Flamboyant developer Jonathan Daou sues franchisee over delayed North Ward School project

in Local Courts/Top Headlines by

A legal battle has begun over St. Petersburg’s defunct North Ward School, with a flamboyant developer taking a struggling franchisee to court after it pulled out as anchor of the shopping center project on Fourth Street North.

Self-described “creative real estate investor” Jonathan Daou bought the site on 327 11th Ave. N from the Pinellas County School District in January 2014 – promising to reuse, repurpose and not “tear down” the school.

Daou’s Northward Holdings paid $1.7-million to the for shuttered North Ward Elementary building, and over subsequent years, spent hundreds of thousands of dollars to refurbish the Mission-style structure built in 1914.

After coming to St. Petersburg from New York, Daou made a splash in the area with several ambitious foodie-themed projects, most notably in 2014 after paying $825,000 for the dilapidated Monticello Motel on Fourth Street North, announcing plans to turn it into a trendy “food hall” concept. After much derision, he scrapped the idea, later putting the property on the market for $1.2 million. Daou recently announced plans to construct a permanent market venue in St. Pete’s Edge District in a vacant lot on Central Avenue between Intermezzo Coffee and the roundabout on Central Avenue at 11th Street.

In 2016, Daou told the Tampa Bay Times he planned to fill the renovated school with a Costa Vida Mexican restaurant, shops and a yoga studio.

During development of the school site, Daou faced several delays – as he did with the Monticello project – over coding and parking, struggling with city officials who he once described as failing to “think outside the box.”

The Times notes that parking issues with the North Ward project forced Daou to abandon plans to repurpose an L-shaped wing of the school added in 1948 and expanded in 1960. He is seeking to knock the extension down.

H2R Restaurant Group is a franchisee “developing Costa Vida Fresh Mexican Grill Restaurants on the West Coast of Florida.” Robert Harris and Will Robinson lead the Carrolton, Georgia-based company.

In August 2016, H2R opened its first franchised Florida location of the Utah-based restaurant chain in Gainesville. At the time, Costa Vida was unique to the area, incorporating Baja California and Mexican flavors with fresh ingredients, tortillas, and salsa made at the restaurant daily.

Costa Vida, founded in 2003 by JD and Sarah Gardner, have outlets mostly in the western, southwestern or northwestern United States, with several in Canada. According to its website: “Costa Vida is one of the fastest growing restaurant franchises in North America.”

Costa Vida had agreed in 2016 to lease restaurant space at the former North Ward Elementary.

But in an April 2017 letter, H2R relented, telling Northward that it would not open a restaurant there, after all, citing difficulty in raising capital after failing to turn a profit at the Gainesville Costa Vida franchise.

“This is not an easy decision and was only made after extensive evaluation of many factors, including how to improve our operational efficiencies, reduction of costs, demand for fresh Mexican food, capital outlay requirements, etc.,” the letter states. “No matter how we analyzed the situation, the conclusion was the same – H2R Restaurant Group would not be able to secure adequate capital and open and operate a profitable Costa Vida restaurant at your center and it is best to advise you of that fact sooner rather than later.”

H2R then offered to work with leasing agent Kris Kral to find a replacement tenant — ideally, either a company-owned Costa Vida restaurant, or a Costa Vida from another franchisee. They also expressed hope the two parties could avoid becoming “adversaries in this matter.”

However, Daou and Northward are having none of it.

In its May 9 response letter, Northward’s attorney warned that if the company did not “promptly retract its repudiation” of the lease, they would take it to court.

Northward is following through on its threat, filing suit June 27 in Pinellas County Circuit Court, seeking damages for breach of contract, breach of guaranty and eviction.

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Phil Ammann is a St. Petersburg-based journalist and blogger. With more than three decades of writing, editing and management experience, Phil produced material for both print and online, in addition to founding HRNewsDaily.com. His broad range includes covering news, local government and culture reviews for Patch.com, technical articles and profiles for BetterRVing Magazine and advice columns for a metaphysical website, among others. Phil has served as a contributor and production manager for SaintPetersBlog since 2013. He lives in St. Pete with his wife, visual artist Margaret Juul and can be reached at phil@floridapolitics.com and on Twitter @PhilAmmann.