Aspen City Council keeps agreement on affordable space for now
September 19, 2014
For now, the Aspen City Council is sticking to an agreement it reached with a group of downtown developers on an affordable restaurant space that has sat vacant on Cooper Avenue for the past two years.
The council majority came to the decision Tuesday during a work session, where officials focused on the space's estimated $1 million buildout, which has been a major deterrent for potential tenants.
While detailing background on the situation, Aspen Community Development Director Chris Bendon said, "In retrospect, it would have been wise to require the applicant to build out the restaurant."
Located at 508 E. Cooper Ave., the 1,591-square-foot space is part of a redeveloped building owned by Cooper Street Owners — a group of limited-liability companies controlled in part by Aspen businessmen Ron Garfield and Nikos Hecht, of the law firm Garfield & Hecht. It sits on a lot previously occupied by former local watering holes Cooper Street Pier and Bad Billy's.
In November 2007, the city denied the request of Cooper Street Owners to subdivide the property into separate condominium interests. A month later, the owners filed a complaint in Pitkin County District Court alleging that the city exceeded its jurisdiction and abused its discretion in denying the redevelopment request.
The two sides settled in August 2008, allowing for the redevelopment — which includes a penthouse spanning the top two floors — based on two conditions. The owners provided a cash-in-lieu affordable-housing payment of $309,710 to the city, and the lease for the rental space carried a cap of $50 per square foot, with annual increases.
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Bendon — reasoning that at some point, any tenant is better than no tenant — asked the council if it wanted to keep the restriction in place, alter it to allow general retail uses or remove the restriction altogether.
"Why is it the city's responsibility to lift this restriction?" Councilwoman Ann Mullins asked, adding that she doesn't think altering or removing it is any more advantageous than keeping it.
Citing his experience as a landlord to various restaurants, Councilman Dwayne Romero said it's quite typical for a property owner to participate in a buildout, sometimes in the $600,000 to $700,000 range. Crunching numbers to support his point, Romero claimed that if Garfield & Hecht were to put up $640,000 for the buildout and found a tenant, it would see $64,000 of gross return in the first year alone. Additionally, the restaurant would see an increase in market value, protecting the investment moving forward, Romero said. He then urged Garfield & Hecht representative Lex Tarumianz to "get creative."
"Lean harder into it. Make it work," Romero told Tarumianz. "I'm not abandoning this deal, and I'm definitely not giving an easy exit."
In agreement with Romero, Mayor Steve Skadron said Garfield & Hecht got its penthouse and therefore needs to deliver on its end of the bargain.
"This is a relatively little ask for your team to deliver," Skadron said.
As described by Tarumianz, the space is concrete with gravel floors. The price of the buildout includes installation of a commercial kitchen as well as restaurant hardware such as lighting, seating and table items.
Tarumianz said that despite Aspen's tough restaurant industry, people are willing to invest. As an example, he used Meat & Cheese, Wendy Mitchell's concept on Aspen's restaurant row, which she is building out in its entirety while also subjecting herself to higher rents. But that space is at ground level and in a good location, he said, while the Cooper Avenue space is dark and uninviting. He suggested that the council consider allowing general retail, perhaps a yoga studio or another health offering.
Neither Skadron nor Mullins accepted that argument, listing Big Wrap, Finbarr's Irish Pub and L'Hostaria as successful basement restaurants.
Councilman Adam Frisch said Tarumianz brought up good points but that when taken into account with other Garfield & Hecht legal battles, particularly the settlement that resulted in the new Aspen Art Museum, many in the community are frustrated. He wondered whether the property owners would be willing to "cross their arms and leave the restaurant vacant" if the restriction is not lifted.
"Let's just let it flesh out and see what happens," Frisch said.
At one point, Skadron turned to City Attorney Jim True, who said he will explore legal standards for buildouts and investigate if they are being met in this case. True said that at the time of the agreement, the understanding was that the Aspen Brewing Co., who was a Garfield & Hecht property tenant, would be moving into the basement space, requiring a particular buildout. That never happened, and True added that the estimated cost of buildout surprised him.
Romero said he would respond better to a proposal from Tarumianz rather than an ultimatum on the restriction.
"We're considering just lowering the standard in this exercise by pivoting away from the existing agreement," Romero said. "I don't want to just simply lower standards because it's been difficult. It was understood to be difficult."
Tarumianz said he will explore options with his clients.
"We're going to try to come up with a proposal, I think, on something that we can do that works down there," Tarumianz said.
City officials were also in agreement not to run any more local advertisements in an attempt to drum up interest from potential tenants, which it did this summer two or three times a week in newspapers.
"Let's not spend any more time or money on that," Frisch said. "I don't think that's what's stopping us."