Spokane Journal of Business

How Salty’s deal came down

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Spokane city officials knew they had a tiger by the tail when the city became interested in buying the Saltys at the Falls restaurant property while Saltys owner was negotiating to lease the site to Clinkerdagger Restaurant.


The city, in a Jan. 30 meeting with Clinkerdaggers owner, Restaurants Unlimited Inc. (RUI), of Seattle, talked of ways to make RUI whole and promised an immediate response to RUIs concerns.


That response never came. Heeding the advice of its legal department, the city cut off all communication with RUI.


We feel we were handled in pretty high-handed fashion, says Jim Welch, RUIs executive vice president. That occurred with the city, and it also occurred with Saltys.


Phil Williams, the citys director of planning and engineering services, claims that the communications blackout with RUI is to last only until the city wraps up its purchase of the building, which it will raze as the Lincoln Street Bridge is built.


The (city) attorneys advice was, No, dont send a letter until after weve bought the property, Williams says. The transaction was to close Tuesday, March 11.


The citys purchase of the property overlooking Spokane Falls also includes these twists and turns:


When the City Council voted March 3 to pay $2.78 million for the Saltys property, the city had not yet had an appraisal done on the property. Williams says an appraisal now has been arranged, but it wont be completed until mid-March, days after the scheduled closing.


City officials knew last September that RUI wanted to lease the site and move Clinkerdagger there. Williams contends that he worked to discourage RUI from leasing the propertywhile also trying to avoid squelching RUIs negotiations with Saltys owner, Happy Guests International Inc., of Seattle. RUIs Welch, however, says RUI believed that the city was encouraging itnot discouraging itto lease the property.


The city considered making extensive modifications to the design of the planned bridge so Clinkerdagger could use the property, but those changes became almost comically implausiblewhile involving cost increases that were anything but funny.


In the late 1980s, before Happy Guests obtained an option to buy the property from Seattle businessman Dave Cohn, the city reached a preliminary agreement to buy the restaurant site from Cohn for about $950,000a third of what the city will pay now. The City Council passed on that transaction because it didnt know for sure that the property would be needed for the bridge project, says Dennis Beringer, the citys real estate manager.


Scott Switzer, executive vice president of Happy Guests, denies that the Seattle company will cut a fat hog in its sale of the Saltys property to the city. In addition to spending the $1.3 million to buy the property in 1995, Happy Guests sunk $2 million into property improvements, laid out thousands more for restaurant equipment, and choked down startup costs and operating losses from the ill-fated seafood eatery, Switzer says.


We wont make any money on the deal at all, he says. The city is paying, I think, a fair price for the property.


Despite the contention over the property transaction, City Councilman Orville Barnes and City Councilwoman Roberta Greene say the councils approval of the deal was the best decision for the city, given the rats nest of complicating factors. In part, the council based its decision on legal reasoning that Greene personally doesnt agree with, but believed she had to heed because that liability pocket was just yawning wide.


How hard did the city work to avoid the Saltys-Clinkerdagger mess?


Williams says that when he moved into his job last July, he made it a point to meet with Happy Guests about the impacts from the bridge project, which is expected to get under way next year. He says he discussed the project last August during a round of golf with Saltys manager Raleigh Johnston and then acting City Manager Bill Pupo.


Johnston and Happy Guests didnt seem very concerned about those impacts, Williams says. Happy Guests Switzer says that RUI had called him in July to ask about leasing the Saltys site.


In September, Williams says, he had lunch at Saltys with Clinkerdagger manager Attila Szabo; RUI Vice President Steve Stoddard; and Pupo to discuss RUIs interest in the property. After lunch, Williams says, he, Szabo, Stoddard, and City Engineer Brad Blegen pored over bridge plans back at City Hall.


Williams says that before Szabo and Stoddard left City Hall, They asked me, Would you move into this property, knowing what you know, during this bridge project? Williams says. I said, Absolutely not.


RUIs Welch says Williams statement is true as far as it goes. But Welch, who wasnt at the July meeting, says Szabo and Stoddard remember that Williams added the caveat, I dont know anything about the restaurant business.


In all, RUI had about five meetings with the city, Welch says. Their perspective now is that they discouraged us. Our perspective is just the opposite. We left those meetings with enough encouragement that we went ahead and negotiated our lease with Saltys. They werent saying there werent problems, but they did offer encouragement.


Somehow, Williams says, Szabo and Stoddard got the wrong impression from his comments. He also maintains that the city was in a ticklish position: If it had alarmed RUI to the point that the company cut off its lease negotiations with Happy Guests, the city might have been liable to compensate Happy Guests for damages.


Happy Guests Switzer says the city also was vague about the impacts from the bridge project back in 1993, when Happy Guests had to decide whether to complete a remodeling of the restaurant building that it had suspended in 1992.


Happy Guests permit for the remodeling was based on construction standards in force in 1991 and 1992, but the city had adopted more stringent requirements after issuing the permit, Switzer says. He says the city told Happy Guests it would jerk its old building permitand require it to get a new one, which would have increased the cost of the remodelingif Happy Guests didnt move ahead with the project.


We said, You cant have it both ways. Back off on forcing us to go ahead with the construction, or buy the property, Switzer says. He says he received a letter from the city saying that it might take the property, but at length the city elected not to buy it. He adds, We never really got to the point that we talked about price.


Also in 1993, a type, size, and location study was done on the planned bridge project, and it became apparent then that the project was going to have a significant impact on that restaurant, says Jim Correll, Spokane-area manager of CH2M-Hill, the engineering firm thats designing the bridge.


Three panels involved in the bridge projecta citizens advisory committee, a technical advisory committee, and a value engineering teamwere asked whether the city should consider buying the restaurant property, Correll says. All three said yes, and their recommendations were presented to the city in the summer of 1993, Correll says.



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