Florida Keys News
Tuesday, January 8, 2013
Commission to vote on 20-year lease with brewery
City would front up to $2M for repairs to its property

The City Commission will decide tonight whether to strike a 20-year deal with two local restaurateurs who want to build a microbrewery and seafood restaurant that would fill the largest spot on the Key West Bight that last housed the Waterfront Market.

If the Commission approves the lease, then the city will agree to front the investors for "basic building repairs" of the nearly 19,000 square-feet available at the two-story property built in 1970.

Also, Waterfront Brewery, which is Joe Walsh and Chris Shultz, would get reimbursed for all costs needed to bring the property up to code, including floor leveling and the electrical system.

Key West Bight had a building improvement fund of almost $8 million at the end of the last fiscal year.

The company's reimbursement, at the prime rate plus 1 percent, is not to exceed $2 million, the lease states.

Key West will ultimately receive a restored waterfront property and fill the largest anchor spot at the city-owned bight, said proponents of the deal.

"It's in pretty deplorable condition," said Commissioner Jimmy Weekley, whose district includes the bight. "If the lease doesn't go through, the city would have to do it. Here's somebody willing to do it themselves."

Waterfront Brewery has submitted sketches and designs for the project that include a rooftop cafe with a prime view of the harbor, and has agreed to a list of conditions from the Planning Board over any live entertainment, which must end at 10 p.m.

The brewery will give tours and sell its wares, souvenirs and logo-affixed apparel.

City staff said that after five months of marketing followed by public notices published for four weeks in early 2011, the only "responsive" letter of interest came from Walsh and Shultz.

The lease projects that for the first year, Waterfront Brewery will pay almost $614,000 in rent.

The base rent is $21 per square foot in the first year, subject to increase yearly if the business does well. "In no event shall the minimum base rent be decreased," the lease states.

Other restaurants on the bight include the 14,500 square-foot Conch Republic Seafood Co., which pays nearly $37 per square-foot monthly.

Turtle Kraals, at about 9,600 square feet, pays $24.44 per square foot as its rent.

"The tenant has agreed to make building improvements at their cost and the (city) will provide for reimbursement of the building improvements over the lease term, which is mutually beneficial," wrote City Manager Bob Vitas in a Dec. 26 memo to commissioners.

Two years in the making, the brewery's investors have already sunk a significant sum into the project -- and now pledge to reimburse the city for building repairs.

"The Waterfront Brewery will produce what is sure to become an iconic product, create new jobs and bring more patrons to the waterfront, thus becoming a destination anchor tenant and economic driver" for the Key West Bight, Vitas wrote.

The commissioners will convene and sit as the Community Redevelopment Agency tonight after their 6 p.m. meeting ends at Old City Hall, 510 Greene St.

Waterfront Brewery is ready and waiting to begin renovations on the dilapidated property, which city staff said cannot be leased right now due to its poor condition.

"We've been doing a fair amount of design and engineering work and hoping and expecting that the deal would be approved," said Walsh on Monday. "Any new business venture is a risk. One of the attractive features about it for us is an opportunity for a waterfront restaurant at the Key West Bight. Historically, waterfront restaurants at the Key West Bight have done very well. It's a great address."

Walsh pointed out that the lease states clearly that the city won't pay for any equipment, furniture or anything related to the operation of the restaurant and brewery.

"The city will be paying for some infrastructure," Walsh said.

If the lease is approved tonight, Walsh said that he will write out a check to the city of Key West for impact fees -- fire and police services, water and sewerage and other basics tied into redevelopment -- that is about $160,000.

Another check, six months' rent as a security deposit, is also required. Walsh estimated that amounts to $200,000.

The brewery and restaurant could open in nine months, he said.

"It's going to be a big draw and I think it's going to help the other business" at the bight, said Weekley, who owns the Fausto's grocery stores in Key West.

The brewery isn't getting any special treatment, said Weekley.

"It's something we've done before," he said. "That whole area had electrical problems and some of the tenants were the ones who came in and made the repairs."

In return, the city gave the owners rebates on their leases over a period of time, Weekley said.

One commissioner openly opposes the brewery deal.

"The last thing we need over there is another restaurant," said Commissioner Mark Rossi, who owns a cluster of bars on Duval Street, including Rick's and Durty Harry's. "I'm not going to vote for it. They should have rented that to West Marine and had a tenant forever."

Asked if it's about fending off competition, Rossi replied, "I don't own a microbrewery."

Rossi said that he expects the lease to win approval by a majority of the seven-member commission.

All building improvements "are permanent and would be desirable/transferable to other lessees," Vitas wrote in his memo, which predicted success for everyone once the brewery and restaurant project open.

Waterfront Brewery has "the demonstrated experience and proven track record of operating successful businesses in Key West," Vitas wrote.

Walsh is a longtime Key West restaurateur who owns Caroline's, Fogarty's, Jack Flats, Red Fish Blue Fish and Mangoes.


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