The Hollister Redevelopment Successor Agency – or city council – has recommend to its oversight board representing local taxing entities that they restructure loans made by the former Hollister RDA to the Honda Powerhouse and Cain/Renz property at 102 San Benito St.
Staff officials presented the idea to council members as the best way to secure loan principal rather than initiate foreclosure actions. The restructuring would forgive the accrued interest and eliminate all future interest on the loans in an attempt to recover the original loan amounts over time, according to Hollister officials.
The Honda Powerhouse loans amount to $1.9 million; restructuring would forgive approximately $495,000 of accrued interest.
According to the documentation, the property used to secure the loan is presently valued at $1.7 million, but repayment of the RDA loan is subordinated to a $2.2 million loan the business owes to the former San Benito Bank. This means that a foreclosure at this time would likely net no money to the city.
The report also noted that the Honda Powerhouse still has more than 20 employees and generates significant sales tax revenue, and that the new terms were the best options to regain the principal under the current circumstances.
The RDA in 2011 approved a second, two-year extension on repayment of $1.9 million in loans on the 22,000-square-foot business at 411 San Felipe Road.
The second property, 102 San Benito St., had an original loan for $81,000 to clear blight, including the remnants of an old gas station. Restructuring the loan would revise the promissory up upward to $100,000 to cover about 75 percent of unpaid accrued interest to date, forgive future interest, and provide no term. About $6,000 of accrued interest would be forgiven and the $100,000 note would require repayment as a condition of sale.
The property has an assessed value of $225,000 and is listed for sale along with $500,000, but generates no current income. Clearing the property for new construction or reconstruction of commercial or multi-family building of more than three units would also require a relatively a seismic fault study.
The city does not expect the oversight board to act until the September meeting. Following that approval, the proposed changes require the approval of the California Department of Finance.
