Distrito in Moorestown to close as sale of Garces restaurants to go forward

Distrito in Moorestown Mall, as seen before its opening in July 2014.

Distrito’s Moorestown Mall location will close after business Thursday, May 31, as Jose Garces tightens his restaurant empire before an auction next month in bankruptcy court.

On Wednesday, Garces told staffers — including 34 full-time employees — that the Mexican restaurant, open just shy of four years, that they would be offered jobs elsewhere in the company in Philadelphia and Atlantic City, his spokeswoman said.

Companies sometimes shed poor-performing assets before a sale, just as Vetri Family closed its Osteria location at the same site in Moorestown in 2015 before its sale to Urban Outfitters. That sale was not bankruptcy-related.

Distrito’s University City location is unaffected. The spokeswoman said no other Garces restaurant closings were in the offing.

Garces emphasized that operations at the company, including a catering division, would continue after the auction. His spokeswoman said the strategy was to focus on managed-service contracts, in which Garces manages restaurants rather than owning them. She said future restaurants at the new Ocean Casino in Atlantic City would be subject to that kind of arrangement.

Moorestown Mall operator PREIT is working with a replacement restaurant tenant, a spokeswoman said Thursday.

Bankruptcy Judge Jerrold N. Poslusny this week cleared the way for an auction of the Garces restaurants on June 26, with a hearing to announce the winning bidder on June 28. The auction proceedings likely will be conducted behind closed doors at a Center City law firm.

The leading bidder — the “stalking horse,” in legal parlance — is Ballard Brands, a restaurant company based in Covington, La. The floor price will be about $6.8 million. Ballard has offered to make good on outstanding gift cards and catering deposits.

Poslusny dismissed petitions by two Garces investors to thwart the bankruptcy filing, ruling that operating agreements for Amada, Village Whiskey, Tinto, and the Olde Bar gave Garces the authority to file.

Poslusny ruled that Garces did not have authority to file on behalf of Buena Onda, his taqueria.

In a statement after the dismissal, Garces said: “Today is a proud day for me. This ruling proves that I have adhered to fair and legal business practices. It not only confirms claims made by these investors completely false, but also that they are the ones that have perpetrated a litigious sham based off contrived ignorance on how we have run our business for more than a decade.”

Garces is likely to emerge after the bankruptcy as a player within the winning bidder, though his role is not known. Testimony in Bankruptcy Court has indicated that Garces and the company brand have significant power.

It is unknown how the sale proceeds will be divided among creditors.

Most of the buyout money would go to M&T Bank of Buffalo, N.Y., a secured creditor owed about $7 million. It has liens on Garces’ restaurants and his home and farm.

Garces, 45, has blamed his financial woes on the impact of the 2014 closing of the Revel casino in Atlantic City, which housed four successful Garces restaurants, and the recent failure of an Amada restaurant in New York City.