After more than four months of disappointment, the Garlic Festival Association has decided to cut its losses and move on.
On Monday, the association's board of directors voted unanimously to stop making payments on the $8.8 million loan it took out along with its partner, Pleasant Valley Development Group, to finance the four-story commercial and residential stucco building at 7600 Monterey Street. The development duo, known collectively as 7600 Monterey Associates, has not received one written offer since the condos and first-floor commercial space went on the market in June. The partnership submitted a written notice to South Valley National Bank Thursday, according to Garlic Festival Association Executive Director Brian Bowe.
"The real question was the bigger picture, looking down the road a couple of years and seeing how deeply we would've had to go into the festival's reserves to sustain this project," Bowe said. "It didn't make any sense to spend down the festival reserves to keep this building going. The whole point from the start was to keep this building and the festival separate and to protect the future of the festival."
The festival has already lost $1.04 million. That money came from the sale of the festival's old office space across the street as well as the parking lot behind that space. It then supplemented this cash with about $200,000 from its general fund and another $200,000 from its reserve fund, according to Bowe. The Pleasant Valley Development Group - the festival's 50-50 partner - has incurred an identical loss of $1.04 million, Bowe said, adding that the association still maintains a robust rainy day fund and that residents have no reason to worry about the festival's future.
"Our reserve fund is still very healthy, and that's what we wanted to continue," Bowe said. "The board voted to protect the future of the festival."
7600 Monterey Associates signed a five-year lease for its space in the building last week, and Bowe said the festival plans to remain in the building that will eventually enliven downtown once the market turns around.
"We will always be proud of this building and this commitment to the community," Bowe said.
Bank representatives did not immediately return calls, but Bowe said the terms of the non-recourse loan meant the bank could not liquidate the festival and had to take the building as collateral. What it will decide to do, though, remains to be seen.
"I can't speak for the bank, but I imagine this is one difficult issue on a stack of difficult issues for them," Bowe said.
Chris Bone Chris Bone covers Gilroy or South Valley Newspapers. Reach him at 847-7109 or e-mail him at cbone@gilroydispatch.com.
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