Restaurants are a terrible investment. The hours are long, the margins are gossamer-thin, and every day brings a novel set of problems. Most restaurants can be financially justified only as passion projects, and so when investors get involved, skeptics take note. 

Such has been the case with what is today known as Sortis Holdings, a peculiar hospitality group whose current version was born midpandemic. It started with barbershops, of all things. Early in the pandemic, a prospective deal came across the desk of Paul Brenneke, heir of a successful real estate family and a founding partner of the investment firm Sortis Capital. He deals mostly in commercial real estate development, brokering deals like the recent sale of Seattle’s Macy’s building, but a colleague mentioned that the progressive barbershop chain Rudy's had struck a sour deal with another investment firm and was facing bankruptcy, and its founders were likely to be forced out of the company. 

In 2020, getting a haircut in public was unthinkable. Brenneke was going to pass. Then he recognized a name: Wade Weigel, a cofounder of Rudy’s. “A light bulb went off in my head,” he says. Weigel is also a cofounder of the Ace Hotel chain, perhaps the most powerful trendsetter in boutique hotels, and an influential player in the heyday of Portland’s West End. 

Brenneke’s investment firm organized a fund to buy Rudy’s out of bankruptcy, in partnership with Weigel and another cofounder. It has since grown from 17 to 29 stores, in five states. A breathless wave of similar deals ensued, including with notable Portland brands like Bamboo Sushi, Sizzle Pie, Ava Gene’s, Tusk, See See Motor Coffee Co., and Water Avenue Coffee, as did investments in several hotels around the Pacific Northwest, including Portland’s Woodlark Hotel. The collection of businesses is overseen by several distinct companies that all have “Sortis” in the name. Eventually, most of the associated brands fell under Sortis Holdings, a private company (separate from Sortis Capital) that trades as an OTC stock (“over the counter,” colloquially known as penny stocks) and at one point mounted a valuation of nearly $74 million. 

Portland looked on, wondering why Brenneke was magpieing a bird’s nest of disparate businesses. It turned out that he had a plan: “The first thing I asked Wade Weigel, after we helped him save his barbershops, I said, ‘OK, now that we helped you do that, are you going to help me go buy Ace?’”

Before he could own the crown jewel of Portland boutique hospitality, Brenneke needed to amass a credible portfolio. Hospitality businesses are about people: chefs, barbers, sommeliers, baristas, maître d’s. It’s an inherently personal arena, with an immense relational footprint in a small city like Portland. Consumers grow accustomed to seeing these people, decade after decade. Sortis Holdings, through a tangle of partnerships and investments, came to employ 1,500 of them around the country. “Sortis is a young company that has a lot of not-young brands,” says Brookes Decker, operations manager of Sortis Holdings–owned Submarine Hospitality, which oversees the restaurants Ava Gene’s, Tusk, and Cicoria. Sortis Holdings is not consumer-facing and doesn’t make its presence known. Customers in line at See See or Water Avenue don’t see any visual signs of Sortis Holdings’ ownership. Brenneke says he shies away from public light to direct attention to the businesses themselves, staying out of the way; skeptics say that announcing the company’s ownership would diminish the brands’ perception as being independently owned. 

Criticism of Sortis Holdings has been sharp: one viral meme, an infographic, suggests that corporate raiders bought up the city overnight, comparing Sizzle Pie to Pizza Hut, Rudy’s to Supercuts, and so forth. “Evil doesn’t die. It reinvents itself,” it reads. 

“People think we are the big bad private equity company scraping these guys off,” Brenneke said in late September 2023, at Sortis Holdings’ offices next to the Burnside Bridge, an open loft previously occupied by the branding agency OMFGCO. Visitors are encouraged to pose for Polaroids in front of a sequined selfie wall. Brenneke is dressed modestly for a venture capitalist, in a purple gingham button-up tucked into jeans. He’s perplexed by the negative commentaries, remarking that the vast majority of Sortis Holdings’ businesses would have gone under without help from them or a similar investor.

“We’re white knights,” he says, reeling off the names of the businesses they bought out of bankruptcy: Rudy’s, Bamboo Sushi. Out of distress: See See, Ava Gene’s, Sizzle Pie. “We changed the name to the Sortis Rescue Fund purposefully. That’s what we were doing.”  

His logic downplays the indelible hierarchy drawn when investors rescue a company. The deals vary in structure: Sortis Holdings owns a controlling interest in much of its portfolio, like coffee shop and motorcycle evangelists See See Motor Coffee Co.—which you may know from its annual motorcycle expo and helmet art show. To stave off financial distress, founder Thor Drake brought in several partners during the pandemic, but their efforts never took. “We weren’t making any money for two years,” he said. “I needed a business structure that was solid. That’s not my forte; I’m a creative.” Other investors made offers, but Drake wanted to remain involved in the business. “Sometimes, if you get an investor, they just want the thing,” he said. “And then they take it and do what they want with it.” Sortis Holdings bought the business, trading Drake stock in Sortis Holdings for ownership of See See, and employing him to maintain See See’s creative vision. 

Some companies have kept a greater distance: both Blue Star Donuts and coffee chain Barista accepted financial support, yet chose to take on debt and continue operating independently. “The restructured ownership table kept myself as the largest stakeholder,” says Blue Star CEO and founder Katie Poppe, “and I was even able to carve out some equity for key team members.” Barista’s deal gave Sortis Holdings right of first refusal should the company sell in the future.     

Sortis Holdings is often inaccurately compared to the restaurant management company ChefStable. ChefStable advises restaurants like Ox, St. Jack, Lardo, Grassa, and Coopers Hall in nearly all matters of building and running the businesses, but they’re structured differently. Kurt Huffman, a prolific local restaurateur, owns ChefStable and holds some variety of financial interest in most of the businesses his company works with; ChefStable charges a fee, and the restaurateurs retain ownership. Sortis Holdings often owns controlling interests or, if not, owns a quantity of debt that rivals the value of the brand. 

The rare business to dance with Sortis Holdings that didn’t need rescuing was creative agency WLCR, which designs digital platforms for a range of clients; for hospitality businesses, think QR code menus and digital marketing and branding, all of which became indispensable during the pandemic. “I signed on when it became clear that the intention was: these are mostly going to be Pacific Northwest brands,” says WLCR founder Adam Shearer, “and that the founders are going to be involved, and that what we would be doing would benefit the local community and economy.” He still runs WLCR and serves as Sortis Holdings’ CTO. 

While its buying spree continued, Sortis Holdings dallianced with the Ace Hotel. Hotels commonly have three major stakeholders: the company that owns the land and building, the company that owns the brand, and the company operating the joint. Often it’s three separate firms. In 2021, Sortis Capital organized a fund to purchase the building of the Ace Hotel Portland, and hired Sortis Holdings (a separate legal entity) to manage the hotel. Sortis Holdings would go on to spend nearly a year in negotiations—in and out of court—to purchase the storied global brand and its management company. With a cool $85 million tied up in the deal, the company’s entire portfolio strained.

Back in September, Brenneke’s endgame was definitively ownership of the Ace Hotel. Elbows on the table and hands on his temples, he spoke of the cultural force of the Ace brand: its symbolism of approachable cool, its power to carry a neighborhood (or in the case of the West End, rebuild one). According to his plan, the Ace would serve as a linchpin to carry the rest of the portfolio, a uniting label that would raise the value of each company. Sortis Holdings would be renamed under the Ace brand, capitalizing on its legacy, “making one plus one equal three,” says Brenneke. The whole company would go public under the Ace name, providing a framework to expand some brands nationally and a starting point to acquire more real estate attached to Ace locations around the country. The rebranding under Ace would also distance the company from its investment firm roots. 

Then in October, the Ace acquisition deal failed. 

Commercial real estate interest rates spiked, and the Ace folded several locations—about 20 percent of its portfolio, according to a statement Sortis Holdings issued at the time—making the numbers no longer sensical for Sortis Holdings. That, anyway, was Brenneke’s spin.

What happens when a company that owns many of a small city’s institutions crashes? The same week that the Ace deal failed, news broke of four lawsuits filed against Sortis Holdings. Three suits dispute unpaid rent to landlords; the fourth, a wrongful termination suit, was brought by former Sortis Holdings hospitality executive Michelle Andersen, who joined Sortis Holdings in May 2021, as CEO of Bamboo Sushi’s parent company. Brenneke moved to quickly settle with Andersen; negotiations are ongoing. He downplays the rest. “Having a few [locations] in lawsuits for small six-figure numbers—I don’t enjoy it,” Brenneke says, “but it’s just a fact of doing business.” What’s more, Sortis Holdings’ valuation dropped to $16 million in November (more on that in a moment). 

Before Thanksgiving, the Beaverton outposts of See See and Rudy’s closed, as did Sizzle Pie’s recently opened Hillsboro location. A flurry of articles predicted that Portland’s reeling hospitality community was in peril. From the outside, it looked like the wheels were falling off. 

It was a potentially devastating turn of events for the employees that saw Sortis Holdings as something of a savior or a white knight. To ambitious employees, Sortis Holdings provided exciting career paths beyond stand-alone restaurants. Monica Amestoy, the former bar manager at Tusk, started last year as beverage manager of Sortis Holdings. Stability and health insurance drew her to the company, a common tale. Adán Fausto, a prior sous-chef, is leading the opening of two new restaurants as executive chef for Submarine—the group behind Ava Gene’s and Tusk. Submarine functions as something of a creative studio for all of Sortis Holdings, crafting new, high-end concepts as needed. For instance, Fausto’s La Leñadora and Los Burros Supremos, an upscale Mexican restaurant and mercado, will fill the former Woodsman Tavern space, which the company recently closed. 

The entrepreneurs’ response has been more sanguine. “The way that I understand it—I’m not a financials guy—is that I traded my 50 percent ownership of See See for a percentage ownership of the mother ship,” says Drake, the See See founder. “When I go on long trail rides”—he’s a motorcycle guy—“I bring the tools to keep me going, but I don’t bring tools to rebuild my engine. If, for whatever reason, this thing explodes, then I’ll have to figure out what’s next. And I think everybody will. So it would be no different if I was the sole owner.”

Brenneke frames it as a watershed moment for the company, a time to pivot and refocus resources and “right-size” its portfolio for a smaller-scale operation. 

It’s hard to discern Sortis Holdings’ financial well-being. About that waning valuation: it’s not necessarily an accurate measure of the company’s value, says Maria Chaderina, an assistant professor of finance at the University of Oregon. The OTC stock exchange is “an in-between thing,” she says, often allowing businesses to raise money without the high entry fees and complicated financial disclosures of the major stock exchanges. But it’s far less active than the New York Stock Exchange or the Nasdaq, which makes the valuations it produces significantly less accurate. Does the valuation crash “mean that the company is worth a quarter of what it was a couple months ago?” Chaderina says. “It’s not clear.”

“If we wanted to sell these companies, there is value. It’s certainly more than $16 million,” Brenneke explained over coffee at Water Avenue Coffee in Southeast Portland, days after the Ace deal crashed. The barista addressed him as “Paul,” and asked how things were going “over at Sortis.” Across all of the businesses, “We still do $2 million in revenue each week,” Brenneke went on. “Stocks go up and down.”

Brenneke’s new plan is to double down on the stable of businesses the company has assembled. Ambitions are subdued, scaling back on the big swings for the time being. Stone’s Throw, a Submarine project slated to fill the vacant restaurant space off the Ace Hotel’s lobby, is paused. “We’re not spending a million dollars on a restaurant today,” says Brenneke. The forthcoming Sizzle Pie at the airport is a licensing deal that will be run by a third party, but another Sizzle Pie location may still be coming to NE Killingsworth Street, green-lit because it’s a turnkey operation. 

Gone is the prior plan to unify. In fact, separation options are on the table, such as spinning off a handful of like establishments. The most dramatic separation may be Brenneke’s own; he talks of passing on the reins. “I would love—and I hope to, in the next year—to replace myself. And find somebody who’s way better at doing a lot of this than I am.”      

He says that he’s “kind of a deal person. I was good, I think, at helping architect this, and design it, and bring people together. But I’m not an operator.” He reverts to that same behind-the-scenes affect that he sees as staying out of the way, which is received by some as shirking responsibility. “I’m just kind of the guy who helped put things together.”