Risk, 'growing pains' and the Edison investment
Audit will revisit the original deal that converted an old electric plant into a swanky restaurant
Back when city commissioners were figuring out what to do with the old Electric Building at Cascades Park six years ago, they were warned by industry consultants and business professors that restaurants were a risky investment.
But they plodded forward anyway, choosing a brewpub and restaurant over a proposal to convert the building into office space with a small cafe.
That project evolved into The Edison, a high-end restaurant that has struggled to find its footing since it opened in September 2015, despite playing host to wine tastings, wedding receptions, political fundraisers and other social events.
Staff turnover, temporary suspension of its lunch menu last summer and a recent shakeup of its top management have raised questions about the restaurant’s ability to meet its financial obligations to the city — which holds the lease on the building.
Those concerns have prompted city officials to launch an independent audit of the restaurant’s finances, the history of the request for proposals and the agreement that was negotiated with the restaurant’s owners and verification of the money spent on the project.
“It is important that we ensure that all obligations are met and that the public has a clear understanding of the history of the building and its tenant,” Commissioner Scott Maddox said when he requested the audit.
The restaurant's fits and starts have confirmed the concerns expressed by Commissioner Gil Ziffer, the only no-vote on the development agreement.
Under its agreement with Cascades Holdings, the limited liability created in 2013 to develop the property, the restaurant has a 20-year lease structured to pay back the city's $1.3 million investment. The agreement also required Cascades Holdings to invest a minimum of $1.55 million.
Adam Corey, an entrepreneur with a wide range of interests that include lobbying, restaurants, and real estate, formed Cascades Holdings with business partner Ryan Grindler to take over the development of the electric building. Corey said he welcomed the audit because taxpayers have a right to know the restaurant is meeting the terms of its agreement with the city.
"Since we rent a city-owned building we welcome the audit because taxpayers have a right to know we are complying with the deal approved by the City Commission," he wrote in a My View column to the Democrat.
If Corey can make it work, the Edison will enjoy a long life at Cascades Park and pay back the city's investment.
"We knew it would take some time to build a clientele," said Mark Beaudoin, a realtor who was the city's real estate administrator during the negotiations with The Edison's owners.
Worst case scenario, the city has a fully renovated and finished building on the historic register on the edge of a $35 million park within walking distance of 26,000 state workers.
“We’ve got a finished restaurant we can turn around and lease,” said Judy Donahoe, the city’s current real estate administrator.
“Anything not screwed down or nailed down is theirs, all that extra work they did,” Assistant City Manager Wayne Tedder said. That includes the bar and bathroom fixtures. "It is as-is leasable."
A new lease on life for an old electric plant
The electric building was a state of the art power plant when it was constructed in 1921. But by the mid-50s it had outlived its usefulness and the state bought the building and land in 1963 for $10.
When the city started discussing cleaning up and renovating the toxic dump that was Cascades Park, it asked the state if it could have the building back.
A little over a decade ago, the Department of State Division of Historical Resources gave the building back to the city, but with the condition that it be restored in historic detail.
“We wanted complete control over that building because it’s inside Cascades Park,” Tedder said.
The city spent $288,000 in 2007 to remove lead and asbestos from the building, tear out rotten floors, and replace the roof with a fiberglass reinforced membrane. Windows were removed and covered with wire and slanted wooden canopies to keep out water and animals.
Commissioner Nancy Miller and staff were authorized by the commission on June 27, 2011, to create a report outlining the various development options for the building.
That report, delivered to the city commission September 21, 2011, explored the costs, logistics and problems associated with turning the electric building into a restaurant. City staffers talked to industry professionals and academic experts, restaurant owners, developers and officials from other cities.
One of those experts was Mark Bonn, a distinguished professor at the Florida State University Dedman College of Hospitality who has provided analysis for state and county and city governments, professional baseball teams and is a frequent media source on tourism.
“He checked our estimates on restaurant table turnover, and had several discussions with (former real estate administrator) Mark Beaudoin regarding the business structures and operations for restaurants,” said Roxanne Manning, executive director of the Tallahassee Community Redevelopment Agency. “He helped to ensure we were not making any assumptions that were incorrect.”
Bonn recommended turning the building into a banquet hall where FSU students could be trained in the hospitality industry.
"I provided (the city) with a written evaluation of my 'best use' assessment for that facility, and options for it as an event destination venue," Bonn said in an email to the Democrat.
Since that time, Bonn has advised Corey on the Edison and helped create its first wine list. Bonn continues to hold wine tastings there.
Other options given to the city at the time for consideration included a bistro, cafe, casual or fine dining, a coffee or yogurt shop and even a bike rental shop or kite or toy store.
The commission approved the report and used it to shape a request for proposals advertised a year later in April 2012.
Proof bows out, the Edison is born
The Baycrest Corporation, a longtime Tallahassee construction firm owned by the Ghazvini family was the only respondent in that first round. But city staff rejected the proposal because it had no end use and the financial request was $1.7 million more than the Tallahassee Community Redevelopment Agency was committed to spending.
The city readvertised its RFP and got two proposals — another one from Baycrest and one from Liquor Loft LLC, doing business as Proof Brewing Company. Proof's owners — Byron Burroughs, Edward Ward and John Hennessey — had joined forces with Corey, developer Jonathan Lee, and Paul Phipps, who at the time was FSU's vice president/general manager of the Florida State property for ISP Sports and assistant athletics director for the Seminole Athletics department.
They had an ambitious plan to turn the electric building into a brew pub and distribution center. But after crunching the numbers, Burroughs realized the space was too small to accommodate his plans.
"We passed over the reins to Adam," Burrough said. "We just told the city we were pulling out and opening a brewery at Railroad Square. Since Adam was part of the group, he wanted to move forward with it."
Corey already had branched into the restaurant industry by forming the Tallahassee Hospitality Group in 2011 and opening the 101 Restaurant at the Tallahassee Center downtown. It closed suddenly last May and is in the center of an ongoing legal battle with a former owner.
He and Grindler opened Tequila Tribe at the same location in February only to shut its doors two months later.
With Proof out of the picture, the concept for the building changed into what ultimately became the Edison. The City Commission formalized its agreement with Cascades Holdings in December 2013, agreeing to spend $1.3 million in addition to $817,000 the CRA had committed to spend.
Critics accused the city of favoritism toward Corey because of his ties to Mayor Andrew Gillum. The two have been friends since their college days, and Corey was Gillum's campaign treasurer when he ran for mayor.
Corey said his group raised more than $1.8 million for additional development and startup costs, equipment, furniture and lights. Most of those investors, who include lobbyists Sean Pittman and Nick Iarossi, have not been disclosed.
Cascades Holdings took out a third party loan of $530,000 to buy high-end kitchen equipment. City records show that $4.1 million was spent renovating the building.
Risk and reward
The most recent upheaval was the decision to part ways with Steve Adams and replace him with Mike Xifaras, a former proprietor of Carrabba's Italian Grill.
Adams, who had helped develop some of Tallahassee's most "iconic" restaurants including Shula's 347 and Level 8 as well as the now-shuttered Front Porch, told the Democrat the Edison still faced "continued fiscal constraints."
Sam McKay, the former vice president of operations for the Tallahassee Hospitality Group and the Edison, said he resigned after Adams came on board last fall "due to financial differences with ownership."
McKay said he also had been brought on board to stabilize both the Edison and Tallahassee Hospitality Group.
"This indicates that since opening the restaurant has been under constant transitional management," McKay said. "And now appears to have lost two great business 'fixers' due to financial issues."
Corey acknowledges that a destination restaurant located in a new park is a "risky" endeavor, but he sees a bright future for the Edison.
"Just like any new restaurant, we've had our share of growing pains," Corey said, "but the Edison is now a successful operation enjoyed by locals and visitors alike and an important landmark for the community."
Contact Schweers at email@example.com. Follow him on Twitter @jeffschweers.