MORGAN HILL
– City Council members stepped into unknown territory when they
accepted El Toro Brewing Co.’s plan to turn the
soon-to-be-abandoned police station building into an entertainment
draw and family-style brewpub.
MORGAN HILL – City Council members stepped into unknown territory when they accepted El Toro Brewing Co.’s plan to turn the soon-to-be-abandoned police station building into an entertainment draw and family-style brewpub.
The city and El Toro owners Geno and Cindy Acevedo will spend the next 120 days negotiating with firm milestones for performance.
“Failure to meet the key milestones would result in the termination of the (negotiating rights),” said Garrett Toy, the city’s director of Business Assistance and Housing.
The five city representatives followed a staff recommendation and chose El Toro over a similar offer by Rick Page last Wednesday. Basic criteria involved financial return to the Redevelopment Agency (which owns the building) and how the plan would fit into the downtown vision.
First on the list of questions was why sell the building, on the corner of Monterey Road and E. Main Avenue, for El Toro’s offer of $650,000 when it had been appraised at (up to) $1 million?
“We recommended El Toro on the sole basis of return to the agency,” Toy said.
The Acevedos plan an energetic, family-type restaurant with a stage for live bands (after 9:30 p.m.) and dancing, Foosball, darts and high definition plasma TVs but no pool tables.
“Like Jack’s used to be but cleaned up a bit,” Geno Acevedo said. “We would make a gateway statement with a mural on the side of the building – if it gets by the ARB (Architectural Review Board).”
The mural, Acevedo said, would relate early settler Martin Murphy and author Brete Harte watching two bulls fighting on what was Murphy’s Peak. A second mural would show the two men “high-tailing” it down the mountain when the bulls noticed them and objected.
An El Toro Brewpub would include dining also on a second floor balcony, allowing “people watching.” They envision lots of appetizers and a moderately priced menu.
“It would be a true brewpub,” Geno said.
Before making the decision, the Acevedos’ numbers were subject to scrutiny.
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.
“Our CPA firm was asked to evaluate El Toro’s numbers,” said John Rick, who studied the plans in detail, “… and feel the start up and construction costs are reasonable. Others fail because they put too much money into them – they become Taj Mahals.”
Rosy Bergin, of downtown’s Rosy’s at the Beach, said that as an experienced restaurateur, she was not sure the project would succeed.
“I’m worried about the high cost to renovate (the building). “Look at the restaurants that failed,” she said, mentioning Station 55 and Old City Hall in Gilroy, Stoddard’s in Campbell and Fanny and Alexander in San Jose.
She encouraged 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. “If we want it to be successful, we may not be able to get market value with such high renovation costs.”
Carr and Steve Tate were on the economic development subcommittee that took a close look at the two plans.
“In El Toro’s favor, 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,” Carr said.
“Larry and I thought the design of El Toro was better,” Tate added.
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 have never owned such an establishment.
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 said.
