When veteran restaurateur and nightclub owner Demetri Alexander (Lola’s Club Roulette, Alexander’s) approached Standard & Poor’s trader Reno Scalise last year about investing in a new steak house at 1212 N. State, Scalise thought it was a great idea. “I liked the location most of all, with all the action right near Rush and Division, and I thought it would be great to own a high-quality place,” says Scalise.

He got something slightly different than he bargained for. The State Room opened in April 2000, with an interior designed by Alexander’s wife: pink, blue, and green leather chairs, floor-to-ceiling sheer drapes surrounding high-backed white leather booths, and huge crystal chandeliers. Alexander manned the front of the house.

The place was bashed by the Tribune and Chicago magazine, and while the beautiful people poured in to see and be seen, nobody was eating. Only three months into the deal, Scalise realized he had a disaster on his hands: a restaurant with an identity crisis, negative cash flow, and poor management. “I’d never been in the restaurant business and didn’t want to become a restaurateur, just an investor,” he says. “But I ended up at the place every day, watching it fall apart.”

He and Alexander parted ways in late June, and Scalise–who won’t go into further detail due to pending litigation–decided to stick with his sinking ship. “I knew I had made some serious mistakes, but I felt cheated and wasn’t willing to give up so fast.” Over the next four months he promoted a few employees into management roles and tried to keep the place afloat “by the seat of my pants,” he says. Clubgoers continued to pack the place, alienating any serious diners, and revenues kept falling. On the advice of friends in the business, Scalise set out to find a new management team, and by mid-November he’d hired Lou Frangella, a former server at Morton’s and manager at the Palm and Tavern on Rush, as his new general manager.

Frangella immediately advised Scalise to tone down the pulsating music in the dining room and close the downstairs lounge. “By the end of the year I was telling people at the door that we were no longer a bar,” says Frangella. “The word spread quickly.”

In December Frangella brought in a new director of operations, longtime friend Michael Lyman, who’d spent 20 years in the industry, most recently as a manager at Morton’s. “Scalise told me he was sleeping better knowing that I was running the show,” says Frangella. “I told him he’d go into a coma with Lyman on board–he’s the best I know in the business.”

Lyman, Frangella, and Scalise made a few menu changes in early December, but they soon realized the Band-Aid approach wasn’t working; they needed a new chef to overhaul the menu. Lyman turned to high school buddy Paul Kahan, chef-owner of Blackbird, for help. Kahan knew Spruce was closing, and soon Scalise and partners had hired its former chef, David Shea. They also brought in pastry chef Sheira Harris, who’d worked at Blackbird and Charlie Trotter’s.

In early March the three managers closed the restaurant for two months to rehab the rest of the operation while the chefs rehabbed the menu. Frangella worked on the room; he got rid of the leopard-skin-covered host stand and put in a hand-carved redwood podium, installed a custom-made wine rack near the bar, and removed the floor-to-ceiling drapes. The gaudy pastel chairs were replaced with sleek, low-backed black metal ones, the carpeting with wood floors. Lyman, meanwhile, was charged with stocking the new wine racks. His finished list, focused on American varietals, includes gems like a ’97 Dutton Ranch chardonnay and a ’97 Opus One. It includes about 30 splits, and Lyman hopes to expand that to 70 by the end of July.

The State Room reopened May 9 as 1212, and while the stylistic overhaul certainly makes the place more palatable, it’s the new menu that gives it a real chance for success. Several meat dishes remain on the menu, but instead of 24-ounce slabs of beef Shea offers a spice-rubbed lamb loin served over a fricassee of spring vegetables with tarragon-scented consomme, or grilled slices of rib eye on a mound of sauteed Swiss chard in a satiny red-wine reduction. His aptitude with shellfish comes across in a chilled lobster appetizer bathed in lemon creme fraiche, topped with American sturgeon caviar, and sided by paper-thin slices of fresh fennel. Harris has a particular knack for sorbet–a trio of buttermilk-lime, blueberry, and raspberry is served with chilled honeydew soup, poured tableside. Chocolate fans shouldn’t miss her bittersweet ganache cake with ScharffenBerger chocolate-chip malt ice cream. The constantly evolving American cheese selection is also worth trying.

With management in order, a more diner-friendly interior, and food that can be taken seriously, the restaurant has a final challenge: drawing customers. Ironically, Scalise’s initial reason for liking the space–location–may work against it, as people aren’t usually drawn to Division Street for the fine dining. “We knew we were taking a big risk with the overhaul,” says Frangella. Time will tell if it will pay off.

1212 is at 1212 N. State, 312-951-1212.

–Laura Levy Shatkin

Art accompanying story in printed newspaper (not available in this archive): photo/Dorothy Perry.