City extends loan repayment terms for 2 years
Business was brisk at the local Hollister Honda store on San
Felipe Road until recently, when the affects of a slumping economy
forced its owners to seek an extension of the loan repayment terms
with the city’s Redevelopment Agency.
City extends loan repayment terms for 2 years
Business was brisk at the local Hollister Honda store on San Felipe Road until recently, when the affects of a slumping economy forced its owners to seek an extension of the loan repayment terms with the city’s Redevelopment Agency.
“The store was progressing and doing everything we planned it to do,” said Marty Greenwood, who, along with his brother Mike and their partner, Dave Galtman, purchased the former Good Times Bowl in 2004 with plans to turn it into a motorcycle dealership. “All of a sudden, our two-year plan got thrown off track due to the economy. So we approached the RDA to work with us.”
The agency in 2006 approved a loan of up to $1.5 million for the business, which sells Honda motorcycles, watercraft and all-terrain vehicles. The store is one of two so-called “Level 5” businesses in the state, meaning it carries nearly everything that Honda makes – except cars.
In 2007, the RDA provided an additional loan of $400,000 to the business, which was one of the top 10 sales-tax generators in the city in 2008, according to city officials.
The original loan terms included a deferment period that meant business owners did not have to make principle or interest payments while the store got on its feet.
The modified loan, approved at the June 15 City Council meeting, extends the deferment period for two more years.
“After two years, we’ll look at what the sales are doing and what the employment numbers look like,” said William Avera, Hollister’s development services director. “If sales numbers are exceeding what we hoped to have, we’d begin the loan repayment process at that time. If the economy is still way down, there’s an ability to extend the repayment terms for another three years. After that, it’s fish or cut bait.”
The interest rate on the loan amount is based on a formula that factors in the number of jobs created at the store as well as annual retail sales. The more employees and higher the retail sales, the lower the interest rate, according to Avera.
“It’s a pretty important business for us,” he said. “That’s why we’re interested in making sure they stay solvent. The motorcycle industry in general is not doing as well as it was a few years ago, but that could be said about almost any business.”
Greenwood said the Honda store was tops in sales volume in its district and No. 19 in its zone, which encompasses five states.
“We’re also in the top 190 out of 1,200 dealers nationally,” he said, noting that some customers have driven hundreds of miles to visit the store because of the variety of Honda products it offers. The extension of the loan terms “is giving us a chance to grow the business.
“The business itself is standing in good principle and the business plan was well on its way to being successful.”
Hollister Honda has 14 full- and part-time employees, according to Greenwood, who acknowledged that it has had to make “a few cuts” as business slowed.
The opening of the Hwy. 25 bypass has diverted some traffic that used to pass by the store, as well as the nearby Tiffany Ford and Greenwood Chevrolet.
“Selfishly, you’d like that traffic coming by you, but obviously the bypass is a wonderful thing for our community,” Greenwood said. “It does affect the number of local people driving by, but we still have that exposure to people who are coming to town from the north.”
Despite lagging retail sales, Greenwood said the store is benefiting from a strong police motorcycle business, for which the dealership has secured more than 80 purchase orders from police departments in Gilroy and San Jose, among other cities. The dealership has also been invited to be a Honda vendor at Laguna Seca on the Fourth of July.
Avera said the city made a wise investment when it lent Greenwood and his partners the money to rehabilitate the former bowling alley.
“We have a nice looking building at the entrance to town and we have a business in there that, up until recently, was one of the top 10 in the entire city,” he said. “We got rid of a blighted building and got a business that produced. It’s probably one of our best deals ever.”
Greenwood thanked city officials and council members for agreeing to the restructured loan terms.
“They have given us an opportunity to grow this business, which I think is a great benefit to our community,” he said.
Meanwhile, Greenwood said his local Chevrolet dealership – just up the street from Hollister Honda – is “holding its own” with help from its successful service and parts departments.
“We’re running lean and mean but that’s pretty invisible to the customer,” he said. “We took steps two years ago to watch our expense structure. We’re faring well and hanging in there.”
