Here’s the reason why Subculture Coffee closed in Delray Beach

Subculture Coffee

Note: This post has been updated.

Subculture Coffee blamed “greedy landlords” on its Facebook page for the coffee shop’s closure Monday in downtown Delray Beach.

But it was a trial verdict and judgment that turned off the coffee drips at the popular java hangout, at 123 E. Atlantic Avenue Monday night.

On March 6, Palm Beach County Circuit Court Judge Edward Garrison issued a final judgment against 123 East LLC, the entity that leased the space from property owner William R. Burke. Owners of Subculture, based in West Palm Beach, owned shares of 123 East LLC.

In a trial held earlier this month, Garrison ruled the coffee shop had violated its lease with Burke. The trial ended a two-year legal battle between Burke and 123 East LLC/Subculture.

The main source of contention: The sublease of the upstairs floor to real estate brokerage The Knight Group, without Mayo first obtaining written permission from Burke to do so. Subculture occupied the downstairs space.

According to court records, the lease limited the use of the entire premises to a restaurant. It also forbade the sublease of space without Burke’s prior written consent.

But Subculture co-owner Rodney Mayo leased the upstairs 1,000-square-foot space to Knight anyway, according to court records. The Knight Group also was named in the eviction action, first filed in October 2015.

The trial and judgment were not mentioned on Subculture’s Facebook page, which announced the store would be closing its doors Monday evening.

Instead, the Facebook post referenced “greedy landlords looking for any excuse to kick out existing tenants despite them paying rent on time.”

“It’s not about greed. It’s about trying to get your tenants to comply with the terms of the lease,” said Burke’s Boca Raton lawyer, Howard DuBosar. “They didn’t want to comply, and they paid the price.”

DuBosar added: “A judge would not enter an order of eviction unless the judge found there were material breaches of the lease, and in this case, that’s exactly what occurred.”

Garrison’s March 6 order gave Burke the right to take possession of his prime downtown Delray Beach space. It also ordered 123 East LLC to pay an accelerated rent of $366,708, plus attorneys fees and costs.

In an email, Mayo said the landlord won on a “technicality” based on an oral representation “versus a written.”

An oral agreement typically isn’t worth the paper it’s written on. Nonetheless, Mayo, a sophisticated commercial real estate owner, investor and restaurant/nightclub operator, said he relied on a broker saying a sublease was OK.

And despite the lease language allowing for an upstairs restaurant, that was “virtually impossible” due to city rules, Mayo added. An upstairs restaurant would have required installation of an elevator and two stairways, which would have used up pretty much all of the first floor, Mayo said.

Mayo concluded Burke wanted the property back “most likely due to the increase in values and his ability to rent the property at a higher rent.”
Caught in the middle of all of this is the Knight Group’s Jim Knight, a prominent commercial real estate broker in Delray Beach.
Knight said he responded to a sign in the Subculture window about the available upstairs space. And he said he did what he could to make sure the deal was OK, including obtaining a letter from the city that the space could be used as a commercial real estate office.
Furthermore, Knight said he also relied on a broker’s oral OK about the deal.
“The Knight Group was assured by the listing broker that all parties, including the property owner, approved the sublease,” Knight said. “Knight Group was not aware there was an issue with the sub-lease until being notified after taking occupancy.”
The listing broker, Christian Prakas, declined to comment, as did his father, Tom Prakas. Both men are with Prakas & Co. in Boca Raton.
Knight Group now had taken moved back to its former offices, at 10 S.E. 1st Avenue, second floor, Knight said.
And despite Subculture’s closing, Mayo tried to remain upbeat about the store’s Monday closing.

“We went out with a bang and everything was free all day,” Mayo wrote. “The support from the community was overwhelming and very much appreciated.”

Mayo said he’s actively on the hunt for a new location, and already he’s found a couple of possibilities in the immediate area. But an appeal of Garrison’s decision is unlikely, due to the legal expenses involved, he added.

In any event, hope–  and coffee — spring eternal as spring nears.

Mayo said Subculture will be doing a “pop up” store Friday at Mizner Park in Boca Raton for St. Patrick’s Day.

Meanwhile, Subculture’s original location at 509 Clematis St. remains open.



Author: Alexandra Clough

Alexandra Clough covers business for the Palm Beach Post. She has written real estate, law, economic development, banking, retail and high-tech stories for the Post for more than 20 years.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s