Restaurant owners seek financial backing from their many loyal
customers
Rebuilding Sinaloa, the popular Mexican restaurant that was destroyed by fire a year ago, has hit a brick wall. Owner Steve Peña said Monday that he has received little money from his insurance company and the bank is refusing to loan enough to cover the costs of rebuilding under circumstances he can live with.
The site of the former famed and beloved restaurant is now vacant, fenced and bleak. But immediately after the fire, even while wisps of smoke were still rising from the remains, friends and customers arrived to stuff flowers through the fence, tie hopeful balloons and gaze wistfully at the debris.
Instead of waiting for the insurance company and bank to change their mind, Peña wants to offer his many faithful customers the opportunity to invest in the new Sinaloa. He estimates that he needs $2.5 million to get the building up and the restaurant running.
“The insurance company didn’t take care of us,” he said. “We got pennies on the dollar on the contents; they shorted us on business interruption. This added up to bucks we needed badly.”
Peña declined to name his insurance company but had said shortly after the fire that it was based in San Diego.
“The only people who were constant through this whole time,” Peña said, “ have been my customers.”
Peña said he is always stopped at the grocery store and around town, by people asking when Sinaloa will be able to reopen. A Sinaloa float in the July 4, 2002, parade and a booth at the 2002 Taste of Morgan Hill – after the fire – brought huge displays of support.
“So I am looking for investors,” he said. He would like to set up a limited partnership and could use some legal and financial advice as well on how to do so.
“We are so overwhelmed by the stuff we have to do,” he said. “The costs especially.”
If investors appear, Peña will build the new restaurant and be able to prove to the bank that it will be a success. And he has no doubt of that since Sinaloa is a regional legend, appearing in “Best Restaurant” books for years and a destination spot for travelers.
“By this time next year,” Peña said, “if I get investors we can go back to the bank and ask for money to pay back my investors.”
The fire at 19210 Monterey Road at Peebles Avenue started in a kitchen during the early morning hours of June 29, 2002, and destroyed the 100-year-old building and its contents. The loss was estimated at $750,000 plus some contents according to Santa Clara County Fire Department spokeswomen Teresa Meisenbach.
The Sinaloa Café, opened in 1960 by Adolpho Peña, was famous for its home-style Mexican food and margaritas. Since his death, the restaurant has been operated by his widow Mary and her three children, including Steve.
Jim Rowe, city planning manager, said most of the permit work has been completed.
“We worked with them to try to expedite the process so they could reopen,” Rowe said. “They did have a learning curve in permits but we’ve had a team of staff to help them along the way.”
Rowe said most departments have signed off on the bid permits but that there were still some landscaping details that haven’t been settled.
“They can bond for that,” Rowe said. He referred to a process in which Peña could promise to complete the work by posting a bond guaranteeing that it would be done. A similar “improvement agreement” covering off-site work – curbs, gutters and the like – was approved Wednesday night by the City Council.
Rowe said exterior lighting plans also must be submitted.
“Other than that, they’re ready to go,” Rowe said.
“They’re part of the community,” he said. “We felt the loss, too.”
CITY ASSISTANCE
Joyce Maskell, Business Assistance and Housing Services manager, said her department has offered help to the family numerous times.
“We provided ombudsman services and some financial assistance for the initial surveys,” she said. “Once he’s figured out where there’s a need in the project, we want to take a look at it and see if there’s a way to help.”
The new restaurant is designed to be larger than the old and more parking was both desired and required – it was often difficult to find parking outside and seating inside because of the crowds.
In order to have room to expand, the Peñas tore down two adjacent historic but architecturally insignificant buildings. Before they could be removed, the city requested a historical evaluation of the two properties detailing the remaining historic design elements, the history of the area and whether or not it would be viable to move or retain and renovate them.
It was not viable but the Morgan Hill Historical Society – which is notified before historic structures are to be removed – requested that a pictorial documentation of the structures be part of the new building’s interior decoration. It asked that the Peña family erect a plaque outside telling some history of the two buildings. The Peñas agreed.
Maskell said she told the family that additional city or redevelopment funds might also be available, depending on the situation and “demonstrated need.” Need, Maskell clarified, comes into play if the insurance company would not cover the costs of rebuilding, which is the case.
She was surprised to hear that the bank was refusing to provide a construction loan, having talked to the bank recently.
“The bank sounded like it would make it happen for them,” Maskell said.
FRUSTRATION GALORE
Peña said he was highly frustrated with the hoops he has to jump through to rebuild his family restaurant.
“They (the bank) don’t want me to use my own contractor,” he said. “It’s not our decision – we have no control over anything.”
After he chose Jeff King to design the new building, Peña said the design was tweaked by every agency possible.
“The city chose the design and I had to take material out of the houses I demo-ed and use it in the interior,” he said.
The Architectural Review Board and Planning Commission required changes to the façade color and landscaping design that King and Peña had worked on, and wanted a verandah added to represent old Madrone architecture. It will be a place for the hordes of overflow customers to wait for tables.
But the contractor choice is what rankles the most.
“If I could pick anything, I would pick the contractor,” he said. His choice is Rich Hernandez of Medallion Construction, a boyhood friend. “I’ve seen his work. He worked on the original Sinaloa. If he says he will do something, he does it.”
The bank wants Sinaloa to be built by a larger firm.
“The bank wants safeguards that will cost $3.5 million,” Peña said. “Everything’s a risk. All I want to do is get back in business.”
Adding to rebuilding costs was the discovery of an underground gasoline storage tank on the property.
“It was underneath the sidewalk,” Peña said. “We found it when we demo-ed the building – it must be from two or three previous owners.”
There were clean up costs too.
“These costs are eating us up alive,” Peña said. “The bank doesn’t think we are a good loan. They said it will cost more to put the building up than it will be appraised for. It’s $20,000 for a $10,000 car.
“We miss our customers so bad. Your life is put on hold and you really can’t do anything. We are hoping some of our customers will step up and help us. We must find a way over, around or under that brick wall.”
Details on helping Sinaloa and the Peñas, call 778-0878 and leave a message. The Sinaloa website is www.Sinaloacafe.com
