Crash And Burn

 

By Rick Boettger

 

I’m helping a couple of friends put together a roughly $2 million complicated real estate/business deal. They are both smart and already successful, and they’ve got me as their consigliere, so I wouldn’t bet against them. But a couple of spectacular failures I read about recently must give anyone pause on how hard it is to make money on restaurants and real estate in Key West. 

 

The real eye-catcher was the quick demise of the restaurant that replaced the locally-beloved Finnegan’s Wake on Grinnell. Opening as Backspace on February 24, it closed for good in mid-June. Under four months! Less time than they spent renovating it.

 

To appreciate the drama, read the 109 posts on a TripAdvisor thread you can easily Google. My belief from reading the postings is that if anybody deserved to go bust, this owner did. The allegations I believe are:

 

  • He fired the popular chef after working him like a dog until the last minute, also giving no notice to the other staff.
  • He appropriated all of the positive comments about Finnegan’s Wake from their Facebook page, even about food he wouldn’t be serving.
  • On the other hand, he deleted negative comments from the Facebook page, and answered criticism on TripAdvisor by calling his critics “idiots” who wanted the “cheap food and filthy kitchen” of the old Finnegan’s.
  • Charged A-restaurant prices for B-restaurant food.
  • Got frozen fish from Sysco.

The guy was not nuts. He runs the same restaurant in New Orleans successfully, and the typewriter theme here he tied to Hemingway. But when you serve your Hemingway sandwich as a Cuban on French bread, fire the chef badly, diss all the locals, and don’t provide anything new, you’re toast in this tough restaurant town.

 

Friends of mine poured their heart and soul into the restaurant at the Blue Lagoon for 2 ½ years and went bust. That broke my heart. They worked hard for locals’ business, had some original food, and interesting local music, but bought in at the start of the recession, and sometimes what the world does matters, and your own fate is sealed. Them I felt sorry for. The Backspace owner, no.

 

A recent sale of one of the Seaside condos on South Roosevelt led me on a merry jaunt through the Clerk’s website. A northerner named Robert Butler, no relation to our locally renowned Bobby Butlers, developed the four-story sea view residences, but ended up having seven loans foreclosed for a loss of $12.5 million to the banks—sadly, two of them to my beloved Keys Federal Credit Union (maybe that’s why they sold my own 3.875% refi with them to Flagstar right after I closed with KFCU—they felt snake bit).

 

This guy didn’t do anything weird. Made interesting condos with covered parking, elevators, high views over the mangroves, fine amenities. Unfortunately, he bought in and built a couple of years too late. If he’d been able to sell them at $2 million each, which could have happened in the wild days of 2006, he’d have made a fortune. But he was a year late and it turns out $12.5 million short.

 

Some savvy investors lost money in the crash, but they were way ahead. The best one I could find was a guy who flew helicopters in Hawaii, came here in the early 2000’s, and turned over properties to make $10 million by 2007. He was left $1 million underwater on the properties he was holding at that time, but still had $9 million in the bank. We can say the same about the three biggest, smartest landowners in Key West, named Swift, Spottswood, and Knight, who all took a thrashing in the crash. But they were zillions ahead before and have largely recovered already.

 

Makes me very humble about my own real estate luck. And very careful about my friends’ complicated business venture. You’ve got to respect anyone who’s made it big in this town. We are basically a place to spend money you made somewhere else. Next time you see one of the winners, salute anyone you know who’s managed to beat the odds in Key West.

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