Overcooked Restaurant Deal Served on Brandons Full Plate

Call it the anatomy of a restaurant failure.

The recent tax closure of Louie’s Grill and Bar in Fayetteville shows how the seemingly simple task of serving burgers and fries can devolve into debt and disputes, and how disaster in one endeavor can shed light on other, unrelated dealings.

Perhaps no one knows this better than Gary Brandon, founder of Gary Brandon Enterprises of Springdale, who now finds himself listed as a co-defendant in at least two lawsuits tied to the Louie’s closure, and who, along with his business partners, faces demands for back state and Fayetteville taxes, back rent and payment on an outstanding startup loan.

But for Brandon, there is more. Once among the top homebuilders in the region who reported $31 million in revenue in 2008, he is still haunted by the Great Recession, and by the most recent count, has about $5.7 million in active judgments against him in Washington County Circuit Court.

Those judgments are linked to Brandon’s development deals, making Brandon but one of many affected when the housing market crumbled six years ago. By email from the Northwest Arkansas Business Journal that was forwarded to him by a close business associate, Brandon was asked for an interview but did not respond to the request.

Brandon, a native of the region, is widely regarded as a good guy with a good family and a good reputation. Those who say they know Brandon say he should not be lumped into the same category as rogue developer Brandon Barber, a convicted felon, or bad-boy builder Gary Combs, who would have been indicted in the Barber case had he not died from colon cancer in California.

“I’ve never known anyone who has spoken negatively of Gary Brandon — as a businessman or as a person,” said Perry Webb, president and CEO of the Springdale Chamber of Commerce. “Nothing he did was ever done poorly. Everything he did worked until the system blew up [during the recession].”

 

Order Up

With Louie’s, at least in the beginning, Brandon appeared to be on the winning team. In 2008, he went into business with the Oklahoma-based Hal Smith Restaurant Group, which manages a diverse line of eateries that includes Wes Welker’s, named after the All-Pro wide receiver for the Denver Broncos. Veteran restaurateur Mark Martinez, a popular manager who earned his name with Outback Steakhouse in Springdale, ran Louie’s. Brandon was a silent investor who had no involvement in the day-to-day operations of the restaurant.

The group had big plans for Louie’s and put up big dollars to make it work. According to records on file at the Washington County Courthouse, Martinez, Brandon and Smith signed on as guarantors of the $730,000 Louie’s startup loan from The Bank of Fayetteville and were also signees to the $128,700 per-year lease between Louie’s and Omaha, Neb.-based landlord Lockwood Development Inc., operating through an entity called LRDF1 Fayetteville LLC.

Even with the backing of Smith’s restaurant group and a seasoned investor like Brandon, Louie’s ultimately flopped and was shuttered by the Arkansas Department of Finance and Administration on Jan. 17 due to nonpayment of taxes.

Public records show Lockwood Development has filed a suit seeking more than $91,000 in back rent and fees. In a separate suit, The Bank of Fayetteville is trying to collect on what it claims is an outstanding loan balance of more than $263,000.

And Brian Thomas, deputy prosecutor for Fayetteville, said Martinez has been summoned to appear in city district court on March 5 on a code violation for not paying the city’s hotel-motel-restaurant tax. Martinez has also been sued by Tontitown-based B&S Metal Sales Inc., which claims that Martinez, doing business as Louie’s Grill and Bar, owes $9,500 on work dating back to 2011, according to a lawsuit filed by B&S in Washington County Circuit Court.

In May, as Louie’s was increasingly under pressure to meet its financial obligations, Martinez was arrested in Johnson and charged with DWI, driving on a suspended driver’s license, and refusal to submit to a sobriety test, according to documents in Springdale District Court. In a separate case, Martinez faces a Springdale charge of unauthorized use of a motor vehicle.

On appeal from city court, Martinez goes to trial in March on the DWI, the refusal to submit and the unauthorized use of a motor vehicle in Circuit Judge Doug Martin’s court, according to Fourth Judicial Circuit records.

In reference to Martinez, one Brandon associate who did not wish to be named said that with Louie’s, Brandon unwittingly made one of the biggest mistakes an investor can make — he went into business with the wrong person.

 

Rugged Recession

Regardless of how the legalities with Louie’s turn out, the most recent setback for Brandon sheds light on what’s happening to him on the real estate end of his business ventures. And the fact that he is in trouble should not necessarily be unexpected.

Speaking to the broader issue of what happened during the crash and its aftermath, Lance Johnson, president of Lance Johnson Building Co. of Springdale and past president of both the Northwest Arkansas Home Builders Association and the Arkansas Home Builders Association, had this to say: “It was ugly for a while. The price of raw land got out of line with value. A lot of the homebuilders went away and a lot of the subcontractors who served the builders went away. Nothing surprised me during the [downturn] in the economy.”

According to public records, Brandon, who has not filed for a business or personal bankruptcy, has about $5.7 million in judgments against either him, his company or his wife and business partner, Sherri Brandon, or a combination thereof. Those who vouch for Brandon say that for context, his debts should be compared to the mega bankruptcies of John David Lindsey, at $169 million, and Bill Schwyhart, at $41 million with his Pinnacle Point Properties.

The most recent judgment against Brandon, registered in Washington County in July by BancorpSouth Bank, is in the amount of $819,000 and is linked to Island Breeze LLC, a condominium sales business Brandon formed in 2004 with Birmingham, Ala.-based investor Ronald O. Durham, according to the Alabama Secretary of State. According to records on file with the Florida Secretary of State, Island Breeze LLC is no longer authorized to do business in Florida.

An active foreclosure judgment against co-defendant Brandon, now at $2 million, was awarded in July 2012 to Liberty Bank of Arkansas, and in August 2012, a foreclosure judgment, now at $2.89 million, was awarded to RL Regi-Ar GBE LLC, according to Washington County Court Records.

Webb, citing flaws in the financial system in the years leading up to the crash, was quick to note that although the spate of judgments does not look good, when evaluating Brandon, who established Gary Brandon Enterprises in 1987, his entire body of work needs to be considered.

“Two decades of solid business and success should speak for itself,” Webb said. “He got swept up in a bad system. It’s not his fault.”

Brandon’s attorney, Charles T. Coleman of Rogers, and the respective attorneys for The Bank of Fayetteville, Lockwood Development, Martinez, RL Regi-Ar GBE LLC and BancorpSouth Bank did not respond to the Journal’s requests for comment.

 

A Builder’s Builder

In his prime, Brandon was a builder’s builder, with ambition and the know-how to back it up. Otter Creek, a high-end development in Cave Springs, is a great example. The subdivision, valued at around $15.6 million in 2006, included 192 lots near the Illinois River Watershed Sanctuary and was located in the prized Bentonville School District. The property eventually went into foreclosure and is now under the trusteeship of First Community Bank of Batesville. But of late the subdivision, and Brandon’s original vision, is making a comeback.

Otter Creek currently has 69 lots and three spec homes available for sale and three pre-sold homes are under construction. The exclusive consortium of Otter Creek builders includes Payne Construction, Boulder Creek Homes, David Harris Construction and Jon Brittenum Construction, and house prices range from $375,000 to $450,000, said super-agent Heather Campbell of Weichert Realtors—The Griffin Co., who, along with Philip Cingolani of Crye-Leike Realtors, has the Otter Creek properties listed.

“It’s crazy,” Campbell said. “We’re getting more calls on this than anything else. Everybody loves Otter Creek.”