Parham Kitchen at a crossroads
Published 7:15 am Saturday, September 21, 2024
- The Bobby Parham Kitchen, once considered the largest cook-chill kitchen in the country, has struggled to find new purpose in the wake of Central State Hospital’s shutdown.
Peach State Kitchen, the company that began cooking and packaging frozen meals out of the Bobby Parham Kitchen on the former Central State Hospital campus in January 2023, stopped production in June, the company’s CEO said.
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The company had been on a month-to-month lease with the Central State Hospital Local Redevelopment Authority through the Authority’s LLC called the Georgia International Food Center. The lease has been terminated, though some remnants of the PSK business remain inside the facility. With no lease, there’s no direct income being generated to help the CSHLRA make the payment on the sizable loan that funded improvements to the kitchen a few years ago.
It’s all part of another chapter in what has been a turbulent four years for the Parham Kitchen, once known as the largest cook-chill facility in the country.
PSK was cookin’, then wasn’t
PSK had been in the co-packing business, meaning it cooked, froze and packaged meals for national brands that either do not have the capacity to make the meals themselves or are at capacity in their own facilities. PSK at one time was reportedly cranking out 40,000 frozen meals per day. They were trucked to distribution centers around the country and later made their way to grocery store freezers.
Brian Ivy, CEO of Peach State Kitchen, who lives in the Atlanta area, told The Union-Recorder Wednesday the reason for the shutdown was that the group his company was packing for “substantially” reduced its volume.
“They weren’t able to fulfill the commitments that they initially laid out in front of us,” Ivy said.
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Business dried up. Production stopped in June and layoffs occurred. At last count late last year, PSK was employing around 70 full- and part-time workers. Ivy declined to give the number of people laid off, only saying that “everybody was taken care of.”
“Nothing like anybody was treated with the FSP group,” the CEO said.
Ivy was referring to Food Service Partners, the previous tenant inside Bobby Parham Kitchen. After two years in operation, in July 2022 FSP shut down and filed for bankruptcy, leaving employees out in the cold waiting for their last paychecks.
Since PSK’s own production shutdown, Ivy has kept some employees on to maintain the company’s expensive equipment and to do some “trial runs” to try and drum up more business.
“We’ve gotten a little bit of traction, but not enough to really to be able to commit to anywhere long term,” said Ivy. “We’re still in hopes that we can get some business to support us staying there.”
Some of Peach State’s equipment has been moved offsite to a warehouse in the Atlanta area because it it has not been needed in the trials.
“Over the next couple of weeks we’ve got a couple of more trials to secure some business,” Ivy said. “We’re hanging on. We’ve got all of our accreditation still. I think right now it’s a 50-50 shot … Hopefully I’ll know something in the next couple of weeks.”
While Ivy attempts to salvage his business, there’s a rub.
Peach State Kitchen has not made a lease payment since around the first of August, according to Central State Hospital Local Redevelopment Authority chairman Johnny Grant. Peach State fulfilled its legal obligation to give 60 days notice to terminate its month-to-month lease back in May and is seemingly being extended a little grace by the CSHLRA board.
Ivy acknowledged that PSK is currently unable to pay rent.
That means there is no direct income to support the hefty loan payment on the Parham Kitchen.
GIFC, LLC
Six years ago, the CSHLRA created an LLC called the Georgia International Food Center. Through that LLC, a $10 million loan was taken out to fund improvements for the 120,000-square foot Parham Kitchen prior to Food Service Partners moving in. When FSP went into bankruptcy, CSHLRA was left to foot the bill on the note payment to Chicago-based Byline Bank, holder of the loan. Some $500,000 was spent over the course of about six months to keep payments current until Peach State Kitchen came in at the start of 2023. Getting PSK in to replace FSP so quickly was seen as a major win for the Central State Redevelopment Authority. PSK’s monthly lease payments, upwards of $65,000, covered the note until the last transaction came through early last month.
As part of the loan schedule, the loan is being recalculated and is set to increase soon.
Creating jobs?
The CSHLRA board was created more than a decade ago to lessen the sting of the state hospital’s closing. The Redevelopment Authority recruits businesses to either lease or purchase the left-behind buildings on the campus in an effort to replace the jobs lost when the hospital shut down.
CSHLRA Chairman Grant was asked Wednesday if the board considered any concessions, like eating some of the hefty loan payment, to help keep Peach State Kitchen in operation locally.
“I think the only conversation we had is we were willing to absorb that differential (the increase in loan payment) until the end of the year if it could help them stabilize,” he said.
The CSHLRA board is financially self-sustaining through leases and purchases of the old state hospital properties. It does not receive any funds from the government at any level – local, state or federal. As of Tuesday’s board meeting, the CSHLRA had just under $1 million in its regular bank account, which is separate of the GIFC account used to support the kitchen. Businesses and organizations often set up separate LLCs for business ventures to protect the main organization’s assets from seizure should bankruptcy occur.
Grant was asked about the future of Parham Kitchen with no direct income to support the loan payment.
“We are current with Byline Bank right now,” he said. “It’s decisions that we’re going to have to make about how we move forward with the status of the kitchen. We are hopeful that we can get a sale in a very short order, but we don’t know at this point.”
Kitchen for sale
There’s yet another wrinkle. Parham Kitchen has been on the market for about a year now. When Peach State Kitchen moved in, it had hopes of purchasing the building itself. After a few months of negotiations, Peach State declined the option to purchase. The reason given was that the building still needed too much work to be done. Attempts were made between CSHLRA and Peach State to reach a middle ground, but none could be found and PSK opted for a month-to-month lease until terminating this summer.
Ivy said there is interest on his company’s part to share space inside the massive building with a potential buyer or co-tenant, but Grant said the Authority did not feel it would be practical to subdivide the building.
“We felt like the building would probably be better marketed without a client that’s just taking up a small portion of it,” Grant said.
The CSHLRA contracts with real estate firm Fickling & Company to handle listings on the campus. Parham Kitchen has had a prospective buyer come look at it as recently as the last week or so, but at the advice of Byline Bank, the CSHLRA on Tuesday voted to hand the kitchen listing off to global commercial real estate firm CBRE. The company has offices in more than 100 countries according to its website, including an Atlanta location.
Grant said during Tuesday’s meeting that it has been communicated to Byline Bank that the CSHLRA “will not long be able to continue making note payments” without any direct income generated in support.
“All of these things are fluid,” Grant added in a Wednesday phone interview. “We will deal with the challenges as they are presented to us. The board has not made a decision right now as to what we may or may not do.”
Should the board decide not to keep up with payments, Byline could place the Georgia International Food Center in default and eventually foreclose on the Parham Kitchen property. But with $9.1 million still remaining on the loan, it’s unlikely that sum of money would be recouped through any potential foreclosure sale.
“That’s certainly a possibility,” Grant said of foreclosure, “but it’s a relatively long process and they have really no reason to foreclose at this point. I don’t think a foreclosure is imminent.”
A sale would render all of the uncertainty moot. The bank would get its money back, and the Redevelopment Authority would presumably be able to pad its account to better develop and market the properties around the former hospital campus.
The CSHLRA chairman, who along with at least a couple of others has said he will no longer serve on the board once his term is up at the end of this year, summed up the kitchen saga thusly: “The kitchen has been a problem area for this board for the last four years.”