“As much as homeowners are entitled to receive a return on their property, we (shouldn’t) forget that there are a lot of people struggling,” Xue said.

Xue is far from alone. Despite the optimism at this time, with Bay Area restaurants able to return to full capacity, the financial pressures of the shutdown persist. Many restaurateurs say their recovery is far from certain: at least one restaurateur who spoke with The Chronicle has faced eviction proceedings even though safeguards are in place to prevent this. Others are worried about whether the outstanding debt will lead to another round of closings in the months to come.

A recent survey of more than 100 restaurants found that 60% of restaurants ran into debt during the pandemic, up from 34% in March 2020, according to small nonprofit SF New Deal, which conducted the study. On average, restaurant debt almost doubled, from $ 62,000 to $ 114,000, according to the survey.

“It’s an existential crisis,” said Dennis Lee, co-owner of Namu Stonepot, of the outstanding rents. “All of our businesses are in danger. “

In San Francisco, unpaid rent for retail businesses like restaurants and bars is much higher than for other businesses – 89% to 98% of the money owed, even though they are only about a quarter of leased commercial spaces in the city, according to a March report from the Office of the Budget and Legislation Analyst. This could be in part due to the fact that restaurants and bars in San Francisco experienced the biggest sales decline in 2020 of any business line and were forced to close, with the exception of take-out, during much of the year, according to the report. Statewide, nearly a third of restaurants have closed permanently during the coronavirus pandemic, according to a report presented to the state Senate in May.

Temporary moratoria on evictions in Bay Area cities are not always clear solutions, either. Xue’s Wonderful restaurants are located in San Mateo County, where the moratorium requires businesses to show they cannot pay rent due to declining business net income directly resulting from the pandemic. So, in November, Xue said he was shocked to receive three days’ notice asking him to pay $ 39,000 in rent for his location in Millbrae or to relocate. The owner, Xue said, argued that the restaurant lost income, not profits.

A judge eventually ruled in Xue’s favor, but not before Xue incurred $ 20,000 in attorney fees; he is now in legal action to get his owner to cover this. Neither Xue’s owner nor his owner’s attorneys responded to The Chronicle’s requests for comment.

“Our first priority is to keep the doors open and prepare for any eventuality,” Xue said. “This is not to reimburse our landlord.”

Other restaurateurs have made deals with their landlords to reimburse the rent and said the process has been largely cooperative and supportive. However, the reopening does not mean that they are in the clear with their debts.

The owners of San Francisco restaurants Nopalito and Liholiho Yacht Club, for example, adjusted the rents to a percentage based on sales with a base minimum, his partner Jeff Hanak said. But this month, that minimum will be back to its full amount before the pandemic. And if restaurants have higher than expected sales, they’ll have to start paying off an additional percentage of deferred rent, Hanak said. He and other homeowners are hopeful, but unsure whether demand will increase enough to help them pay off their debts.

“I hesitate. I’m a little nervous about our sales volume as we start to increase, ”Hanak said. “We took small steps and were very careful not to push him. “

Anamika Khanna, owner of the Kasa Indian Eatery in San Francisco and Redwood City, has agreed to repay rent over the next five years at two of her three restaurants. But her lease recently expired at Kasa’s Polk Street location, so she pays monthly while she negotiates a new lease.

This has proven difficult: Khanna and the landlord “have different ideas about what the market rate is,” and it might be untenable to commit to paying more rent when your business has not. bounced back again, she said. Corporate catering, which accounted for a third of Kasa’s business before the coronavirus pandemic, has been slow to return.

She still runs her restaurants with reduced staff as expenses such as food costs and insurance increase. The Chronicle was unable to immediately contact its owner for comment.

“It’s really hard to say I’m completely confident, but at the same time I don’t know how to do it otherwise,” Khanna said of paying off her debts.

As the Bay Area reopens, homeowners seek to recoup their losses from the pandemic. Landlords rely on rent to pay for mortgages, property taxes and other expenses, said Charley Gross of the San Francisco Apartment Association, which represents residential and business owners.

“It’s been tough on both sides,” Gross said of landlords and tenants.

In addition to rent, many restaurateurs have deferred payment of everything from sales tax to utility bills. Some have taken out more loans to keep their businesses afloat during the shutdown. Joe Hargrave, co-owner of Tacolicious, is up to date with all of his rent payments. But he took out a $ 2 million loan to keep his chain of Mexican restaurants alive last year. A large one-time payment at the end of the loan term will be due in about three years with “pretty good interest”.

“It’s suffocating,” he said. “I kinda did what most people did, (that is), if I can put it off for three years, that will give me time to figure it out.”

The lingering uncertainty makes the prospect of paying off a large debt even more daunting. Restaurant owners say sales are starting to rise and level off, but have yet to return to pre-closing levels. Many feel stuck in a trap: they must scale up operations to increase sales and pull their businesses out of the red, but worry about the potential return of restrictions and incur even more expense with the addition of parklets and more seats.

“We have no choice but to go 100%,” said Lee of Namu Stonepot.

There is still help. Many attribute the combination of federal and local grants to help them stay afloat and partially cover costs like rent and utility bills. SF New Deal recently launched a $ 1 million fund to provide grants of up to $ 2,500 to small businesses in the city. Over 900 applied. (The app is open until Friday.)

Moratoriums on business evictions in some Bay Area cities have also been crucial for small businesses. The San Francisco moratorium has been extended until September 30, which means landlords cannot evict tenants until they have given written notice and a chance to catch up on their payments. It also gives tenants extra time after the moratorium expires to pay off any unpaid rent.

Dennis Faoro, a San Mateo lawyer who represents business landlords and tenants on the peninsula (he represented Xue in his case), said helping tenants pay off pandemic debts is mutually beneficial. The alternative for homeowners could be a vacant building that is more susceptible to vandalism and therefore higher insurance costs.

Cities in the Bay Area have also offered support in other ways, such as temporarily closing streets to traffic to allow for more alfresco dining, placing caps on third-party delivery charges, and waiver of license fee renewal.

But the moratorium on evictions and subsidies may have given some homeowners a false sense of security. William Ortiz-Cartagena, a commissioner with the Bureau of Small Business in San Francisco, said many local Latino restaurateurs were using funds from the Paycheck Protection Program and the Restaurant Revitalization Fund to pay off rent so that they are not trying to renegotiate their leases, and they are not but are under pressure from their landlords because of the moratorium. Most are sole proprietors and may find it more difficult to access financial and legal resources due to the language barrier, he said.

“It’s going to have a lasting effect. Specifically in the Latino community, in September we are going to see a huge flood of commercial evictions, ”said Ortiz-Cartagena.

His non-profit organization Clecha, which supports Latino entrepreneurs, is trying to stem this tide by offering real estate lawyers on mandate and reaching out to restaurants owned by Latinos.

San Francisco supervisor Ahsha Safaí, who represents District 11, which includes the Excelsior, the Foreign Mission and the Visitacion Valley, also sees this as a critical time for the survival of local businesses. He’s pushing the city to budget up to $ 50 million in rent relief for small businesses, and said he’s worried that without further support the city will experience another “extreme” wave of closures. Supervisor Dean Preston also recently introduced legislation that would exempt businesses from paying rent when they have to shut down under pandemic health orders.

“They are at a critical point,” Safaí said. “If we don’t find a way to give them some extra help to pay off some of their rent, a lot of these businesses will be faced with filing for bankruptcy. “

Whether the subsidies and temporary protections will be enough to keep businesses open remains to be seen. Yuka Ioroi of Cassava in San Francisco said the federal paycheck protection program, the Restaurant Revitalization Fund and local grants have helped pay off part of his half-million dollar debt. Still, the restaurant continues to operate at a loss, she said.

“We are definitely not relaxing,” she said.

Elena Kadvany is a writer for the San Francisco Chronicle. Email: [email protected] Twitter: @ekadvany