returned. He said he can’t afford the rent increase that is set to take effect Jan. 1 and will be forced to close the store.
“For 25 months, the city blockaded the street nearby, making it difficult for people to get to my store and permanently altering my customer base,” Tilem said. “Nowhere in my lease did it say anything about major construction causing such a big disruption to my business. If the city sticks to this rent increase, I will have to close this store.”
Tilem has started an online petition drive to try to convince city officials to let him continue paying his current rent.
Beverly Hills City Manager Jeff Kolin told the Business Journal last week that a year was long enough for Pioneer to get back to normal.
“That should have been adequate time,” he said.
All seven businesses on the block lease from the city. Kolin said that the other six businesses – including an independent grocery store, bakery and barber – have recovered since the street reopened. Four of those got rent reductions and will have the original rent restored by March 1. Only Pioneer is having difficulty.
Tilem has offered to give back some space and renegotiate a lease rate based on the store’s smaller footprint. The City Council will take up the offer in closed session at its Nov. 13 meeting. But Kolin said the space under discussion is small and narrow.
“It all depends on the lease potential of the space being given back,” he said.
Kolin said the city is preparing contingency plans to market the Pioneer space to other potential tenants should the negotiations collapse. The block of Crescent Drive just south of Santa Monica Boulevard is zoned for community-oriented businesses; the city set up the district in the early 1980s to ensure that small neighborhood stores were not wiped out by an influx of pricey boutiques on nearby Canon, Beverly and Rodeo drives.
Pioneer was originally on Beverly under different ownership. The Tilem family, which owned Lucerne Hardware on Crescent, bought the shop and merged it with its store. The family ownership included Jeff Tilem’s father, Joe, a former mayor of Beverly Hills. Jeff Tilem took over the combined hardware business in 1993, later renaming the operation Pioneer.
In early 2009, the city notified him of an upcoming street closure to prepare for construction of the Annenberg Performing Arts Center. Crescent between north Santa Monica and south Santa Monica boulevards was completely barricaded, cutting off the main access to Pioneer.
To compensate, the city reduced the rent on the store twice during the two-year street closure to $7,300 a year, for a total drop of 22 percent.
Even before the closure, the housing bust had cut into sales. When construction began on the arts center, revenue dropped more.
“Our sales fell by at least 30 percent after the street closure,” Tilem said.
When the city reopened Crescent, Tilem hoped his business would come back. But it didn’t. Many of his longtime customers had switched to other hardware stores, especially Koontz Hardware, two miles away in West Hollywood.
This point was driven home to Tilem during a recent power outage that affected much of Beverly Hills and some of West Hollywood.
“Koontz Hardware was closed because of the power outage and all of a sudden, I saw several customers I hadn’t seen since before the street closure,” he said. “They said they found Koontz Hardware more convenient for them.”
Tilem said he has few options if the rent restoration goes through Jan. 1.
“I can’t raise my prices or sell higher-ticket items because it states right in my lease with the city that I must sell products and services ‘at prices affordable to persons of low to moderate income,’” he said.
He added that selling his store is not an attractive option.
“I doubt I would be able to find a buyer,” he said. “Little hardware stores just don’t work now like they used to.”
He faces a challenge in trying to fight the city. According to one legal expert on lease rate disputes, the city is under no obligation to continue accommodating a business long after the source of a disruption ends.
“This is akin to a force majeure, but I doubt a judge or jury would find a continuing force majeure where the tenant should get continual rent relief for years after the event,” said real estate attorney Andrew Kirsh, a partner in the Beverly Hills law firm Raines Feldman LLP and who is not involved in the dispute.
Kirsh suggested another possible solution: have the city agree to market Pioneer’s products and services for a time.
“We’ve had clients in shopping malls undergoing renovation,” he said. “The easiest way besides rent reduction for the landlord to accommodate the tenant is to provide them with free advertising.”
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