Watchdog: Accountability

Six small shopkeepers are big losers in CFPB headquarters building renovation

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Business,Food and Drink,Watchdog,Richard Pollock,CFPB,Accountability,Constitution,Patrick McHenry

Federal officials have ignored six small businesses on the ground floor next to the Consumer Financial Protection Bureau's new headquarters, refusing to share information about the building's renovation or the future of their shops.

The shopkeepers' fears are warranted, because CFPB's renovation blueprints assume the businesses will be forced to leave in the bureau's $136 million project.

The sight of CFPB officials forcing out independent shopkeepers may not sit well with Congress, which created the bureau in 2010 to protect consumers and small businesses in the marketplace.

Many of the store owners fear they will lose their entire life's savings when CFPB begins demolition of the interior of the building, which is in the 1700 block of G Street near the White House.

Only the Treasury Department Federal Credit Union is slated to remain in its present location after the renovation is completed.

The future of a nearby CVS drug store is also questionable — it's also not on the blueprints the CFPB gave to federal planners.

Many of the owners have successfully operated their stores for decades. They are often packed during the lunch hour by federal employees from the surrounding neighborhood.

Among the shops headed for closing by the CFPB project is a popular coffee house that first opened for business in the nation’s capital in 1916. It has been at the CFPB site for 20 years.

Another store slated to be kicked out is an eye center led by a woman whose business has been there for 36 years.

The six shop owners have pleaded with federal officials for information about the pending renovation plans since last summer.

They told the Washington Examiner they have received only vague information or warnings that their leases are worthless.

“Everyone’s been very nervous, not having enough information. What’s going on, what going to happen to us,” said David Choi.

Choi is naturalized citizen who graduated from Cornell University but left Wall Street during the credit crisis in 2009. That year he decided to use his financial talents to help his family and founded G Street Food.

Choi maintains all the owners and their employees are “completely in the dark" about the renovation.

Dr. Patricia Shustock, who is the owner of the Vision Source DC-Focus Eyecare Center, expressed frustration that federal officials have been vague about the future of her business.

“After several conversations, the landlord has been unable to provide a definite schedule or information on resolving the remaining years on our lease,” she said.

Hun K. Chung, who at age 69 still runs the Ellipse Café, can be seen working every day behind the counter with his wife, Joyce, who is 64.

They do it all by themselves. “We may be a small people,” he told the Examiner, “but it is our entire life.”

Speaking of the renovation plans, Hun, a naturalized citizen from South Korea, asked in slightly broken English, “whatever they have to plan, they have to give me information, yes?”

Des S. So, also a naturalized citizen who owns the 8,000-square-foot Met Café, is also nervous.

“First thing, I was surprised. But as the reality sets in, I think it's human nature to be fearful of uncertainty. I have four children to raise,” So said.

Scores of employees may lose their jobs when the small businesses are forced to leave their present locations.

The Met Café has 15 workers. G Street Food employs 11, and the eye center has 10. The M.E. Swing's Co. Coffee Roasters provides jobs to 12 employees.

“Ideally, someone in a responsible position would understand that people’s livelihood is at stake here, not just mine but employees who have worked here for 20 years, 15 years or 10 years,” said Mark Warmuth, who owns the popular M.E. Swings. It attracts 1,000 to 1,500 customers each day.

In 2006 Warmuth purchased the company from Patricia Swing, the great granddaughter of co-founder Michael Edward Swing, after whom the coffee shop is named. The award-winning coffee shop, which also has a location in Alexandria, Va., has been in continuous operation in the nation's capital for 98 years, a record that could be ended by CFPB's renovation plans.

“All we would ask for is a little bit of leadership or understanding that people have to be able to make plans and not be left in the dark,” Warmuth told the Examiner.

Matthew Kimwon, who owns a Quiznos sandwich shop, has a remaining five-year option on his space. When he mentioned the option to an official at the federal Office of the Comptroller of the Currency, which owns the building, he says the official told him it was worthless.

“I sent an email to her that I am going to renew my option,” Kimwon told the Examiner. “But she said, ‘option is nothing.' You can’t get any compensation and you cannot take the option because they have a renovation plan.”

The owners want to know how long they will be able to stay, when they will be forced out, the amount of advance notice they will receive and how long they will have to find and resettle at a new location.

They also wonder how CFPB can push them out when most of them possess valid leases that guarantee exercisable options extending their occupancy for two five-year extensions. And they want to know how they will be compensated for their losses.

But an attorney familiar with condemnation law said the power resides with the federal government, which can condemn or take property if it serves a “public purpose.”

“When you’re a tenant in a government building and the government decides it wants to rehab the building, that’s already a ‘public purpose,’ ” said David Freishtat, a condemnation and land use attorney with the law firm of Shulman Rogers.

“If the leases say the government can throw them out, the government can throw them out without compensation,” Freishtat said.

“If the government doesn’t have that right but they want that space, they can condemn the lease hold, but they have to pay ‘just compensation,’ " he said.

The owners cannot fight an eviction, he said, but they can hope for just compensation. A court will decide “how much money they will get, if they get anything at all.”

“The amount of time and money that went into the project is my life’s savings,” said Choi, who estimated that he and his family have invested $800,000 in their shop.

“I didn’t put in $800,000 to do business for four and a half years, then get kicked out when I have two five-year options remaining,” he says.

So, of the Met Café, said he is still paying off a Small Business Administration loan. Hun estimated that he invested $200,000 in his shop. Warmuth said he invested an additional $20,000 in his coffee shop just last November.

CFPB declined to comment, referring all queries to the Office of the Comptroller of the Currency.

Brian Hubbard, an OCC spokesman, told the Examiner his agency is “coordinating” with CFPB and that at an undetermined date “additional information will be provided [to] the tenants.”

Hubbard said he was not aware of the shopkeepers' plight, but added “I am aware of what the sensitivities would be.”

Rep. Patrick McHenry, R-N.C., chairman of the House Financial Services oversight and investigations subcommittee, said he found the treatment of the small business owners “deeply troubling” but not surprising.

"While I find it deeply troubling that the CFPB has kept these small businesses in the dark about the future of their leases, I cannot say I'm surprised,” he said, noting that Congress also has been in the stonewalled by the agency.

“It is long past time for the CFPB to come clean about the scope of the project, its costs, and its impact on these small businesses," he said.

Rep. Sean Duffy, R-Wis., who has also been critical of CFPB, said the bureau “has disregard for how their policies and actions affect the lives of hard-working Americans. This is the little guy getting his lunch eaten by the bully.”

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