Detractors say the city subsidized the Mint with $1 million in taxpayer money. Officials say the city merely upgraded the One Exchange Plaza building to attract a tenant, as any landlord would. Neither tells the full story.
Among a wide array of dining experiences, the city bet on fine dining. And fine dining lost. Raleigh City Council members will vote Tuesday on a new tenant for the space, Hanah LLC.
While no money went directly to the Mint, money went to renovating a building based on the Mint’s now-failed concept.
“I didn’t think a white tablecloth restaurant was going be a huge success,” said Councilor Thomas Crowder, who voted against the initial deal. “We’re not really a white tablecloth kind of town. If you look at successful restaurants downtown, you can’t just rely on special occasions.”
And those words—“white tablecloth”—were actually built into the lease the city developed.
“We made a good investment,” City Manager Russell Allen told the Record of the city’s decision to lease to the Mint.
While the city invested $1 million as part of the deal, the Mint reportedly invested upwards of $2 million. The good news, Allen said, is that much of that $2 million stays with the building and adds value.
The Mint’s lease started at $12,922 per month and went up gradually each year.
The city is currently set to close a deal with a new tenant, Hanah LLC, this week The lease will start at the same rate as the Mint’s did in 2008, so whether the Mint’s $2 million investment adds value is unclear.
Should the City Be in the Restaurant Business?
At its April 17 meeting, the council expressed reservations before deciding to allow the city manager and city attorney to negotiate a new lease for a new restaurant.
Councilor Bonner Gaylord made clear that the city should not be involved in the restaurant business.
“Generally real estate ownership and being a landlord is best left to private enterprise,” Gaylord told the Record. Private enterprise is “going to be able to derive better value than the city, who is not in that business, would be able to.”
Crowder also expressed reservations about a new restaurant deal, but said that it was better than paying to strip the restaurant interior and start over.
The city manager continued to say that he didn’t think the upfit was bad for the city and that the outdoor seating added vibrancy to downtown.
While Gaylord believes the city shouldn’t be in the commercial real estate business, he added, “Restaurants are particularly challenging because of the volatility associated with them.”
Calculating the Loss
Despite the initial agreement that the Mint’s rent would rise each year, the restaurant was forced to restructure its lease three years after signing. The deal lowered the rent for years four, five and six of the lease and would recoup the money in later years of the ten-year deal.
The city lost $13,915 in 2011 on the restructuring and at least $5,797 in 2012. Since those revenues were meant to be recovered later in the lease, the city may never get that money.
The owners of the Mint, who operate under the name Raleigh Restaurant Group, have said they hope to pay the city back the amount lost on restructuring, said Allen.
Raleigh Restaurant Group couldn’t be reached for comment. The company’s phone number has been shut off.
Even if the amount is paid back, the long-term impact is difficult to quantify.