I would like to give the neighborhood an update on the Firehouse restaurant project. Since many people joined this list midstream I will backtrack a little so everyone is on the same page.
Several years ago Nextgen Development was awarded the Firehouse via RFP where we were to be the developer and Mike Benson (operator of St Ex bar and café) would be the operator. Near the end of a year planning stage Mike Benson and his partners dropped out for personal reasons. Over the next 14 Months we met with approximate 20+ qualified operators and while there was interest from many operators, most were frankly afraid to take the chance of opening a restaurant in an untested neighborhood. Near the end of the 14 months we met Twyla Garett of Martini 2020 who upon looking at the site and the neighborhood potential rapidly moved forward to commit to the project. Nextgen proceeded to complete the acquisition and moved forward on the project. Unfortunately for Nextgen Twyla signed that agreement just as the financial mess hit nationwide. As a result four or five months after she signed the agreement the financing she had lined up disappeared and she defaulted on her agreement.
In spite of that default Nextgen made the decision to move forward on the project while we looked for a new operator. We committed to spending between $500,000 and $750,000 of our own funds while we searched for a new operator. (Note: this does not include the $100,000 in interest payments we have made to date while we carry this project) The work performed to date on the site is as follows:
95% completion of the exterior building restoration.
We addressed some environmental issues we became aware of
We completed 90% of the non-structural demo required for the project
We spent $250+k completing the architectural and structural plans.
We initiated structural stabilization of the building
Bid out most aspects of the critical systems so we could move quickly when we find the right operator.
During the time we were doing the above work we have continued to search for operators. While we have gotten close to signing a new operator over 7 times, each time something would surface near the completion of the deal that undid it. I will share two such situations here. One operator we found was in a financial cash position to move forward however one of the conditions they were looking for some nominal help from the city for their first 5 years of operation to make their numbers work.. Unfortunately while we had every indication from the city that this would happen (including legislation being introduced to that effect) however the deteriorating local economy killed the city’s ability to deliver that help in fiscal 2008 and that deal died. Subsequent to that opportunity collapsing we signed a letter of intent with another operator, and started working through the operating agreement, however 1 week after we signed that agreement their financing partner collapsed. (Their financing partner was Lehman Brothers)
During the time we have been have been marketing the space we have gotten a number of operators that expressed interest only if they could purchase the building as part of the transaction. In the past we declined to consider that because we wanted to make sure that we could fulfill our commitment to the community of delivering a restaurant on the first level of the building.
After discussion with several bankers regarding how restaurants are currently being financed we have come to realize that in today’s financial instability that the only likely way that a restaurant will get financing on this type project is if they use the building as collateral to complete the build out. While this was not true in the past the problems banks are having has resulted in it being nearly impossible for any other option.
To that end we have changed our marketing strategy to bring this project to market. Shortly you will see a lease/sale sign appear on the building. This is also being placed in Co-star, Loop net as well as the MLS as a sale/lease. The hope is to bring in an operator that previously might have rejected it because they could not lock in their costs by purchasing part or majority ownership of the project at the time they build-out the restaurant. It may be that we may just become general contractor on this project. Our intent is to still to find a way in spite of the financial environment to try to move this project forward. We are trying to think outside the box to keep this process moving. We have also reached out to the Council members’ office for advice/options also. Thank you for your understanding and patience.
Tuesday, January 27, 2009
Firehouse Restaurant Update
This is an old pic before $100,000 of work was done on the building(although it still looks the same to me the last time I passed by it). Apparently, it is now for sale as the Bloomingdale blog notes. Brian Brown, the owner and developer of the property, posted an update on the Eckington listserv explaining what is going on: