Power struggle – Why McGowan’s closed

Posted by Dan Whisenhunt March 24, 2014
McGowan's closed last week. Decaturish wanted to know why. The answers are surprising.

McGowan’s closed last week. Decaturish wanted to know why. The answers are surprising.

It just didn’t make sense.

McGowan’s Oakhurst Pub at the historic Scottish Rite building on West Hill Street shut its doors last week. For a few days, people weren’t quite sure what had happened.

Chris Seaver, a reader, Tweeted to Decaturish, “Did McGowan’s in Oakhurst close? Any idea what might take its place?”

At first, we had a difficult time finding answers to that basic question. McGowan’s left without fanfare. There were no heartfelt goodbyes to the community and no press releases explaining the circumstances. The restaurant’s website went offline. The emails to McGowan’s bounced back.

The only explanation was a note taped to the door: “McGowan’s Pub Closed as of March 19, 2014.” That was it.

But this wasn’t any old pub. It was a restaurant doing business inside a historic building, a landmark the Oakhurst community fought to save. The rehabilitation of the former convalescent hospital in the early 2000’s was the catalyst for the neighborhood’s gentrification. The building’s east wing, the Solarium, plays host to community events and wedding receptions.

McGowan’s was in a prime location at ground zero of Oakhurst’s renaissance. It closed and no one knew why. It didn’t make sense at all.

We kept digging for answers and found them. But we also found something we weren’t expecting.

The Scottish Rite property is embroiled in a lawsuit pitting the nonprofit that fought to save the historic building against the nonprofit that redeveloped it. The owner of McGowan’s told Decaturish that the lawsuit is directly responsible for her decision to leave Scottish Rite, a claim contradicted by the building’s current landlord. The outcome lawsuit could ultimately determine who owns the building for the foreseeable future.

When we started asking questions about this lawsuit, we learned that few people knew about it or its implications. McGowan’s closing was just the subplot in a story about a power struggle for control of a Decatur landmark.

That struggle dragged on quietly for years. Cover your eardrums, kids. Things are about to get loud.

What’s up with McGowan’s?

By Friday, March 21, word began to get out that McGowan’s had closed. Decaturish.com’s Twitter account received shout-outs from curious readers. Someone asked about it on the Oakhurst neighborhood Facebook page, and it soon filled up with replies. Everyone wanted to know what had happened.

We visited the restaurant and noticed the sign on the door. We reached out to the owner, Jill Alikonis, on March 21 but couldn’t connect with her that day. We checked DeKalb County court records to see if there were any court filings that might shed light on things.

We found something. Alikonis is named as a defendant in a lawsuit filed in Superior Court in March of 2013 by the Community Center of South Decatur. The other defendant is Scottish Rite’s current owner, Progressive Decatur.

Well, holy shit. Keep reading. It only gets more interesting from here.

Back in 2002, Progressive Decatur, a subsidiary of Progressive Redevelopment Incorporated, signed a lease with Community Center of South Decatur, the group that had been working to save Scottish Rite since the 1970s. Under the terms of the lease, Community Center of South Decatur would pay Progressive $10 a year. In exchange, Progressive Decatur took control of the redevelopment of one of Decatur’s key assets. The lease also contained a purchase option clause. It stipulated that if Progressive Decatur tried to transfer or sell the building, Community Center of South Decatur would be able to execute its option to buy it.

Other records obtained by Decaturish.com show that over the years Community Center chafed under that arrangement. There were disagreements about who had the responsibility for making repairs to the structure under the terms of the lease. One of those disagreements sparked the lawsuit.

Local attorney Kyle Williams filed the lawsuit on behalf of Community Center. Williams is also a candidate in the May 20 Democratic Primary for state Senate District 42.

“I have represented for a number of years pro bono (Community Center of South Decatur) which is the tenant of Progressive Decatur, the owner of the totality of the property,” Williams said.

According to the lawsuit, Progressive Decatur claims that during Scottish Rite renovations someone switched power meters for the Solarium with meters for McGowan’s side of the building. Community Center’s lawsuit claims the nonprofit paid about $30,000 worth of electric bills that should’ve been sent to the restaurant. The lawsuit claims that the bill is ultimately Progressive Decatur’s responsibility, as landlord.

Progressive Decatur filed a counter suit alleging that Community Center of South Decatur had slandered the redevelopment firm by misrepresenting its financial condition to Decatur City Commissioners. The counter suit also said the Community Center’s purchase option is unenforceable under state law.

Williams said a judge will ultimately have to decide whether the purchase option is valid.

“Our position is the letter of option agreement is a valid option. It has all of the essential terms and is a binding contract that gives us the rights of the option,” Williams said.

The lawsuit provoked many questions. we decided to seek an answer to the most basic one: why did McGowan’s close, and did this lawsuit have anything to do with it?

This rabbit hole keeps going and going

We tried multiple times to reach representatives with Progressive Decatur for a comment about this story. Eventually, CEO Bruce Gunter replied with a short email.  “Two not related,” he wrote. “Can’t comment on the lawsuit. That’s about it.” He didn’t respond to an email asking if he knew the reason McGowan’s had closed.

As you might recall, the Scottish Rite went on the market in December 2013 for $2.1 million. Keep in mind that this lawsuit had been going on for several months prior to that announcement. A few days after that news about the listing of the property became public, Community Center of South Decatur released a letter about the situation to Decatur Metro and other media outlets.

“The members of the CCSD board want to reassure the Decatur community that we intend to continue our work as stewards of The Solarium to ensure that it remains available as a public resource,” the letter said. “In that spirit, we have informed Progressive Development, the current owners of the Historic Scottish Rite property, of our intent to exercise a clause in our lease that allows us to purchase The Solarium.”

What most of the public didn’t know at the time is Community Center and Progressive already were haggling over ownership of Scottish Rite in Superior Court.

We spoke to Bill Adams, the Realtor for the Scottish Rite property and a former board member for Progressive Redevelopment, the parent company of Progressive Decatur. He called the lawsuit “frivolous” and said it had nothing to do with why McGowan’s closed.

“I think McGowan’s, they were just behind in their rent,” Adams said. ” … It seemed like a pretty nice little restaurant. It didn’t seem like they had a whole lot of clientele.”

Adams said he didn’t know how far behind McGowan’s was on the rent. He said he only knew about it because of information obtained while getting the property ready to go to market.

“We do an income and expense statement,” Adams said. “We got a rent roll. You look at what all the tenants are paying. That’s when the landlord said they’re supposed to be paying this and they’re behind.”

So that’s clear cut, right? The company that marketed the property said McGowan’s was behind on rent and wasn’t doing a whole lot of business. That’s not uncommon. It sounded like a plausible explanation when we spoke with Adams on Saturday, March 22. Alikonis hadn’t been responding to messages. We reached out to her attorney in the lawsuit filed by Community Center, and he agreed that his client should probably make a statement.

Decaturish was ready to run a story that said Alikonis couldn’t be reached for comment. Then, late on Sunday evening, March 23, we got a phone call.

A different story

It was Alikonis. She promised a statement would be forthcoming. Within an hour she sent the following message via email. Alikonis flatly contradicted what Gunter and Adams said about whether the lawsuit played a part in McGowan’s departure.

“The members of the Board of the CCSD (Community Center of South Decatur or The Solarium) filed a lawsuit against McGowan’s and the building owner, PRI (Progressive Redevelopment INC), in March 2013 regarding switched Georgia Power meters,” Alikonis wrote. “In response to a specific settlement request dated October 7, 2013, from The Solarium Board regarding the lawsuit, PRI listed the entire Scottish Rite Building for sale in late 2013. I decided to relocate my restaurant when I heard rumors of a short sale. I was worried about the stability of the building. Patrons had canceled long standing reservations because of the gossip surrounding the sale of the building. Despite my attempts to negotiate with PRI, my lease expired in January. The uncertainty surrounding the sale of the building, the pending litigation, and the rumored short sale, led me to conclude that relocation is my best option. We are currently scouting for space in Midtown and Inman Park.”

We asked another Realtor to confirm whether Scottish Rite was listed as a short sale, meaning that it would be sold for less than what Progressive Decatur owes on the building. The Realtor said he couldn’t find any evidence that the building is listed as a short sale.

But what about Adams’ claim that Alikonis’ was behind on rent?

Alikonis wrote, “My restaurant had a very easy amicable relationship with Progressive Redevelopment Inc. for some time, including when the general economy was down, and when the unexpected power company invoices surfaced. At several points, we were able to negotiate payment schedules that would work for everyone, until this lawsuit was filed. Soon after that point, the relationship broke down.”

The lawsuit, it seems, played a central role in McGowan’s closing. But it’s also unearthing some other interesting things, too.

Truth as a defense

Remember the counterclaim of “slander” that Progressive Decatur filed against Community Center that we mentioned earlier?

“Plaintiff has falsely stated and continues to falsely state that defendant is insolvent,” Progressive’s counterclaim says. “Plaintiff has falsely stated and continues to falsely state that defendant is in default of the loan secured by the property of which the premises described in the lease is located. The foregoing allegations by defendant are false in that defendant is not insolvent and is not in default under the loan encumbering the property.”

In its response to the counter suit, Community Center cites the “affirmative defense of truth” as a rebuttal to Progressive Decatur’s “slander” claim.

We didn’t find evidence that the building is under threat of foreclosure. But Adams, the Reatlor, did raise the possibility that the property could be in foreclosure at some point. Adams made the comment while saying that Community Center’s lawsuit is “frivolous.”

“The only thing the lawsuit could potentially do is throw the whole property into foreclosure,” Adams said. “The nonprofit that owns it (Progressive Redevelopment), doesn’t have a whole lot of cash now with McGowan’s closing. If they have to defend this suit, then it could be that the building could go into foreclosure. If that’s the case, then all bets are off on leases. So you really could be killing the goose that laid the golden egg.”

So why doesn’t Progressive “have a lot of cash now,” as Adams put it?

Well, back in 2010 the Atlanta Journal Constitution reported that Progressive Redevelopment Inc. defaulted on $8 million worth of bad loans and had several properties in foreclosure. The AJC story quotes Gunter extensively.

“We’re fighting for our survival,” he told the AJC. “We’re out of money. We made the mistake of trying to do too much with too little. And when the housing market tanked, we got shot full of holes.”

We couldn’t find the original article on AJC.com, but some astute individual published it on their Live Journal page.

The article said that Gunter planned to hold on to about 12 of his properties and use those to rebuild his company.

We asked Adams whether or not Progressive Redevelopment is still in the business of providing affordable housing.

“They’re still in business,” Adams said. “They are just winding down, in a pretty orderly fashion. They had sold or had given back all the properties that they own. They have a couple of properties that are under contract. They’re down to three properties.”

The sale of Scottish Rite for $2.1 million would probably help make the winding down process easier if it weren’t tied up in this lawsuit.

Williams, Community Center’s attorney, said there is currently no scheduled hearing on the purchase option. He didn’t rule out the possibility of seeking a temporary restraining order to block Progressive Decatur’s sale of the property.

“The Community Center of South Decatur will do whatever it needs to do,” Williams said.

And we’ll need to stop the story right there, for now. we have several more questions that deserve a response and more trails to follow.

But, the short story is, that’s why McGowan’s closed.

Editor’s note:

This story was updated from its original version to clarify the source of the claims outlined in the lawsuit. 

By the way, this story was a pain in the damn ass to report. It required calling numerous people, scouring records and several pots of coffee. Do you like having this kind of journalism in your community? I can’t keep doing it without your support. There’s a donation button in the bottom right hand side of the screen. Any amount you give will go toward paying writers who can provide the kind of journalism this community needs and deserves. As you can see, a lot of things fly under the radar around here. 

About Dan Whisenhunt

Dan Whisenhunt is editor and publisher of Decaturish.com. https://www.linkedin.com/in/danwhisenhunt

View all posts by Dan Whisenhunt

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