Hole in the Wall in Danger of Closing
Tenant and landlord offer different accounts on negotiations
By Kevin Curtin,
4:30PM, Fri. Sep. 11, 2015
Hole in the Wall, a live music venue in the heart of the University of Texas campus providing stomping ground for underground Austin acts and a bar for underdressed patrons, is in danger of closing when its lease expires in December, potentially ending a historic 41-year run.
If the closure comes to pass, blame Austin’s booming real estate market. The club’s rent is set to increase from $15,000 monthly to $20,000, according to owner Will Tanner. He says that even if he could afford that price hike, he’s not certain he can negotiate a new lease.
Tanner maintains he’s been trying to initiate lease renewal discussions with his landlords at the Weitzman Group/Cencor Realty Services for over a year, and that a recent meeting gave him the impression they wanted to move on. His hopes sank further this week when he says he learned that brokers were shopping the space to national businesses.
"If they want us there, I’m there,” promises Tanner. “But I think they want to maximize the money vis-à-vis Popeyes or Quiznos. Even during the 40th anniversary [June 2014], I kind of knew the writing was on the wall.
"The bottom line is it’s my landlord's decision and it’s his to make however he wants to make it and that’s his right – which I respect. He owns the building free and clear, and can turn it into a pet shop if he wants. All of my options are pretty much dictated to me at this point, unless I want to walk – which I don’t want to do.”
Tanner estimates, optimistically, a 33% chance that the HITW can survive. He’s even put the option on the table to split the place in half, letting East Side King have their own restaurant, and making HITW just the front room as it was originally.
“I’d be happy to do that, but the landlord’s saying that doesn’t work for them,” he says. "I’m ready to keep going, so having someone else call it for us ... It’s tough to swallow.”
Consider that Red 7, which was in a bona fide entertainment district, closed over a similar, $5,000 rent increase – from $9,000 to $14,000.
"Red 7 has the strongest booking agency in town with Transmission, and they left because their rent is being raised to less than what I pay now,” sighs Tanner. “I don’t have a contemporary. Beerland doesn’t pay what I pay, the White Horse doesn’t pay what I pay, Stay Gold doesn’t pay what I pay. No one else does. It’s a hard model to make work.”
The crux of the problem is that Tanner feels he’s paying market value and the landlord disagrees. This afternoon, after a call for comment, the Chronicle received an email statement attributed to Scott Freid of Cencor:
"We have always told Will that it is a priority for us to have this business stay. We have told him this multiple times over the last year and sat down with him as recently as last week.
"Since the beginning, Will has continued to maintain that the business is a labor of love and it makes no money. This is further proven by the sales he reports to the TABC.
"Will is obligated in his lease to maintain the building. He has obviously done a poor job, and this obligation has been a major sticking point of the renewal along with several other violations.
"Will decided to be the steward for the Hole in the Wall eight years ago, and it has not gone as he planned. We want him to renew and have given him every opportunity to work something out, which included several concessions from the landlord. Instead of telling the public that he is ready to move on, it seems he has chosen to make the landlord responsible for the demise of his business.
"Needless to say, all of this is a little surprising, since we’ve been working with him every step of the way. But he has to commit to working out a new lease near term or we have to release the building. What happens to the Hole in the Wall is squarely in his hands.
"We have received calls from tenants interested in the building forever. There is nothing new about tenants wanting to lease this great site. Will has been non-committal for years and did not exercise his renewal option. But to be clear, the partnership that owns the building has not engaged a broker to lease the space nor has a marketing program commenced.
"But Will’s lease expires in four months, and there is only so long that we can wait for an answer.”
J.D. Torian, owner of nearby businesses Austin’s Pizza and Tom’s Tabooley, says the property is being overvalued by the landlords. He’d know: Torian sold the HITW to Tanner in 2008 after acquiring the business in 2005. He’d been an instrumental figure in the revival of the HITW after it shuttered in July 2002, aiding then Austin Pizza owners Clay McLaughlin and James Cashiola in the acquisition and reopening of the dormant club in May 2003. In 2005, he brokered the deal for the property to be purchased by the Weitzman Group, his former employer.
It’s Torian’s original HITW lease that expires in three and a half months.
"There’s no way the rent should be more,” he insists. “It’s hard to do business down here right now. It seems like the real estate guys in Austin are taking the position that, ‘You guys have the best location’ and it’s just not true. I have two businesses on the Drag, and it’s very difficult.
"Students are only here nine months a year!”
Torian acknowledges that it’s a broker’s job to get the most money from a property.
"But Will [Tanner] is a great tenant,” he says. “He always pays his rent and there’s no way it can be looked at as an underachieving business. He’s been down there fighting, and look at how much everything on the Drag has changed. There are very few local business on that part of the street.”
This is a matter of bad timing, in Torian’s opinion. HITW’s lease is ending at a time when real estate companies are charging ridiculously high rent, a reoccurring trend that contributed to the venue’s 2002 closing. Doug Cugini, who founded the HITW in 1974 and operated it until 1998 when he sold it to longtime employee Debbie Rombach for a nominal fee, hadn’t yet heard the bad news when reached for comment Friday afternoon.
"It would be a shame if the Hole in the Wall closed," he lamented. “There’s never been a place like it in Austin. Other bars are immaculate and pretty, and the Hole has always been like it is now, put together on a shoestring budget and filled with counterculture people who walk to a different drummer.”
Cugini thinks he probably paid around $800 in rent per month in the Seventies. For the first five years, he didn’t even have a lease. It was a handshake deal with a family who owned the building.
"Austin has changed so dramatically,” he says.
Cugini’s not particularly surprised that the venue could go out of business.
"It’s always seemed miraculous to me that the Hole could exist and stay mostly the same for 40 years,” he admits. “I guess the reason it’s always been there is because the city, the bands, the newspapers, and the whole culture have embraced it.”
He adds that Tanner deserves credit for maintaining the quality of the music. Tanner, meanwhile, says he’s already fielding calls from bands who want to book one last show on their favorite stage.
"I still hope that I can make a deal and keep Hole in the Wall open,” he says. “But when I heard they were shopping to national tenants, I decided it was time to raise a warning signal so people would have an opportunity to come play and say goodbye. If, in fact, we don’t get to re-sign our lease.”
Note: This story has been updated to reflect that the HITW lease expires on Dec. 30, not Jan. 30, as originally reported.