After six years of planning and approvals, recessionary delays, failed attempts at financing and a devastating flood that cut off her main source of income, the end date is finally in sight for Char Magaro.
The Harrisburg restaurateur, who operated the successful Char’s Bella Mundo in Shipoke for nearly 10 years before closing it last fall in the aftermath of Tropical Storm Lee, expects to open her new establishment — Char’s at Tracy Mansion — by mid-October.
Renovation work for the restaurant — the first phase of a mixed-use historic rehabilitation and construction project at the Tracy Manor mansion — got under way in June.
The plan also calls for office tenants in the mansion and construction of a neighboring condominium building.
The American brasserie-style eatery will blend fine dining and small-plate menus, while giving patrons a wide-open view of the Susquehanna River along Harrisburg’s Front Street.
“Through all of the misfortunes, we persevered,” said Magaro, reflecting on the 2006 conversations she had with York-based Susquehanna Real Estate about creating a riverside attraction in the capital city.
The real estate company garnered city approval for the project in 2007 before soaring material prices and the economic fallout delayed site work.
Magaro then struggled to sell her 46-seat riverside bistro during the recession and found financing a new venture was nearly impossible as lenders clamped down.
Interest waned in the condos. Without a project spark in the restaurant, Susquehanna was unable to move it forward.
“I did not want to have two restaurants, so by not selling the other, I had doubts,” Magaro said of the Tracy Manor project.
Since she wanted to pursue it alone, capital for what already is a difficult pitch to banks and other lending institutions — restaurant financing — became even harder. She said she was turned down by several banks; others declined to even hear the proposal.
“I had other offers to put a restaurant in their space … great offers, but none that I could purchase the property or none that was a better location,” Magaro said.
She had been looking in York, Gettysburg and on the West Shore before being approached by Susquehanna.
Through a Bella Mundo patron with connections in the economic development community, Magaro met Marie Shires at the end of 2010.
Shires is the vice president of the Pennsylvania Community Development and Finance Corp. in Reading, a certified development company of the U.S. Small Business Administration. The nonprofit administers SBA 504 loans to new and growing businesses.
“Knowing how successful her existing location was, I didn’t feel it would be that difficult to secure a (lending) partner,” Shires said.
Given the state of the economy and the risk associated with the restaurant business, traditional financing became a difficult sell, she said.
Last summer, Shires connected with Bucks County-based MileStone Bank, which believed in the $2 million project enough to partner on financing.
The organization’s program uses a 50 percent bank loan, up to 40 percent SBA funds and 10 percent from the borrower, Shires said.
“Banks like our program because they basically have only 50 percent exposure and the first lien on assets,” she said.
Representatives for MileStone Bank were not immediately available for comment to discuss the specific financing model.
“I think a lot of lending institutions just have a certain credit box,” Shires said. “Restaurants just aren’t in that box.”
She said she believes there was concern about Magaro being able to run two restaurants on her own. Shires’ organization also had not funded any restaurant projects prior to this proposal.
“It’s all about Char. We believe in her, her attention to detail and the commitment of her staff,” Shires said.
Lenders are looking for experience when it comes to restaurant financing, said Dan Betancourt, president and CEO of the Lancaster-based Community First Fund, a nonprofit lending institution that offers SBA-backed loans.
However, the bottom line is the lender’s portfolio, he said.
“You don’t want to have a high concentration in any one industry,” he said.
Financial institutions use government-backed loan guarantees as an enhancement for the loan. If the loan is risky and they have a high concentration in that industry, the guarantee really doesn’t matter much, Betancourt said.
A startup with a lot of experience and large infusion of capital or an established restaurateur with a steady cash flow will always do better with the banks if those institutions have the loan capacity, he said.
With contractors working at the Midtown mansion, there has been some renewed interest in the remaining space, Susquehanna CEO Jack Kay said.
“We are in negotiations with some prospective users for the balance of the space,” he said, pegging that number around 9,000 square feet. “It’s too early to tell if there is a deal in the making.”
The firm is hoping to have something in place by the end of the year. Space is available on the first floor with the restaurant. The entire second floor is available with an option for a third-level mezzanine, as well as a rear carriage house on the Second Street side.
All are available for sale or lease, Kay said. Susquehanna also is open to leasing with options to buy, Vice President Tim Fulton said.
“It continues to evolve as a long and ongoing story,” Kay said about the project. “It is one of the most interesting things going on in Harrisburg. We are very happy to be a part of that and hope we can turn it into a positive that moves the ball forward in the market.”
Tracy Manor: A brief history
In 2005, a limited liability company led by Susquehanna Real Estate CEO Jack Kay purchased the historic Tracy Manor mansion in Harrisburg for $1,875,000, according to Dauphin County property records.
Located two blocks from the Governor’s Residence on North Front Street, the 20th-century Tracy Manor was built as a 30-room private home but was converted into an osteopathic hospital and later a mental health facility.
It sat vacant at the time of the purchase by the York-based development company.
In 2007, the city approved the renovation of the mansion. The plan called for a mixed-use office, restaurant and condominium project.
Susquehanna Real Estate planned to rehabilitate the old mansion for the restaurant and office uses and build a seven-story, 32-unit condominium next to the Midtown property.
Tracy Manor is the largest known development parcel on Front Street, according to the firm. It has frontage on both Second and Front streets.
Char Magaro’s restaurant, which is slated for a fall opening, is expected to serve as the catalyst for the rest of the project.
With the lengthy delay since it was approved — the recession being the primary reason for that — the developer has decided to step back and conduct a survey to determine market demand today for the residential construction phase.
The survey will be available on Susquehanna’s website, Vice President Tim Fulton said. It will focus on size and amenities and could lead to a redesign of the condo building.
Leasing or a sale of the available spaces in the mansion will determine when the company breaks ground on the residential component, Fulton said.
What is a brasserie?
A brasserie is a type of French tavern with a relaxed upscale setting that serves single-plate dishes.
Char’s at Tracy Mansion will include traditional brasserie fare — seafood dishes, homemade sausages and steaks — but with American and Eastern influences.