Sylvia’s struggles laid bare

BY GREGORY WILLIAMS & LARRY NEWSOME

ST. PETERSBURG — First of all, we would like to thank the residents of Midtown, the larger St. Petersburg community and the west coast of Florida for their support of Sylvia’s Queen of Soul Food Restaurant.

Although these have been a challenging two and a half years since we initially opened, we still have a strong belief in this project and are fighting to see it succeed.

While my remarks are tempered by the fact that we are still in litigation with the city, we felt it necessary to enlighten the community on the circumstances surrounding the operations and closure of the restaurant.

The best place to start is at the beginning. Back during the Baker administration we were approached by the city to partner with them in renovating and operating a restaurant and venue center at the Manhattan Casino.  This was after the city had made a concerted local and state effort to attract an operator to the site.

We initially declined for the same reasons that all the other vendors declined. We knew that there were considerable risks and challenges associated with operating a full service restaurant at that location.

After several years of analysis and trying to put together deals for other organizations within the community to operate the Manhattan Casino, we concluded that the only way a project of any kind would ever happen at that site was through a public/private partnership that involved not only Urban Development Solutions, but the City of St. Petersburg, other state and federal agencies as well as private capital.

It took us several years to put all of the capital together in a very complicated business transaction, but we succeeded in raising over six million in capital to invest in the project.

It should be noted that these type projects happen all over the country, and they happen primarily in communities like Midtown.  They happen in these communities because they allow projects to happen that would otherwise not happen if left purely to market forces.

While this approach is not a panacea for development in distressed communities, they are an extremely important part of the effort needed to assist these communities in becoming prosperous.  This same approach was used in the development of Midtown Plaza on 18th Avenue that is currently anchored by a Walmart Neighborhood grocery store.

Even with the funds raised, we still ran into cost overruns that left us with very little working capital by the time the project was completed.  This fact alone caused a lot of the subsequent operating problems.  The reason for this is that these type projects are exceedingly difficult to model.

Although expenses can be reliably predicted, base revenues are much more difficult because there is no history to rely upon.  Even using a typical restaurant in a typical market cannot be relied upon because the customer base is so different.

Because of the uncertainty and newness of the concept, projects of this nature require a substantial amount of working capital to get them through two or three operating cycles.   Working capital is also needed to allow for experimentation, and to overcome mistakes or errors in the initial operation of the business.

The only thing that can be predicted about this type venture is that errors and mistakes will be made. The issue is not whether they will be made, but do you have the necessary resources to help you overcome them.

We will be the first to admit that we made mistakes. Although we have learned through the process, and can see what adjustments need to be made, we lacked the working capital to implement the changes.

After we saw that we were not going to be able to make the corrections necessary, without additional working capital, we approached the city last August and requested assistance to help us implement a turnaround plan.  One of the key components of that plan was a request for assistance in obtaining a federal guarantee of a loan called a section 108 loan. The loan has to be applied for through the city. It cannot be applied for directly.  Mayor Kriseman refused to provide such assistance.

After the city refused to provide assistance, we met with and talked to several other sources of capital.  Some of the sources were interested in helping out but were concerned about the negative publicity that had been received as a result of our difficulties with the city.

We had one company provide us with a letter of intent to provide capital if we could get the city to provide a brief period for them to do due diligence. Again the city refused. We were able to deposit sufficient funds with the court to bring the rent current.  The city has still refused.

All of our efforts to negotiate a resolution of these issues with the city have failed because their only position has been that we have to pay them all delinquent amounts outstanding. There are no other acceptable alternatives for them.

While the mayor has the right to maintain the position that he has, it calls into question why the city is unwilling to pursue other measures or remedies to make this project successful.  They surely could if there was a desire to do so.

While it is true that the city has invested over two million dollars into this project, it is also true that private investors, the state and federal government have invested over six million dollars.  How many other projects, other than the Tangerine Plaza, can this city point to in Midtown and show that their investment was leveraged over three to one to help the residents of Midtown?

The community of investors that do these type projects is very small. They will note the city’s lack of effort in trying to save this project. Taking our six million of investment and giving it to another operator may be an acceptable alternative to this administration, but it will not be to future community investors.

How many entrepreneurs that are thinking of investing in, or starting a business in, Midtown are looking at this situation and factoring it into their decision making process?  It was 30 years before a full-service grocery store operated in Midtown when Tangerine Plaza opened.  The Manhattan Casino stood vacant for over 45 years. Community investors made these projects happen.  How enthused will they be in making additional investments?

Midtown is a very challenging community within which to operate a business. There are a whole host of reasons for this. Yet, it clearly needs to be understood that Midtown will never prosper as a community until it has a vibrant business community that provides jobs and amenities to its residents.

The Manhattan Casino and Sylvia’s are part of that valiant effort to achieve that goal. This goal can only be achieved through the efforts of the entire community and the city working together.