Chic restaurant off to slow start despite subsidy

RALEIGH -- ******

CORRECTION

An Aug. 3 front-page story and an Aug. 12 letter on the editorial page about The Mint, a new downtown restaurant, gave the incorrect title for Rick Jones. Jones is the managing partner of the Raleigh Restaurant Group, which owns The Mint.

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When patrons enter The Mint on Fayetteville Street, they are supposed to be mesmerized by the restaurant's lavish surroundings and metropolitan chic style.

But for some, the glamour elicits a different kind of amazement: Did my tax dollars pay for that?

The city spent $1 million to lure The Mint into the ground floor of its One Exchange Plaza building. That decision has increased the scrutiny on the restaurant, which opened in January and has yet to turn a profit.

Like all restaurants, The Mint is facing an environment in which people are going out to eat less because of the sour economy and higher gas prices. The restaurant is counting on a pickup in business after the new convention center opens next month, and The Mint's owners insist they are in it for the long haul.

"We have a strong financial backing with this company," said Rick Jones, manager of the Raleigh Restaurant Group. "We didn't come in here with our eyes blinded."

But the recent closing of Yancy's, another Fayetteville Street restaurant with a flashy interior, has amplified concerns about The Mint's chances of success, particularly since the average cost of a dinner entree is $28.

Saturday night's menu included poached kangaroo ($14), poulet rouge chicken ($28) and Kurobuta pork chop ($31).

Goal: Break even

Jones said The Mint's goal for its first year is to break even, which will require the restaurant to do $2.2 million in business. The restaurant has been earning, on average, about $140,000 a month, he said, meaning business must pick up considerably if The Mint is to meet its goal.

"We believe the fourth quarter will be a very telling quarter," Jones said.

When the deal with the Raleigh Restaurant Group was announced in January 2006, many questioned why the city seemed obsessed with putting a particular type of high-end restaurant downtown. The Mint's lease states that the restaurant will serve food in a "white tablecloth metropolitan style" and shall feature "low country" cuisine as a prominent part of the restaurant's menu.

The city was doing what private landlords often do: Offer interior construction allowances, free rent and other giveaways as an incentive to lure tenants to their buildings and away from competitors. The practice is more prevalent when there's a glut of empty space, which was true downtown when the city signed its deal with The Mint.

But some downtown restaurant owners are annoyed that the city is subsidizing a competitor.

"Does it rankle? Yeah, a little bit," said George Ghneim, owner of the Riviera Mediterranean Resto & Lounge on South Wilmington Street.

City officials say the arrangement with The Mint is similar to what a private landlord would offer to attract a tenant.

"Our intention was to treat this like a private sector deal," said Julian Prosser, assistant city manager. "I think that's what some people have not fully grasped."

The city paid $8 million in 2003 to purchase the 10-story building at One Exchange Plaza, the former home of Raleigh Federal Savings and Loan. The upper floors are filled with employees of Raleigh's planning, inspections, utilities and development services departments.

Looking to recoup

Most of the taxpayers' money spent on The Mint went towards installing the infrastructure necessary to operate a restaurant in the 6,792-square foot space. The Raleigh Restaurant Group invested an additional $2 million to create the dining atmosphere, according to Jones.

The city expects to recoup its investment over the course of the The Mint's 10-year lease. The lease starts at $20 per square foot and gradually increases to $25.59 in 2017.

Jack Kimball, CEO of Kimball & Associates, said he's heard people argue for and against whether the deal was appropriate for the city. But Kimball, whose company is a leasing agent for the RBC Plaza downtown, said the amount the city invested and the lease rate are comparable to what a private landlord might offer.

"People don't want the city to compete with them unfairly, but it's a market lease and a market up-fitting," Kimball said.

Even if The Mint does fail, the city's investment isn't necessarily a waste.

Prosser said a significant portion of the $2 million the Raleigh Restaurant Group invested was on things that will become Raleigh's property if the group walks away from its lease.

Kimball noted that since The Mint's monthly rent is competitive, there would likely be other restaurant owners interested in taking over its lease.

Raleigh also plans to sell One Exchange Plaza when it no longer needs the office space located on the floors above The Mint. The more paying tenants the city has in the building at the time of sale, the higher the sale price.

"The appreciation to the building is totally extra," Prosser said.