Geno and Cindy Acevedo said
”
time is of the essence
”
when they asked the city for $400,000 in April to pay off
construction debts.
Morgan Hill – Geno and Cindy Acevedo said “time is of the essence” when they asked the city for $400,000 in April to pay off construction debts.
If the Redevelopment Agency doesn’t give the loan, the couple said their business could falter. But if the agency does loan them the money, their restaurant, El Toro Brew Pub, could breathe life into downtown. The Morgan Hill City Council voted 4-1 to preliminarily approve the loan April 4.
After the story broke, a couple of downtown business owners came into the Times office and spoke with the newspaper’s editorial board, raising concerns about the loan. Because they didn’t want to appear as bad neighbors, they spoke off the record. They criticized the city’s “investment” in the Acevedos, given the couple’s limited experience in the restaurant industry. They hinted at favoritism, given the Acevedos’ active history in the community.
However, other merchants say the loan is worthwhile and elected officials emphatically deny favoring the couple.
“It’s not that we want Geno Acevedo to succeed,” said Morgan Hill Mayor Steve Tate. “We want the business to succeed” to boost downtown.
Actually, merchants are far more willing to speak on record about the pub being a success.
“We’d like to see the brewery stay,” said Elaine Stoddard, co-ower of Ragoots restaurant on Monterey Road and Second Street, which opened last August. “In fact, we would like any of these new businesses that have invested their own money to stay. Once a business is committed and open, it’s better for them to stay open. Vacant tenants don’t help anyone.”
But when it comes to making improvements to downtown, Stoddard said she also wants to see a major effort to increase parking, something the city has vowed to undertake in the next few years.
“We’re all suffering from parking issues,” she said. “That’s a large amount of money to be used on keeping one business open and afloat.”
The thing is, the restaurant, which opened last November, emerged as a keystone project of sorts for the city.
“It’s a gateway to downtown,” Tate explained.
“I like the brew pub,” said Jeff Nunes, co-owner of the Music Tree on Monterey Road. “I don’t have a problem with the loan as long as its under appropriate terms. The city needs to do things that generate revenue for the downtown.”
The Times submitted a public records act request related to the public process that led to the restaurant opening. The newspaper obtained more than 100 pages of documents related to the deal.
About four years ago, Geno Acevedo penned a letter to the city inquiring about the disposition of the old police facility on the corner of Main Avenue and Monterey Road. The couple always dreamed of opening a brew pub and the vacant building seemed to be the perfect location. In response to the inquiry, the city mailed letters to 68 developers and financiers – along with the Acevedos – requesting informal proposals to open a restaurant. Three parties responded a month later.
Of the three proposals, two listed considerable restaurant experience. Louie Pappas, one of the parties, was the owner of the 40-year-old-plus Bold Knight of San Jose, along with 840 North First – also in San Jose – and the Cattleman’s Restaurant in Sunnyvale.
Another party included a partnership between Coast Range Brewery of Gilroy and Stoddard’s Brewhouse of Sunnyvale, which was open for more than 12 years before changing hands in 2005.
The Acevedos, meanwhile, had been successful in their beer-brewing ventures, but had never opened a restaurant. Cindy worked in law offices before managing the Flying Lady Restaurant for five years. Geno had held various positions at high-tech companies before opening a microbrewery in 1992. He’s since won national recognition for El Toro’s brews.
Before a second round of proposals, Pappas dropped out of the running. Pat Forst, a commercial Realtor and Pappas’ former partner, said Pappas felt “too old” to pursue the project.
That meant the city had to decide between the El Toro team and the Coast Brewery team. After a lengthy process of drawing up business pro formas and detailed plans, both parties went before the council for a public hearing to present their proposals. El Toro offered to pay $650,000 to buy the building and renovate it, while Coast wanted the Redevelopment Agency to help pay for renovations.
The Morgan Hill Community and Economic Development Committee, then consisting of council members Larry Carr and Tate, recommended the city pick the Acevedos’ proposal because it was financially beneficial. The following week, the council voted 5-0 to grant El Toro exclusive rights to negotiate.
A long negotiation period followed during which the Acevedos secured financing. The process took longer than anyone expected, but the restaurant finally opened its doors last November.
There were mixed reactions. Almost immediately, jabs about poor service popped up on the Internet and around water coolers. Others praised the long-awaited bar and family eatery.
The Acevedos’ operational projections claim they’ll pull $1.5 million in gross sales the first year. (The Coast team’s projections claimed they’d pull $1.9 million in gross sales). Whether El Toro is on track or not is private information. Although, Geno claims the restaurant did $600,000 in sales the first few months.
Regardless, one thing was soon evident – unpaid contractors wanted their money and the couple needed help paying those bills. The Acevedos were once again before the council with a proposal – a request for financing.
The council seemed stuck between a rock and a hard place. They had already thrown their support behind a restaurant’s vision, so what good would backing out do?
“They invested a lot more to improve that property than we expected at first,” Tate said, alluding to the $1 million in equity and $1.9 million in private loans the Acevedos used to remodel the old police station. “They’ve increased the value of that land … and it’s not as though we’re investing, because it’s money we’ll be getting back in a year.”
