DGS Raises Private Flea Market Rents

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The Department of General Services (DGS), managers of the Eastern Market, has offered the private weekend flea markets a new seven month contract to operate on the 300 block of Seventh Street, SE. The new deal comes with a significant raise in rents, according to terms outlined in a letter from Market Manager Barry Margeson. Under the old contract, the two markets each paid $2000 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 $3050 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 the North Hall Plazas or the space under the Farmer’s Line.

The MAG report estimated 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 to be paid on 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 report stated. Per market that is $34,000 to $40,000 annually; or $2,800 to $3,300 monthly. DGS chose to use the midpoint between these two amounts in the seven-month renewal offered to the private flea market vendors.

DGS incurs a $113,380 annual expense for closing Seventh Street SE between North Carolina Avenue 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 per cent increase with no promises to be able to stay there (past the seven months),” he continued. “I do not know anyone who would act so egregiously,“ Berman said.

“The MAG proposal 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. [The notice] was sent on the 12th of October,” he said.

Most of the seven months covered in the license are during winter months 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 says that he charges his vendors between $125 and $130 a day for their stalls.

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 on the Hine School Project once it is completed. No firm date has been set for the move.

EMCAC Responds
Donna Scheeder, Chair of the Eastern Market Community Advisory Committee (EMCAC) responded to the appraisal’s release with this statement:

“A reading of the appraisal confirms the correctness of the EMCAC that the appraisal needs to be done as a whole. There should be no big decisions on the long term use of the 300 block. There needs to be a study done about the best mix of fresh food and arts and crafts and vending. It is supposed to be primarily a fresh food market. We do not agree with this piecemeal process.

It makes no sense for the District to put out an RFP before there have been meetings to determine what the mix or uses in that block ought to be. For example, the stores on that block might want to sell outside on Saturday and Sunday. There are a variety of different stakeholders that can benefit.

That real estate is valuable. We have yet to see why the management of that real estate should be put out as an RFP when there are DGS Eastern Market vendors who could benefit from being included on the 300 block in the weekend markets.

The Market should be appraised as a whole. It is the Eastern Market Special Use Area that should be appraised.“

EMCAC was not consulted about the appraisal of the 300 block. EMCAC is the legally constituted advisory group that makes decisions and recommendations on the Eastern Market which includes the 300 block.