By Stephen Young
By Stephen Young
By Stephen Young
By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
Even more frustrating, when Crews went to talk to representatives from the airlines, they weren't certain how much they would charge him. The quotes varied widely, from a low of $40 a square foot to a high of $135 a square foot. He also asked the airlines if he could pay the fee in installments over two years. They refused. Crews claims that both the airport staff and airline representatives told him that it was board policy for tenants to pay the airlines' space acquisition fee. This is not true. The airport and the airlines were in the midst of a long, complicated process of negotiating the location of and price for the space the airlines were giving over to the new concession program. This agreement would not be finished and approved by the board for more than a year.
In October 1994, Clay Pasley, deputy executive director for business and commercial development at the airport, wrote Crews a terse letter. He told him that the menu, DBE participation percentage, and space acquisition fees were not negotiable. He added that if Crews was not happy with the deal, the airport would cancel the lease.
"I had some tough business decisions to make," Crews says. "I thought the stores would be opened by then and had staffed up accordingly. I decided to pay the fees, so as not to stall the deal further, but reserved my right to deal with the unfairness of them later."
In December, Crews sent a check to the airport for a little more than $200,000--about $44 a square foot--to pay the acquisition fees for the two Delta terminal locations and the one at American. Negotiations for the Benjamin Books' expanded space at American were hopelessly bogged down. Crews wanted to take over space from four unused bathrooms to increase his store at Gate 35 in Terminal 3E. Although American representatives told him that the bathrooms were hardly ever used, and they did not have plans to relocate them, the airline quoted him a price of $135 a square foot--even though Crews was going to pay for tearing the bathrooms out. It made the project economically unfeasible.
By early 1995, Crews' airport project looked more promising. The staff had sent out the request for qualifications for minority partners. He finally got the space for two locations in March and they were due to open in June. Of course, that was 15 months into the lease. He had already been paying the monthly minimum lease payment on the two stores since December 1994. All of his costs had mushroomed far beyond his original estimates, and all his calculations were based on the expectation that he would be getting cash from four locations by now.
By spring 1995, as he prepared to open his two stores at D/FW, Crews was in a significant cash crunch. He had no choice but to sell some of his company to investors. An English concern that managed an insurance pension fund bought 30 percent of The Benjamin Co. for $6 million, which is what he had expected his cash flow to be on the new stores that year.
He hoped when the second Delta location and the American store expansion opened, he would begin to catch up. But the delays had made it difficult for Crews to move forward on finding local partners, as his development director explained in a letter to the airport's DBE liaison. "This delay has prevented us from a full and accurate evaluation of the construction costs for the three locations as well as an accurate evaluation of the opportunity to be offered to a potential partner. It would be extremely unfair to the ... respondents to provide numbers that are inaccurate or that do not fairly indicate the opportunity at hand."
Crews told the airport staff that he was also disappointed with the response to the request for proposals for minority partners. Only two people had responded--Ray Quintanilla from Dallas and Victor Puente from Fort Worth. Both men already had direct leases with the airport and opportunities to expand. In a letter to airport staff, Crews said he thought it was more in keeping with the spirit of the airport's DBE program to offer new minorities airport business. The Benjamin Co. offered to hold seminars for minority opportunities.
In May, concessions director Pat Gleason wrote Crews a letter in which he seemed sympathetic to his plight. He said he shared Crews' frustration with Delta's delay in relinquishing the second space in Terminal 4E, the acquisition fees for which he had paid six months earlier.
He offered to give Crews a substantial rent credit.
He also explained why American seemed to be charging so much for the bathroom space he was trying to acquire. If the space the airline was giving up fell within the concession master plan, its price was calculated at a lower rate; for any space that fell outside the plan, the airlines could charge more. Half the bathroom space Crews wanted to use fell outside the master plan.
Gleason's letter also addressed the DBE partnership issue. "I understand your reluctance to finalize your local DBE partnership or joint venture until all the locations are completed. I think it is prudent to wait until all the costs on the new locations are documented so that you are able to make full and complete disclosure to your prospective partners. At that time, you will have our total support and help to finalize the selection process."