The fate of North Bethany Beach restaurant Redfin Grill may be determined this weekend, when the property upon which it rests is auctioned. That auction comes as part of a court decision requiring the dissolution of the partnership that owns the land and building.
A bitter battle between Matt & Greg Real Estate partners Greg Talcott and Matthew Haley over financial issues involved in the restaurant business led to the Dec. 16 court decision that required them to dissolve the real estate partnership and sell off its assets — namely the property that had been leased to Redfin since it was first established.
Some legal matters involved in Haley’s employment with Redfin and its ownership remain pending. (Talcott is a 100-percent shareholder in the restaurant business, though Haley received 50 percent of the profits and has said he and Talcott had agreed to reincorporate after the business was established, with both men as partners. That particular issue is at the heart of the original disagreement.)
The biggest question for the restaurant-going public, the general public and the various parties involved, is who will come away with the prize in Saturday’s auction.
The 3.11-acre property has been appraised at $1.8 million. Auctioneer Butch Emmert, who is handling the auction, said Wednesday that he expects the final sale price will be “somewhat north of that $1.8 million.” But how much higher, he doesn’t know. That will be primarily determined by who the bidders are and what their plans for the property entail.
“Even though it is a fabulous spot and, historically, an extremely successful restaurant, we have a lot of people looking at it for development,” Emmert said.
Making a bid on the property for residential development could be “rolling the dice,” he acknowledged, since the new owner would need to obtain a permit for conditional use to place residential dwellings in the county’s B-1 “neighborhood business” zone.
With such zoning locked up, however, Emmert said the property had the potential to bring in more — perhaps as much as $3 million. Still, “It’s a little bit of a gamble” to bank on the property for development, he said.
The property would be a true prize for developers, with its waterfront location and 300 feet of frontage on both Salt Pond and Route 1. There are no structures in place except the small restaurant building, and it’s just two blocks to the beach, four to incorporated Bethany Beach.
And with 3.11 acres, the land could potentially accommodate a number of single-family homes or multi-unit dwellings. (The trend for development in North Bethany over the last decade has been decidedly in favor of residences and against small businesses.)
Still, Emmert said, “The property has tremendous value as the existing use.”
While the building’s contents and equipment (and Redfin’s liquor license) are not included in the auction, it was designed as a restaurant and would certainly be suitable for a quick turnover for another dining establishment.
But, according to Emmert, the site’s uniqueness stems not just from its location but also from its history as a restaurant location. “This has been one of the highest grossing restaurants per square foot in Delmarva,” he said. “It’s unique to be selling something like this that is so successful.”
Emmert said the rule with dissolutions of partnerships is that there is generally a negative financial impact on the parties and their assets. Not so in this case, he said. “The restaurant enjoys a good reputation.”
And other restaurateurs may be hoping that reputation carries with the location rather than just the Redfin name or those of the people who founded it.
One person who has a vested interest in that reputation, and the property, is Haley. A partner in restaurant development company SoDel, he is currently working to establish at least three new restaurants in Delaware over the next few years, in addition to an expansion of his successful Fish On! in Lewes.
The first of the new SoDel crop — NorthEast Seafood Kitchen — is set to open in Ocean View on April 15.
Haley said this week that he does plan on attending the auction and making a bid. But it will be a “smart bid,” he said, based on business principles and not out of any emotional attachment to the restaurant he founded or the location he selected for it. He’s got too many irons in the fire to invest much emotion in the outcome, he said.
“I’ll make a bid, and we’ll see where it goes. What happens happens,” he said. But, if he does happen to be the top bidder (with much of the winning bid coming right back into his pocket as part owner of the property), his plans would likely include a restaurant on the spot.
And it is certainly possible that Talcott might also make a bid on the property, whether or not it would remain the home of Redfin should he win. (Talcott’s representatives refused to comment on the possibility this week, when contacted by the Coastal Point.)
The restaurant has remained open since the court decision forcing the dissolution of the partnership. Though the lease expired and the broken partnership could not formally renew it, Redfin has been functioning on month-to-month lease while the legal issues concerning the partnership and ownership of the property were worked out.
Emmert said that — assuming the new owner does not elect to renew Redfin’s lease — the restaurant would have to vacate the premises within 75 days (45 days for the closing process and 30 days after that to vacate). How soon a decision would be made about Redfin’s location (or lifespan) could largely depend on who ends up owning the property after Saturday’s auction.
Though Emmert said he considered the property’s long-term future as a restaurant limited, that possibility, along with the potential for residential development, goes a long way toward explaining the “tremendous interest” he said he’s had expressed in the property.
He said potential plans for the parcel have been pretty evenly split, with some 40 percent of inquiries from restaurateurs, 40 percent from developers and a handful inquiring about the property as an investment possibility for 1031 tax-free exchanges.
Altogether, more than 100 entrepreneurs and restaurateurs have inquired about the property, Emmert said.
That means he expects a crowd on Saturday, even if only some of the inquiring minds actually show up to bid. The auction is open to the public, but anyone wishing to bid will have to register, providing two forms of identification and filling out some paperwork before they can make a bid.
The success of Redfin at the location, the demand for coastal housing (with water views) and a highly speculative real estate market combine to mean the sky could be the limit for the bidders and the property’s future.
An inkling of that future could some Saturday, March 12, at 1 p.m., when the auction for the property begins on the premises.
For more information on the auction, call Emmert Auction Associates at (302) 227-1433.