Mike's Diner Bar, a Midtown 'neighborhood jewel,' faces eviction

After nearly three decades of serving customers in Midtown Palo Alto, Mike's Diner Bar has received a notice to vacate the premises after being one day late with a rent payment to the property owners.

Mike Wallau, who has owned and operated the business at 2680 Middlefield Road for 29 years, mortgaged his home and spent $2 million to completely renovate the neighborhood restaurant, which was in an old building that needed many upgrades. When he reopened on June 20, 2019, the building owners, the Schers and the Finebaums, the latter from Southern California, came to celebrate and spoke approvingly of the renovation, he said.

But on July 20, 2023, a letter by owners Scher Holdings LLC and Finebaum Surviving Spouse's Trust stated they were returning his July rent check for $22,052.81 because he was one day late in his payment. The letter was sent by Ventana Property Service, Inc. as the owners' agent.

Wallau said he was a day late because his daughter, who has special needs, was rushed to the hospital for a medical emergency on July 17, the day the rent payment was due. Ventana's office was closed by 5 p.m. and he wasn't able to get there in time because he was still at the hospital with his daughter.

On Thursday, Aug. 3, Wallau presided over his spacious restaurant with its modern decor and bar, greeting diners by name. He was raised just two blocks from the location and still lives in the neighborhood. Outside, there's still the tree he used to climb as a kid, he said.

The remodel, which expanded the restaurant into the adjacent space that formerly housed Peninsula Hardware, took two years to complete. But eight months after the reopening, COVID-19 hit. The restaurant had to close for 17 months due to the pandemic, he said. Meanwhile, during construction and during the pandemic, his rent continued to rise.

"It was difficult to have the rent and the back rent. There was a lack of willingness to try to work on this together," he said of the property owners' stance.

This isn't Wallau's first eviction notice from the property owners. They filed an eviction against Wallau on Aug. 17, 2022, serving him with an unlawful detainer action in Santa Clara County Superior Court. They claimed he owed more than $19,000, which was one month's rent at the time. The owners had demanded that he leave the premises on July 14, 2022, and gave him three days to pay up or vacate, but he didn't vacate, according to court documents.

Instead, Wallau said he eventually made an arrangement with the owners to pay the back rent and more than $5,000 in legal costs. The agreement stipulated that he would pay his rent on the 17th of each month, but if he was one day late, he could be evicted. When he tried to pay the rent on July 18 this year, that stipulation was strictly held.

"They have been very unforgiving" during the entire time of the pandemic, he said.

Reached by phone, Edward Scher, principal of Scher Holdings, said he had no comment.

Wallau said the family owns additional properties next door, which were purchased decades ago by Meyer Scher, a prominent Palo Alto attorney, and his wife, Hannah, and Scher's sister. The elder Schers have since died. Family members inherited the property.

"My heart would break if I had to leave, not so much for myself as for Midtown. The residents are primary customers and I'd hate to see them not have this place," he said.

Fairmeadow Neighborhood Association leader Len Filppu said losing Mike's would be devastating for the community. The remodeled restaurant is the only large sit-down restaurant in the area, a beautiful space for the community to gather. Filppu sat at the shiny, new bar on Thursday evening to watch the Cleveland Browns football game. Nearby, people of all ages chatted over plates of pasta, pizzas, coconut-shrimp salads and tiramisu.

The news about Mike's cafe has come at a critical time for Midtown businesses, which have seen multiple small-business closures and, down the street, a fire that gutted Bill's Cafe and AJ's Quick Clean Center and damaged Philz Coffee and Palo Alto Fine Wine and Spirits in early February.

"This is the crown jewel of the community," Filppu said. "This is one of the neighborhood-serving centers. Mike is a home-grown Palo Alto neighbor who is running a nice sit-down restaurant in a neighborhood center. Losing that is not in the interest of the neighborhood, the city or the residents. People walk here and bike here," Filppu said.

Wallau has been spearheading an effort to revive the 12-year-dormant Midtown Merchants Association, which was just getting off the ground. He hosted a gathering at the restaurant to bring together city leaders and the small businesses. Mayor Lydia Kou and City Manager Ed Shikada attended, as did members of the Midtown Residents Association and the Palo Alto Chamber of Commerce, Filppu said.

He noted that a number of storefronts are now vacant and Midtown is trying to revitalize the business district.

"Mike is the only person to step up to the plate to lead that charge. We just started to get some momentum on this. Everybody likes him. When we went to pass out flyers, everyone was friendly to Mike," Filppu said.

Midtown Residents Association Co-Chair Annette Glanckopf said the irony is that Mike's is finally doing well after the harrowing pandemic recovery.

"It looked like business was picking up. Mike was very enthusiastic about starting the merchants association," she said. "If Mike did leave, that would devastate retail in Midtown."

Glanckopf and Filppu also wondered about the property owners' intentions for the fully renovated space: whether the owners think they'll get more money out of a chain restaurant or if they have other plans that might change the character of the neighborhood retail.

"Why are the owners being so difficult?" Glanckopf said.

Wallau had the same concerns. He said he has some people who would help him buy the property. But when his attorney approached the owners' lawyers, they said the owners will not sell. And they won't let Wallau sell his business to another restaurateur so it can keep operating.

"What is the motivation? I've had my problems during COVID, but everybody has," he said.

His attorney plans to file a motion to set aside the eviction, he said.