Mike’s Diner Bar in Palo Alto faces eviction after owner paid rent one day late

Mike’s Diner Bar in Palo Alto is facing eviction after 29 years in business because owner Mike Wallau paid rent a day late due to a family medical emergency.

His rent was due on July 17, but he couldn’t drop it off until the next day because he was at the hospital with his disabled daughter.

Eugenia Seraia of Ventana Property Services returned his rent check of $22,052.81 and informed him that the property owners had initiated the eviction process in a letter dated July 20.

Wallau is working with his attorneys to request that the eviction proceedings be halted. Meanwhile, the Midtown neighborhood and the city of Palo Alto are looking for ways to rally support for the long-running restaurant and Wallau. If the eviction goes through, Mike’s Diner Bar will be the latest in a string of business closures in the neighborhood, which has lost 15 businesses in five years and has yet to recover economically from the pandemic’s effects.

Palo Alto Mayor Lydia Kou said the city manager’s office is discussing mediation but isn’t there yet. She advised the owners to “rethink this a little bit more.” This is a popular restaurant in Palo Alto.”

As a real estate professional, she added that many lease agreements include a grace period for rent payments, but she was unaware of the specifics of Wallau’s contract.

“It seems a little intense,” she commented.

Wallau began renovating the restaurant about five years ago, expanding into the former Peninsula Hardware store. He spent approximately $2 million and more than two years on the project in total. He reopened about eight months before the pandemic lockdowns began, and his restaurant was closed for 17 months during the pandemic.

“It’s been over three years of trying to appease the property owners,” he explained. “All I know is that they haven’t been happy since COVID hit, and I haven’t felt welcome.”

He also stated that his relationship with the property owners has deteriorated significantly since the previous owners died and the property passed to a group of inheritors listed on the eviction letter as Scher Holdings LLC and Finebaum Surviving Spouse’s Trust. The relationship also contrasts sharply with his positive interactions as a restaurateur at Portola Kitchen in Portola Valley, where the property owners “worked with me every step of the way,” he said.

Eugenia Seraia, the property manager, and Scher Holdings LLC, the owner, have yet to respond to requests for comment.

This isn’t the first time Mike’s Diner Bar has faced eviction because of a late rent payment. The owners filed paperwork in Santa Clara County Superior Court in August alleging that Wallau owed $19,000 in back rent. Finally, he agreed to pay the back rent, submit rent on time, and cover the owners’ $5,000 in attorney fees. As he paid the back rent over time, his monthly rent rose to around $25,000, he said.

“I’ve been a good tenant for the past 29 years,” he explained. “I’ve given to every church, school, and Little League team in my community.” These are the kinds of businesses that help communities.”

According to Len Filppu, president of the Fairmeadow Neighborhood Association, Mike’s Diner Bar is the “crown jewel” of Palo Alto’s Midtown neighborhood, which has recently struggled.

“I don’t understand how this landlord would do this unfriendly move to a longtime tenant who has been around and loved by the patrons,” said Louise Furutsuki, a Midtown Residents Association liaison between restaurants and businesses. “It’s absolutely shocking.”

Furutsuki claims that the neighborhood has lost 15 businesses in the last five or six years. In the last three months, two businesses have closed: a yoga studio and a printing shop. According to her, one-third of those 15 businesses are still vacant, and many of the new businesses in those spaces provide personal services rather than retail.

In February, a fire destroyed four Midtown businesses: Bill’s Cafe, AJ’s Quick Clean Center, Philz Coffee, and Palo Alto Fine Wine, adding to the list of vacant storefronts.

“The Midtown commercial district is probably going through its most difficult period ever,” Wallau said.

Midtown Palo Alto has long struggled to attract the same types of businesses found in the city’s other business districts. According to a recent economic development report for the city by consulting firm Streetsense, the business district is in decline. Midtown contributed less than 1% of Palo Alto’s overall sales tax revenue in the fiscal year 2021-22; Stanford Shopping Center, Town & Country Village, downtown Palo Alto, and California Avenue all contributed more, according to the report.

There were plans in the works to turn things around. Wallau stepped up to revitalize the Midtown Merchants Association, hosting a Chamber of Commerce mixer and a planning session to help Midtown businesses. The eviction of Wallau’s long-running restaurant is “just devastating,” according to Annette Glanckopf, vice chair of the Midtown Residents Association, who notes that it appears to be part of a larger trend of property owners “not even respecting the fact that it’s a mom and pop store.”

“It really is putting a stake in the heart of retail,” she explained. “The question now is, what will be the next business to fail?”

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