september 19, 2013
Restaurant loans no longer on the menu
Rave reviews and a steady business income no longer guarantee a bank loan for restaurant owners. What lenders now want to see on the table are real property assets that can be used as collateral in case a restaurant tanks.
Before the recession, a restaurateur could apply for bank loans and pool financial resources from a few committed business partners. But those wishing to open small restaurants today have found it increasingly difficult to secure loans.
Gerry Houlihan, a restaurant broker at Houlihan & O’Malley Real Estate Services and principal of Houlihan Business Brokers in Bronxville, said the U.S. Small Business Administration is no longer lending to restaurant owners who don’t own the real estate where their businesses operate. It’s keeping the market “extremely soft,” he said.
SBA loans had been one of the more common methods of financing a restaurant. But since the recession, eligibility rules for an SBA loan have become stricter and restaurant owners have fewer options for financing their businesses, Houlihan said.
“If you were going for an SBA loan, it was based on the income of the business that was being purchased, which required showing three to five years of tax returns, positive net income, and of course the furniture, fixtures and equipment had to be in good condition,” Houlihan said.
But now banks rarely give out loans to small restaurants because they usually lease space, said Leonard Carraturo, vice president relationship manager for business banking at Chase Manhattan Bank in White Plains.
Before the credit market collapse in 2008, Houlihan said about 60 to 70 percent of the more than 100 restaurant deals he closed involved buyers securing home equity loans, while 15 to 20 percent of the purchase deals were financed by SBA-backed loans. Today, he said none of his buyers are applying for bank loans through either process because banks are not willing to lend to restaurants without collateral.
An exception to this trend is Alvin & Friends, a New Rochelle restaurant serving Caribbean and southern-style food, which opened in 2010 in a 1,200-square-foot space with 50 seats at 49 Lawton St.
Alvin Clayton, a majority partner in Westchester Friends Management Group, said the partners had subleased their space from Villarina’s Pasta & Fine Foods Co. to avoid being “under a gun” and “choked with a high mortgage.”
The arrangement greatly reduced the cost of rent for Clayton and his investors. When Villarina’s moved out, Alvin & Friends investors pooled their resources to finance a larger space to accommodate their growing dining and private-party business.
This year, the six investors, including Clayton and his wife, Gwen, bought a 5,000-square-foot space at 14 Memorial Highway. With the purchase, the business qualified for an SBA loan.
“Because we’ve been open for two years, and we had been doing well, we can show the bank that in this economy, we were operating on our own without getting loans,” Clayton said.
Clayton added that it made sense to buy the property instead of leasing because the mortgage payment was equivalent to the monthly rent at the restaurant’s old location. Buying the property gives them more security and eliminates the risk of a landlord pulling the rug out from under them, he said.
For other restaurant owners, two or three years of running a business doesn’t guarantee a bank loan.
John Gazzola, co-owner and partner in Butterfield 8, an American gastropub franchise, knows from experience that trying to get bank loans without real estate as collateral doesn’t “amount to much.” His company, Public House Investments, has opened Butterfield 8 restaurants in midtown Manhattan, Stamford and downtown White Plains. The company has also opened Lola’s Mexican Kitchen in White Plains and Stamford and Mulberry Street Italian Kitchen in White Plains.
Gazzola and his partners are financially sound with about 20 restaurants successfully operating in five states and the District of Columbia. When opening their Westchester eateries in 2012, they were able to finance their investment without seeking a bank lender.
“Over the years, we realized how difficult it is to get a loan,” Gazzola said. “We’re pretty much self-funded. The time it takes for you to wait for bank approvals costs money. When you have to wait for a loan to come through, you’re just sitting on your property paying additional rent and utility.”
Sometimes a restaurant owner can draw on an extended track record of success to obtain a bank loan.
Chris Vegara, executive chef and partner in Saint George, a French bistro opening this month in Hastings-on-Hudson, secured a loan with Chase Manhattan Bank using another property as collateral. Front-of-the-house team member Jason Steinberg said this will be Vegara’s third restaurant, and he has built a relationship with Chase Manhattan through the years.
“Chris opened his first restaurant 10 years ago and we already knew a good person to be talking to about loans,” Steinberg said. “We didn’t have to cold call.”
Even with a loan, most renovations to the former Buffet de la Gare space will be done with their own labor and paid for out of pocket.
“I’ll be reupholstering the chairs,” Steinberg said. “I taught myself to do that. I’ve painted the interior walls myself.”
october 17, 2013
Perfect storm brewing for Sleepy Hollow
An eponymous and hot new TV show, a $60,000 state grant and the most evocative and perfect of holidays – Halloween. Call it a winning trifecta for the village of Sleepy Hollow.
Drawing on its historic ties to the legend of Sleepy Hollow and embracing American author Washington Irving’s tales about the Headless Horseman and Ichabod Crane, times are anything but sleepy for businesses.
Tourism has ramped up since the days when the municipality was known as North Tarrytown, before forward-thinking lawmakers in 1996 made the name change.
“Who wants to be called ‘North’ anything?” asked Anthony Giaccio, Sleepy Hollow village manager.
Giaccio explained that after General Motors Corp. moved out of the village in 1999, it took 4,000 jobs and left the village’s economy and businesses in a state of disarray.
“GM was paying 50 percent of the taxes,” Giaccio said. “It used to be the life source of our village.”
Since 2002, General Motors has been looking to sell its vacant 96-acre site to a developer who can “get the property back on the village’s tax roll,” Giaccio said.
Businesses have slowly begun to recover as the village turned to creative strategies to help businesses generate more revenue. Tourism was the diamond in the rough, which helped business entrepreneur Jeannie Galgano get back on her feet after she abandoned her brick-and-mortar gift shop in Tarrytown. Now she runs her gift shop at the base of the Old Dutch Church property on North Broadway rent free.
“Business has been excellent,” Galgano said. “We’re 40 percent ahead of last year, which is a noticeable increase. Business is starting as early as September, when it usually started in October.”
Galgano, who arranges her Headless Horseman gift shop on two long tables with a small tent overhead, sells items ranging from pewter statues to hoodies. She said the knitted caps with the Sleepy Hollow logo are the newest additions to her pop-up shop, and they’ve been “selling quickly as soon as the cold weather hit.”
Neighboring businesses have experienced an increase in sales throughout the Halloween season. One business owner at a pizza parlor on Beekman Avenue said Halloween plays an integral role in the success of her business. She added that she began decorating her storefront with Halloween ornaments months in advance.
“Halloween really helps our business because a lot of tourists come here from different towns and states,” said Kate Guzman-Kastrati, co-owner of Hollywood North Pizza. “We’re hoping this season it will continue to move our business along.”
Historic Hudson Valley is the nonprofit group that owns and operates three of the attractions visitors seek during the Halloween season including Horseman’s Hollow at Philipsburg Manor in Sleepy Hollow, the Sunnyside Home of Washington Irving in Tarrytown and the Great Jack O’Lantern Blaze at Van Cortlandt Manor in Croton-on-Hudson.
Rob Schweitzer, director of marketing for the Historic Hudson Valley, said each year the number of visitors for these three events have grown significantly. The Great Jack O’Lantern Blaze, the village’s largest pumpkin-carving event that began in 2005, has drawn 18,000 visitors over eight nights last year. This year, the village is on track to top 100,000 visitors over 25 nights. The Horseman’s Hollow, the village’s haunted maze which started in 2010, generated 16,000 visitors over 11 nights last year. This year, the event could draw at least 20,000 visitors over 13 nights, Schweitzer said. Sunnyside hosts myriad daytime programs ranging from celebrations with magicians and puppets to re-enactments of the legend of Sleepy Hollow through displaying objects in the manor that relate to the stories written by Washington Irving.
One of the most popular tours operated independently of the Historic Hudson Valley group includes the Old Dutch Church, built in 1685, which was constructed from fieldstone and flat, yellow bricks from Holland. The Old Dutch Burying Ground, which is the cemetery surrounding the church is about three acres wide. It holds regular funeral services throughout the year and opens up to the public for tours around Halloween. New this year, the Old Dutch Church will bring in 48 5.5-ton bells forged in the Netherlands, which visitors can play from a keyboard set up at the base of the bell tower.
Tourism in Sleepy Hollow will continue to draw new businesses and developers in the area, said John Sardy, executive director of the Sleepy Hollow Tarrytown Chamber of Commerce.
“The brand is exploding,” said Sardy, noting the increased membership of businesses on the Sleepy Hollow Tarrytown Chamber of Commerce. “We’re attracting new businesses from Ossining, Mount Kisco and Elmsford. The tourism is going to foster real estate. New construction for real estate is tremendous with high-end condos and homes coming in. They’re building right on the Hudson River front.”
november 7, 2013
Wall Street North
A ticker on a flashing marquee and nine large flat-screen televisions light up the walls of the newly opened 525-square-foot trading room at Mercy College in Dobbs Ferry. The classroom, which remains dimly lit for better view of the screens, is filled with business students hovering over computer screens and poring over market data as they discuss what companies’ shares they would buy and sell. The Bloomberg and CNBC news channels hum quietly on TVs in the back corners of the room.
Professor Charles Garcia, who teaches a course on organizational leadership and grades 40 percent of the coursework on public speaking, encouraged students to come up one by one and interact with their classmates while using the touch-board television screens.
With plans to teach macroeconomics and co-teach finance with School of Business Dean Ed Weis next semester, Garcia said the textbook approach is not enough to get students engaged in their learning. Not only do the students need practical skills to be successful on the job, but they need tools to mirror real work experience, he said.
After the college acquired Victory Hall, the building that once belonged to the Archdiocese of New York and operated as a Catholic high school, the School of Business got what they asked for: a trading room that replicates the Wall Street experience.
Under the leadership of Weis, a former managing director at Merrill Lynch, and business professors including Garcia, who worked for Bloomberg, the school built a curriculum using the Bloomberg for Education software to bring the world of finance into the classroom setting.
Students sit in front of computers that show real-time market information using a software program that delivers data, news and analytics, similar to the ones global financial professionals use.
“We want to help them apply professional skills in a professional setting,” said Garcia. “This is knowledge that can add value to them if they decide to work on Wall Street.”
Even for students who don’t choose to go the Wall Street route, they’ll have “industry knowledge at a young age,” which shows companies they understand how to “get real life market data” and “know how to trade and invest,” Weis said.
The trading floor adds an experiential component to the students’ education, Garcia said. The School of Business has 10 students who have been placed on the fast track to getting internships with at least one Fortune 500 company through the college’s business honors program. For one student, the trading room is an essential part of his learning experience.
“I was on the trading floor at Goldman Sachs for a mentorship program and it opened my eyes to what I need to learn and where I’m at,” said Angel Cespedes, a sophomore in accounting, who also had a mentorship program at IBM. “Now I can practice and learn the hard, tangible skills I need in the trading room here to be excellent in the work field there.”
Cespedes added that with the knowledge he gained from using the software program in the trading room, he can monitor a company’s performance, use that data to make real industry decisions and apply his knowledge about the financial market by having conversations with prospective employers during job interviews.
The College of Business and the board of trustees are exploring more ways to bring the finance world to life. One idea that’s under review is setting aside a small portion of Mercy’s endowment for business courses that teach investment strategies and allowing the professors and students to collectively invest that money in the market and monitor the growth of that investment.
“By the time that freshman gets to the investment management company, they’ll have had experience managing a slice of real money,” Garcia said. “Nowadays, companies don’t have the patience for one-year-long training programs, so we like to think our program is a transformative model that’s application-based and very experiential.”