DGS Raises Private Flea Market Rents

MAG Appraisal Used as Basis for Seven-Month Extension

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The Department of General Services (DGS), managers of Eastern Market, has offered the private weekend flea markets a new seven-month contract to operate on the 300 block of Seventh St. SE. The terms were stated in a letter from the Market Manager Barry Margeson. The new deal comes with a significant increase in rent. Under the old contract, the two markets each paid $2,000 per month, or $500 per weekend day, for a total of $24,000 annually. Under the terms of the proposed renewal, DGS has upped that to $3,050 per month, a 50 percent increase.

The MAG Appraisal

In support of its decision to increase flea market rents, DGS cited the recently completed appraisal of lower Seventh Street SE conducted by The Marcus Asset Group (MAG). DGS tasked MAG with estimating the value of that public space for flea market vending.

MAG concluded that a fair market value vendor rent would be between $115 and $120 a day per tent. It estimated that 30 vendors could be placed on lower Seventh Street SE once the brick and mortar businesses on the east side of the road begin operations. The report appraised the annual “gross effective potential rent” at between $256,000 and $278,000 for both market days.

The MAG report did not include the DGS-managed outdoor vending on the 200 block of Seventh Street SE, the Natatorium and North Hall Plazas or the space under the Farmers’ Line.

The MAG report appraised the total annual cost of running both private flea markets on lower Seventh Street SE at between $188,000 to $198,000.

To find a “Potential Residual available to be paid as rent, the appraisers subtracted the (private flea market owners’) expenses and cost of management and income ($188,000 to $198,000) from the effective gross revenue ($265,000 to $278,000) to arrive at a range of $68,000 to $80,000 annually for both markets,” the reported stated. Per market day that is $34,000 to $40,000 annually; or $2,800 to $3,300 monthly. DGS choose to incorporate the midpoint between these two figures in the seven-month renewal offered to the private flea market vendors.

DGS incurs a $113,380.80 annual expense for closing Seventh Street between North Carolina and Pennsylvania Avenue SE per its agreement with the DC Department of Transportation (DDOT), the report stated. This is the primary cost of operating and hosting the public and two private flea markets apart from incidentals and overhead.

A Flea Market Owner Responds

Michael Berman, president of Diverse Market Management (DMM) that runs the Sunday private flea market on lower Seventh Street SE, objected to the terms of the new contract. It is a “significant change in terms,” he stated. “With no notification and no due process, I am going to be forced to absorb a 52 percent increase with no promise to be able to stay there (past seven months),” he continued. “I do not know anyone who would act so egregiously,” Berman said.

“The (MAG) appraisal is flawed, but I cannot appeal it or negotiate,” said Berman. “It is set in stone. I was told to sign it or else. I was just told that my license expires at the end of the month. It was sent on the 12th (of October),” he said.

Berman stated that he charges his vendors between $125 and $130 a week for their stalls.

Most of these seven months covered in the license are during winter when vendor activity slows to a crawl, Berman pointed out. “We barely have any business in the winter months. I operate at a loss; and then the time when things get better (April) I am told that I am out,” he stated. The increase, he said, will force him to lay off half of his eight-person staff.

Berman has written to DGS asking that there be no rent increase in the new contract. He told the Hill Rag that he will not agree to the current offer.

Attempts to reach Carol Wright, owner of Washington Arts, Antiques, Crafts & Collectibles, which manages the Saturday private flea market were unsuccessful.

Both markets have been allocated space on the newly constructed C Street SE between the north and south buildings of the Hine School Project once it is completed. No firm date has been set for the move.

Here is a copy of the The MAG Appraisal: Eastern Market Report – Pennsyvlania Ave to C St. Final _ Signed.