Close call: Federal Realty boots Padow's

Two months after a Padow's Hams & Deli franchise opened in the Barracks Road Shopping Center in 1996, co-owner Desiree Dawson and her husband welcomed the birth of a baby boy. Fourteen years later, when she recently delivered the news to her son, now 13, that the eatery would be closing, the boy was stunned. "I grew up in that place," he told her.

Indeed, many of Dawson's customers also grew up, and grew old, coming to eat at the popular lunch spot. In addition to seeing young customers go through grade school and off to college, Dawson says she's also attended customers' funerals. At one recent funeral, she says, the family talked about how much eating lunch at Padow's had meant to the deceased. 

"Our customers mean a lot to us," says Dawson. "They're not just dollars in the cash register; they're family, and they deserve better than this." 

Today, there's a funereal air around the shop because it will be closing its doors next Tuesday, February 22. But not voluntarily. Dawson says that she and her partners– her mother, Gloria Sanders, and her brother, Michael Sanders– were blind-sided by the news.

After getting behind on the rent they pay to Federal Realty, the Maryland-based real estate development corporation that owns the shopping center, Dawson says, Padow's received an eviction notice and was given seven days to clear out.

"I understand they have the right to do it," says Dawson, "but it was the way they did it that makes me angry."

Dawson says that rent for the space had just become too expensive for the kinds of things– mostly lunch foods– they sold. She says the shop was paying $90,000 a year to Federal Realty in rent for the 2,900 square-foot space, not including other expenses. Indeed, another Baracks Road shopkeeper who wished to remain anonymous tells the Hook that base square-footage rates are $30-$40– up about 40 percent from last year. Businesses there sign what is called a triple-net lease, in which the tenants pay property taxes, insurance, and maintenance fees. And Federal Realty also takes a percentage of sales if that amounts to more than the base rent.

For example, if a business with 1,500 square feet at $35 per square-foot generates $1.8 million in sales, and 3 percent is the target percentage, the business would pay Federal $54,000, just slightly over the base amount. If the same business generated $3 million in sales, however, the business would owe Federal $90,000. And if the business generated only $500,000 in sales the owners would still have to pay the base rate of $52,500 (1,500 x $35), which would amount to over 10 percent of its sales.

The shopkeeper calls percentage rent a win-win situation when there are high sales volumes, which tends to work out best for the big box stores, as the percentage of rent from profit is less, and Federal has an incentive to make sure that businesses succeeds.

But if sales aren't so high, then the base rate alone, plus real estate taxes, utilities, marketing, and maintenance, all of which the shopkeeper pays, can be a killer for small local businesses like Padow's. Indeed, Dawson says she never came close to paying percentage-based rent, but she estimates that her base rate went up 3 percent every year.

So-called CAM charges (Common Area Maintence) can really add up too. Last year, one of the big snow storms cost the shopkeepers $100,000 for snow removal. In addition to the money Dawson says she lost during the storm shutdowns, she's still paying $59 a month for having the snow removed. In addition, real estate tax on the shopping center, based on an assessment of $87.5 million (which works out to over $800,000 a year), is paid by business owners. "Federal makes money coming and going," she says.

"We just wanted time to close down properly," says Dawson. "We owe that to our customers."

Dawson stops to compose herself.

"We put every dime we made into this business," she says, "and we are losing everything."

The Hook attempted to reach a representative of Federal Realty, but they did not respond by the time of this post.

Dawson says she understands that having to close down is ultimately their own fault, for not being able to keep up with the rent, but she's bitter about the way Federal Realty treated Padow's.

"In my opinion, they don't really care about their tenants," says Dawson, who has some thoughts about other locally owned businesses.

"Small local owned shops make Barracks Road special," she says. "Yes, it's also nice to have big box stores, but the local shops make it different from your typical mall or shopping center."

Updated 2/21/2011

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The shopping center is a GOLD MINE.

I'm sure with their track record, there are other shopping centers in town that would be glad to have them. That being said, I've only been in their store a few times, and not at lunch hour but it seemed to me they could have gotten by just fine with half or two-thirds the square footage they had.

I don't recall having a better sandwich in Charlottesville. A real shame.

Good ridance! Over priced sandwiches, now I know why. The rent was killing them. Last time we got sandwiches there, the bread was beyond stale, we called to complain and the manager could have cared less. Durty Nellys makes the best sandwiches, with the Bellair market running second in my opinion. It's a shame their only competition is Subway or Quiznos.

you made a living for 14 years so I don't think it's fair to say that you are losing everything.

Durty Nellys, #1? Bellair market running second??

You wouldn't know a good sandwich if it followed you home and jumped on a plate!

Padow's should employ illegals like the neighboring Chipotle store. Then their labor costs would go way down and there would be cash to pay the rent.

The best sandwiches are at Belliar Market.

Padow's is based in Richmond, and is an institution there. I was pleased to see they had a store here in Charlottesville. Their ham is expensive, but it's iconic - when I was a kid, 50 years ago, their biggest business was mail-order of their hams all over the country. I'll miss them here.

Bellair's sandwiches are for people that don't eat real sandwiches; tasty but pretentious. Good for the St Anne's and Farmington housewives that don't know any better.

I haven't been to Padow's in a long while, it's true, but I haven't had a better sandwich in Charlottesville than the one I had there many years ago. Durty Nelly's makes a mighty fine Reuben, certainly.

Little John's too must be mentioned. I'd put Padow's, Little John's and Durty Nelly's over Bellair any day of the week. Bellair is a chi-chi gas station for people that wouldn't deign to eat in a real deli.

How far behind were they on the rent?
How long had they known that they were behind on thir rent?
How long is a landlord expected to give up their income from rental property?
Did they walk away from their obligation?
What were the terms of the lease relating to timely rent payments?

and most important......

Did they want this to happen so they could break the lease?

Banks are blood suckers.

i know this family - and if any of you are reading this, know that your friends are sorry for your loss. best of luck to you all as you rebuild your lives - you will find strength!

Upscale fat and gristle deli closes.
Now start taxing the obese for their costs to taxpayers.

I just moved to Charlottesville in November 2010 and was really glad to see the Padow's at Barracks Road. I had eaten at several of the stores in Richmond and while I agree that they're a bit pricey, I never had a meal that I didn't really enjoy. The employees that I had any contact with were always friendly and very helpful. I guess you get back what you give...if you are nice to the employees, you recive the same treatment back in bucket loads. I wish this family well...unless you've been in a situation of having to fight for your life with Bankers and Realty companies, you cannot know how devasting it is to lose everything you've worked so hard for.

Yet another example of Federated trying to drive out small businesses in order to free up space for chain stores. Anyone remember when they massively jacked up HotCakes' rent a year ago? A good landlord works with their tenants to ensure a win-win result. I strongly suspect that this didn't happen in this instance.

IIRC, didn't something similar happen with the great bakery that was in the north wing of the shopping center a number of years ago? Their focaccia was incredible. RIP, locally owned bakery. :-(

I am shocked by this news. I have eaten at Padows an average of once a week for years and never experienced anything but the best food, efficient service and warmest atmosphere. I really feel like I've lost some good friends in Buzz, Gloria, Michael and of course Desiree. Shame on you Federated.

Doesn't matter where YOUR opinion is on the best place to eat a sandwich. Everyones allowed opinions. Bout how about a little respect & sensitivity on the matter.
These are good people that mean alot to me, everyone there is like a big family. It was a great & wonderful 14 years, lots of great memories there. And we'll keep on making great memories with or without the actual store. Love you Desiree, Zach, Mike, mummum, Will, all the awesome employees! We might have lost the store but we still have eachother!!!

Desiree & Padow's were wonderful to work with. I hate that this has occurred and hope that they will find another home in the near future. They were customers of mine and I will miss them. For those of you who take this opportunity to be mean, you can lick it!

The bakery in North Wing closed because Panera's
came in and they felt they couldn't compete.

I have lived in Charlottesville for 25+ years and have been to Padow's once. I'd put in on par with Subway in terms of sandwich taste and quality, and Subway is much cheaper. Bodo's, Littlejohn's, Bellair Market, Batesville Store and Panera, among others all have better sandwiches. You could make an arguement that they are not even the best sandwich place in the Barracks Road Shopping Center. Albemarle Square has openings.

Thank you, Padow's! I enjoyed your awesome food, great service and you will be missed.

The reality of $10,000 plus monthly rent means any merchant is on a treadmill to do enough business to pay themselves working wages. But in the end they have nothing and all the real money goes to the companies that run these shopping centers. Places like Durty Nellies enjoy the advantages of cheaper real estate.
It's sad that businesses operating out of such venues are cut off from the prospect of reaching the end of their business cycle with owned real estate to show for their efforts.

People where is your compassion??? If you are a true charlottesville local you would love all the sandwiches here because each institution can make a sandwich anyway you please. Belair can make a ham, yellow mustard, and white bread sandwich if you want, same with durt nellys, same with little johns, same with padows and all of them have their own unique signature sandwiches; all have their highs and lows. This story wasn't about sandwiches, it's about a local family losing their business because federal realty for the longest time has been trying to make barracks into a northern virginia strip mall. I don't know about you, but I don't want to be just another "big box" mall.

Sad to hear this. I moved away from CVL in 2005 and when I visited in May of last year, Padow's was one of my stops. It felt like home and family. I hope they do relocate.

How nice of you guys to advertise their competitors while showing the snow pile... : )

I suppose you prefer news sources that alter their photos?

So sad to hear about Padows... I worked in the North Wing of Barracks Road for years and had lunch there nearly everyday. Desiree and Mike made that workday a bit more cheerful with a kind word, a joke, a hug, and a darn good sandwich. Anyone who is excited to see another local business disappear should be ashamed.

I don't know... I thought maybe a picture of Padows would be appropriate to go along with a story about Padows.... ya think?

Everyone who sees success has to squeeze their share out of the successful business or person. Best to keep your head down and your mouth shut.

Does it bother anyone that the property is owned by an out of state company? How did that happen?

They bought it.

Bellair Market is definitely the BEST place for sandwiches. Padow's was good, but I agree that they were overpriced.

I have been eating at Padow's for probably 11 or so years. I started eating there when I was in middle school and I am about to graduate from college. They have the best chicken salad that I've ever had anywhere else in Charlottesville. Though some sandwiches may be comparable to Subway and other chain stores, the service and atmosphere there are not even close to being the same. I am very sad to see them go, and hope that they will be able to relocate to another location elsewhere in Charlottesville. My mom (and me when I am in town) along with a bunch of her friends eat there weekly, along with a lot of other people you come to recognize when you eat there so frequently. With them closing, we, and undoubtedly the other frequent visitors, are hard pressed to find such a quality and friendly place to have a nice sandwich and conversation where you can come and go as you please, rearrange the furniture without getting weird looks, where the employees know you by name, and where if you're not there, your absence is known. Truly an amazing business, very good customer service, and we are very upset to see them go.

I know what the owners of Padows are going through. Federal Realty are bloodsuckers. The only people who can survive the distance there are corporate chains. So Charlottesville, get used to only seeing that. It will look like every other strip mall throughout America. A small business man cannot afford the expenses shopping centers like Barracks Road. And they dont give a damn if you make a dollar working your butt off 70 hours a week.

No one forced the owners of Padows to sign a lease AND renew it. They understood the terms of the lease. Sorry to see them go. Times are tuff and it will be quite some time before the landlord is able to re-lease the store.

Federal Realty has a reputation for hating local business. They ram up the rent to clear out the local shops. They don't like local. If you own a local business in a property owned by them, start looking to move.

Sad day. I really liked Padows

Bellair market was definitely the BEST for the horsey set to pretend they know what a good sandwich is. They don't and the sandwiches there, while somewhat tasty, are needlessly pretentious.

Anyone that thinks Bellair has the best sandwiches simply doesn't know what they're talking about.

I've had great sandwiches, average sandwiches, and not so good sandwiches at Padows; but that's not the point. The point is that small businesses simply can't afford to locate in upscale shopping centers which means a preponderance of national chains. And that, IMHO is a damn shame.

If you don't like Bellair sandwiches, it is because you have never been to a dentist and have rotten teeth. The french bread they use is tough but tasty. The West Virginians who have commented. Think that Padow's was edible probably had their rehearsel dinners at Padow's when they married their first cousin.

I once went to a rehearsal dinner at Shoney's. Classy.

Please, people- Subway's never, ever met Padow's quality, and Bellair is a ridiculous parking area situation, and pricey, though good, if one can ever find a parking place. Padow's was different: a true family business where one looked forward to seeing the owners smiling faces in greeting , and the workers were very pleasant.. Also, the Question Bulletin Board, the colored marbles and the sandwich tickets made it a very homey environment for many. It had places for people to sit and was a definite meeting place for many. C-ville certainly needs such a sandwich shop. Padow's answered a very real need in that area, and did it well.

Fare thee well, all at Padow's - take care and thanks for the memories!

ugh and there was a line around the mcdonalds the other days... so sad.

As a small buisness owner, regardless of the time you spent whether it was 14 months or 14 years... It would be like losing everything you have worked hard for. Any small buisness owner will tell you that you spend all your time, money, and efforts to make a buisness your own and hopefully something you can pass on to your kids. I had eaten at the Padow's in Richmond many times when I lived there, but had not been to the one here (sorry guys) but it is all you can do to run a buisness and go home sane in the evening, especially in this economy. Good Luck to you folks and hopefully we will see you pop up around town very soon in a not so "commercialized" location.

@ aa

That's probably because McDonald's puts some sort of addictive chemical in their food that gives people mad cravings for it. It probably sounds like I'm kidding, but I'm not. I've see people get fiendish cravings for the stuff, even though a McDonald's "hamburger" can't compare to a really good charbroiled hamburger made with 100% pure ground beef, on a real grill. The salt and fat content also plays a part - people fiend for that too - but mainly it seems to be all about the weird chemical additives that create addictive cravings. That's why you don't see lines around other fast food burger joints, even if they're better. McDonald's has something in their "food" that the other places don't have.

maybe it's fluoride or nanobots

From City commercial permit records:

January 27
Federal Realty Investment Trust, 2162 Barracks Road [Peter Chang's China Grill], additions alterations non-residential, $65,000, Hospitality including restaurants and hotels, Contractor: Kore Contracting Inc.

How much rent do they get out of an empty storefront?

Tenants can be a real pain in the butt. They sign a lease, usually don't read what they signed and eventually blame it all on the property owner.

The property owner is in business to make money, not to provide space to lease to a tenant.

If Padows was that good and has a following, perhap they should open up somewhere else in town.

Did they ever pay the past due rent?

Q: Now where the hell can I find an overpriced sandwich in this town?
A: The Market, Take it Away, Littlejohn's, The other Market...