City Council members stepped into unknown territory Wednesday
night when they accepted El Toro Brewing Co.
’s plan to turn the soon-to-be-abandoned police building into an
entertainment draw and family-style brewpub.
City Council members stepped into unknown territory Wednesday night when they accepted El Toro Brewing Co.’s plan to turn the soon-to-be-abandoned police building into an entertainment draw and family-style brewpub.
The city and El Toro’s Geno and Cindy Acevedo will spend the next 120 days negotiating, with firm milestones for performance to renovate the building at Monterey Road and West Main. Failure to achieve a milestone would halt the deal and send it back to council.
But before the five city representatives followed a staff recommendation and chose El Toro over a similar offer by Rick Page, they examined the deal from every angle they could think of and built in key hurdles to ensure that El Toro’s plan is realistically do-able.
Basic criteria involved financial return to the Redevelopment Agency (which owns the building), and how the plan would fit into the downtown vision.
First up was, why sell the building for El Toro’s offer of $650,000 when it had been appraised at $1 million.
“We recommended El Toro on the sole basis of return to the agency,” said Garrett Toy, director of Business Assistance and Housing.
Second was whether the Acevedos’ numbers were realistic.
El Toro estimates the reconstruction costs to be $1.2 million, with a total of $1.8 million, including land/building purchase price and a contingency but no RDA involvement beyond a lowered building sale price.
Page said he would need to spend $2.6 million in reconstruction costs and offered a series of three options, with and without RDA assistance and offering between zero and $500,000 for the building.
John Rick, who is part of the aquatics community with the Acevedos, said he had studied both packages in detail.
“Our CPA firm was asked to evaluate El Toro’s numbers,” Rick said. “We relied upon industry data and used clients’ data (Florentine’s and Hobee’s) and feel the start up and construction costs are reasonable.”
Cindy Acevedo said both Page and the Pappas family (from the Bold Knight restaurant, that showed an early interest in the police station) asked El Toro to be their first tenant.
“But interest rates are so low now,” Acevedo said, “we want to be the owner/operator. We know we will succeed. We have a built in following and believe our plan is best.”
Rosy Bergin, of downtown’s Rosy’s at the Beach, said, as an experienced restaurateur, she was not sure the project would succeed.
“I’m worried about the high cost to renovate (the building),” Bergin said. She encouraged the council to market the property to a well-funded retailer.
Councilman Larry Carr said the opportunity had been broadcast widely to restaurants, commercial and retail.
“We only got three restaurant proposals back,” Carr said, and nothing from anyone else.
“If we want it to be successful we may not be able to get market value with such high renovation costs,” Carr said.
Carr and Steve Tate, on the economic development subcommittee that took a close look at the two plans explained their reasoning.
“In El Toro’s favor,” said Carr, “the RDA gets $650,000 (that can be added to a library building fund), we liked the single owner/operator concept and we liked the design and amenities – brewing on site and the inclusion of Poppy Jasper (the Morgan Hill rock) in the bar and tables.”
“Larry and I thought the design of El Toro was better,” said Tate.
On the other hand, Carr said he thought the Page plan had more realistic development and construction costs and liked the “upscale” operation.
“That fits more with Morgan Hill’s image,” Carr said. “There won’t be a lot of games and it would have a more upscale menu, besides the experienced operator.”
Page would have hired Ron Erskine and Craig Kennedy of Coast Range Brewery in Gilroy and Bob Stoddard, who founded Stoddard’s Restaurant (and Brewery) in Sunnyvale, to operate the restaurant.
While the Acevedos have consulted widely with experienced restaurant operators, they themselves have never owned such an establishment.
Council still discussed what would benefit the most people.
“The highest and best use for this property,” Toy said, would probably be an office. It wouldn’t need such extensive renovation though it also wouldn’t generate sales tax. A restaurant would generate $20,000-$30,000 a year and would bring people to the downtown.” Councilman Greg Sellers considered the $350,000 under market rate the city would get from El Toro’s offer.
“It is certainly a leap of faith,” Sellers said. He wanted to be sure that, if the Acevedos can’t meet the milestones, the projects comes right back to council.
“We can’t take too many risks with somebody who can’t perform,” Sellers.
Acevedo said that the brewpub could open by the end of the year if police vacant the building by July.
