Palo Alto Restaurant at Risk of Eviction as Owner’s Late Rent Payment Causes Concern

After 29 years of business in Palo Alto, Mike’s Diner Bar faces eviction, because owner Mike Wallau paid rent a day late following a family medical emergency.

His rent was due July 17, but he was unable to drop off the rent check until the following day, he said, because he was at the hospital with his disabled daughter.

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

Wallau is working with his lawyers to request a halt to the eviction proceedings. In the meantime, the Midtown neighborhood and the city of Palo Alto are looking for ways to rally their support for the longtime eatery and for Wallau. If the eviction proceeds, Mike’s Diner Bar will be the latest in a run of business closures that have faced the neighborhood, which has lost 15 businesses in five years and has still not recovered from the pandemic’s economic effects.

Palo Alto Mayor Lydia Kou said that the city manager’s office is discussing the possibility of mediation, but isn’t there yet. She said she’d encourage the owners to “rethink this a little bit more. This is a loved restaurant here in Palo Alto.”

Speaking as a real estate professional, she added, many lease agreements offer a grace period for rent payments, but she didn’t know the details of Wallau’s contract.

About five years ago, Wallau took on a project to renovate the restaurant, expanding into the former Peninsula Hardware store. All told, he spent about $2 million and more than two years on the project. He reopened about eight months before the pandemic lockdowns began, and during the pandemic, his restaurant remained closed for 17 months.

“Ever since then, it’s been over three years of trying to appease the property owners,” he said. “All I know is that ever since COVID hit, they have not been happy, and I’ve not felt welcome.”

He added that he’s also noticed a marked deterioration in his relationship with the property owners since the previous owners died and the property passed to a group of inheritors, listed as Scher Holdings LLC and Finebaum Surviving Spouse’s Trust on the eviction letter. The relationship also stands in stark contrast to the positive interactions he’s had as a restaurateur at Portola Kitchen in Portola Valley, where the property owners “worked with me every step of the way,” he said.

Property manager Eugenia Seraia and owner Scher Holdings LLC have not yet responded to requests for comment.

This isn’t the first time a late rent payment has triggered the threat of eviction for Mike’s Diner Bar. Last August, the owners filed paperwork with the Santa Clara County Superior Court alleging that Wallau owed $19,000 in back rent. Ultimately, he agreed to pay the back rent, submit rent on time and cover the owners’ attorney fees of about $5,000. That pushed his monthly rent up to around $25,000 as he paid the back rent over time, he said.

“I’ve been a good tenant for 29 years,” he said. “I’ve served my community and donated to every church, school and Little League team. These are the kind of businesses that support neighborhoods.”

Mike’s Diner Bar is the “crown jewel” of Palo Alto’s Midtown neighborhood, which has fallen on hard times recently, said Len Filppu, head of the Fairmeadow Neighborhood Association.

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

According to Furutsuki, the neighborhood has lost 15 businesses in the last five or six years. Two — a yoga shop and a printing store — closed in the last three months. A third of those 15 businesses are still vacant, and many of the new businesses in those spaces offer personal services rather than retail, she said.

The neighborhood took another hit in February when a fire destroyed four Midtown businesses: Bill’s Cafe, AJ’s Quick Clean Center, Philz Coffee and Palo Alto Fine Wine, adding still more devastation to the tally of still-vacant storefronts.

“The Midtown commercial district is probably going through the most challenging time it ever has,” Wallau said.

Midtown Palo Alto has long struggled to draw the kind of businesses that are popular in the city’s other business districts. The business district is considered in decline, according to a recent economic development report for the city by consulting group Streetsense. Midtown contributed less than 1% to Palo Alto’s overall sales tax revenue in the 2021-22 fiscal year; Stanford Shopping Center, Town & Country Village, downtown Palo Alto and California Avenue were all bigger contributors, the report added.