Batali’s On Boil With Landlord Of Restaurant

The chef Mario Batali was seated before a small table covered in white linen, speaking face-forward to a television camera, one afternoon this past winter.

“We’re shooting to make Del Posto a four-star restaurant in New York City,” he said in the deliberate, teacherly tone he has perfected as a television chef, preparing the footage that would serve as an introduction to Mario, Full Boil, a documentary special for the Food Network about his latest restaurant venture.

It had never been done before, he explained, because Italian food was regarded as too simple. But with Frank Bruni as The New York Times’ new restaurant critic (and therefore arbiter of the fates of even Manhattan’s most powerful chefs), he must have reasoned that he had a chance. The paper’s former Rome bureau chief had become a connoisseur of Italian cuisine during his time abroad.

And yet the food itself was not all. The design of the restaurant, which occupied a choice spot in the huge old Nabisco factory building on 10th Avenue between 15th and 16th streets, would also be an important factor in getting Mr. Bruni’s approval. Del Posto, the documentary seems to suggest, was built for Mr. Bruni.

By 8 p.m. on Feb. 28, they had their answer: three stars, not four. To be sure, a very, very positive review, batting away ambient chatter that the restaurant was an overambitious folly (“Dishtar” was Mr. Bruni’s coinage). And the build-out? Spacious, but it “can seem a bit like a hotel lobby,” Mr. Bruni declared.

But nine days before he got to reveal his ambition to television viewers on Feb. 18, when the documentary aired, Mr. Batali had found that someone else entirely might hold the fate of his restaurant in his hands when his landlord slapped an eviction notice on the restaurant’s door.

Last July, the private equity firm Somerset Partners dropped $294 million on the 11-story building while Del Posto was under construction. According to Mr. Batali, Keith Rubenstein, a director of equity investments at Somerset Partners, called him five months later, as the restaurant opened, to complain that elements of the restaurant’s construction—documented heavily in the Food Network program—violated the terms of the restaurant’s lease, which had been signed with the building’s previous owners, Chelsea Market founder Irwin Cohen and his partners at Angelo Gordon & Company.

“Right when we opened the restaurant, they called and talked to us about a few things,” Mr. Batali said. “We didn’t understand what they were talking about, so we just said, ‘Yeah, we’ll talk to you after we get this baby opened.’”

Mr. Rubenstein wasn’t satisfied with that, and on Feb. 9, he filed court papers to initiate eviction proceedings against Del Posto.

“I’ve never been in a battle like this,” Mr. Batali said.

A “celebrity chef gone wild,” the court papers filed by Somerset Partners call Mr. Batali, whose unflattering attributes allegedly include “buccaneering conduct” and “swashbuckling disregard” for other tenants.

“We weren’t malicious or swashbuckling or buccaneering,” said Mr. Batali, dismissing “all that pirate stuff.

“In the end, we have a 25-year lease. We’re going to be their tenants for a long time.”

In the neighborhood’s recent boom, Mr. Batali understands that his $140,000-a-month lease is a bargain.

“It’s undervalued, which is why they’re so focused on it right now,” said Mr. Batali. “When we signed that lease three years ago, there were crack junkies and very little else on that block. That’s why we got a deal. People didn’t think it was such a great neighborhood. Now, it’s all of a sudden looking really shiny.”

In the papers, Somerset Partners allege that there is illegal duct work; the use of a sidewalk vault space to store the restaurant’s HVAC and various equipment without a permit; the distribution of fliers on the sidewalk for the restaurant’s $29 valet parking, also without permission; and the placement of exterior light fixtures in such a way as to obstruct security cameras.

“The previous landlord had granted us that stuff verbally, but never really wrote it down,” said Mr. Batali. “I’m sure this is just a minor and temporary thing. Whatever Irwin [Cohen] told them is exactly what he told us, and they’ll figure it out.”

Mr. Batali’s optimism has its bases. There is indeed a Yellowstone injunction staying the eviction proceedings. What’s more, extensive video footage of the construction of the space—a major focus of the Food Network special—shows his previous landlord touring the construction site and conferring with Mr. Batali, his partners Lidia and Joseph Bastianich, and his architect on modifications to the space. Mr. Bastianich thinks this footage will show that a verbal agreement was in place with Mr. Batali’s old landlord to make the modifications to the space.

“We have an incredible amount of footage of the prior owners walking through the space, directing things to be done,” said Mr. Bastianich. “They effectively did the project with us.”

Although Mr. Cohen declined several calls for comment from The Observer, he may eventually have to tell it to a judge.

“We’re going to subpoena him,” said Mr. Bastianich.

Mr. Rubenstein isn’t so sure that Mr. Cohen’s testimony—or the footage from the documentary—will make a difference.

“When we bought the building, they signed an estoppel certificate saying that there are no oral agreements and that the lease is in effect,” said Mr. Rubenstein. Mr. Bastianich admits to signing an estoppel agreement, but claims there is a revised one with his comments on it that should be used.

Mr. Batali accepts that an agreement was signed, but he also brushes off the incident by saying that “somehow my partner Joe’s signature got on a piece of paper that maybe he hadn’t looked at.”

IN MARIO: FULL BOIL, THERE IS MUCH FOOTAGE of Mr. Batali in his signature orange clogs, hopping onto his Vespa and driving to his several restaurants, book signings, kitchen-product roll-outs, food tastings and meetings with investors.

That’s when he’s not filming one of his three television shows.

But much of the film documents the construction of Del Posto in the bottom of an old factory in a once-gritty corner of West Chelsea. Through much of this portion of the film, Mr. Cohen and his partners are seen riding along with Mr. Batali as the construction progresses. In the documentary, several calamities arise and are overcome—at one point, the Hudson River flows inside and holds up work on the foundation, potentially jeopardizing the whole building—but none of them arise from disputes with Mr. Cohen.

“We have documented footage of Irwin [Cohen] walking through—not these Somerset guys,” said Mr. Batali. “Everyone is walking through, and everyone knows what is going on. It’s not like there’s some Pink Panther music and I’m sneaking through the night, stealing some ductwork space. It’s pretty straightforward.”

So it is to Mr. Rubenstein as well.

“This is like the tail wagging the dog,” said Mr. Rubenstein as he stood outside his 11-story building.

Construction was already underway in the space next-door to Del Posto, originally sought by another celeb-de-cuisine, Tom Colicchio, for one of his ’wichcraft chain of restaurants. (He is now holding off on plans to build the high-end sandwich shop in the retail space next to Del Posto, according to reports in the New York Post, until the two sides reach a settlement. However, Mr. Colicchio’s much-hyped Craftsteak is still scheduled to open in the building by May.)

The would-be Colicchio space, Mr. Rubenstein alleges, is just one of the neighboring spaces suffering from Mr. Batali’s lease infringements—and not by any means even the most important.

“On the other side of this wall is Del Posto,” said Mr. Rubenstein, standing inside the retail space next-door. “This boxed-in duct is their duct that houses their air conditioning or heat. The reason they put it here was they didn’t want to put it on the other side of the wall. They realized if they had to run their duct—it’s a big duct—they would lose their mezzanine. At some point in time, they decided to do it here.”

“It’s as if someone rents an apartment on the seventh floor and decides they want to put their kitchen on the eighth floor,” he said later.

“This is a major building with major tenants,” continued Mr. Rubenstein. “As long as we’re the owners, they’re going to abide by their lease.”

Indeed, there are some major tenants, including Moët Hennessey U.S.A., College Sports Television, Level 3 Communications, the New York State Police, various mysterious federal-government agencies which occupy the top four floors, and Lehman Brothers.

It was to cater to Lehman that Somerset invited its most recent confrontation with Mr. Batali and his partners.

In order to clean out concrete dust in the electrical room, the building’s power was shut down on a recent Saturday night—obviously, the busiest for any restaurant.

Mr. Rubenstein claims that Del Posto was given advance notice in case they wanted to bring in back-up generators.

“The reason it was done on a Saturday was because Lehman Brothers requested it,” said Mr. Rubenstein. “It was better for them to arrange for their backup generation, and to have all of their consultants here to make sure they didn’t wipe out all their data. It was Del Posto’s cause, and it was done for the convenience of the 590,000 square feet in the building.”

“They had to upgrade the electrical thing,” said Mr. Batali. Although upset with the decision to do it on a Saturday, Mr. Batali also accepts that Somerset Partners own the building and have a right to make changes. “They had to do what they had to do.”

As the recriminatory back-and-forth continues, the March 9 court date, which could decide the fate of Mr. Batali’s new restaurant, is starting to seem inevitable.

Indeed, while it would seem to make sense to patch things up amicably without prolonged litigation, the two sides have not come together to play nicely.

Certainly, the two sides haven’t met around a table at Del Posto to sort things out over a nice bottle of Costamagna Dolcetto.

In fact, Mr. Rubenstein has never eaten there, though he has eaten at Babbo and Lupa, both before and after becoming Mr. Batali’s landlord.

Mr. Bastianich claims that Mr. Rubenstein, and his partners, were treated well at various restaurants, with “three months of getting them reservations at Babbo, buying free deserts [and] free wine.”

“We have all documentation on this—reservation requests here, there, for their parties,” said Mr. Bastianich. “I was like their concierge. Then came the requests for unlimited access to all the restaurants—not just Del Posto, but an across-the-board 40 percent discount.”

“We’ve heard different variations of that before,” said Warren Estis, a lawyer for Somerset Partners. “Basically, there’s no truth to it. [Mr. Rubenstein] never asked, but even at a 40 percent discount he’d be overpaying.

“It’s totally ludicrous to think that all this stems from [the fact that] he didn’t get a discount,” Mr. Estis continued. “Meanwhile, they’re violating the lease right and left.”

“After a $12 million investment [and] three years of my life, I have a 25-year lease,” said Mr. Bastianich. “This is the restaurant that I was supposed to ride into the sunset on. I’m not going anywhere.”

IF MR. BATALI AND HIS PARTNERS WERE naïve to let so much of their understanding with their previous landlord go undocumented, Somerset Partners also seems to be operating one star above their previous operations.

Managing relationships with their tenants, even when their needs conflict, is a big part of being a commercial property owner in Manhattan. And that’s something that’s pretty new to Somerset Partners.

The Nabisco building purchase—which, adding up the historical significance, extensive technological improvements and, most importantly, the sought-after location (which includes rezoning for luxury residential units, trendy meatpacking-district clubs, other celebrity-chef-run restaurants, and adjacency to the soon-to-be-glammed-up High Line)—was astute, to be sure; it is also their first-ever purchase in Manhattan.

Last July, when Somerset Partners completed the all-cash purchase of the building, the company’s real-estate portfolio was composed of a few thousand apartments, scattered far from Gotham, in smaller cities like Atlanta, Little Rock, Ark., and Wichita, Kan. Subsequently, they made one more big Northeast purchase, acquiring a commercial building on K Street in Washington, D.C.

With Somerset Partners and Del Posto having an office in the same building, one might assume that the feuding sides could get together outside the courtroom. Apparently, one meeting was cancelled, and a second was either cancelled or never confirmed. It depends on whom you ask.

“We had a meeting set up in which the lawyers and the clients would be present,” said Mr. Estis. “It was a 2 o’clock meeting. At approximately 10 after 2, we get a phone call from the attorneys, when we’re all here—Keith changed his vacation plans [and] I rearranged court appearances—to tell us they are not showing up.

“To say the least, we were all furious,” Mr. Estis added. “It’s a continuing arrogance on their part. I don’t even think [Mr. Batali] knows what’s going on. He’s so busy running from one TV studio to the other.”

According to Mr. Estis, they never called to reschedule, but Mr. Batali claims that they did, for March 3.

“We had set up a meeting with one of our investors, Henry Kravis, and the main guys at Somerset, Keith [Rubenstein] and his partner,” said Mr. Batali. “They just cancelled it. They said they wanted us to send them a game plan of what we wanted to achieve in that meeting.”

The clock is running out on them: If the two sides reach the court date and Mr. Batali loses, the restaurant will have to be shut down for major renovations, none of which is likely to add to the place’s design. The reopening will be as tough as the opening.

But then, three stars, at least, from Mr. Bruni will already be lining their pockets.

Maybe a redesign would give them another stab at a fourth?

“We’re ecstatic,” said Mr. Bastianich. “We’re going to spend another year working to try and get four. It’s an opportunity and a responsibility.”