This comes from the Business Journal - Friday, July 24, 2009

As the auto industry fights to stay alive through the downturn, two Silicon Valley dealers are bucking the trend. 
Stevens Creek Toyota and Thrifty Car Sales are expanding after finding opportunities from landlords willing to lower rents on property abandoned through bankruptcies.
With lease rates at levels not seen in 10 years, Stevens Creek Toyota jumped at the chance to expand its dealership to a 3-acre site across the street on Kiely Boulevard and signed a 10-year lease. Because rates have fallen from $3.50 a square foot plus costs at the height in 2007 to $2, General Manager Steve Cornelius was able to lock in at a level he could not have afforded two years ago.
Cornelius, head of the family dealership founded in 1971, said he has tried unsuccessfully for years to lease property to store new vehicles and expand his used-car lot.
“With the go-go economy, it was very difficult to find anything that came close to our financial parameters. We had five storage lots up and down Stevens Creek Boulevard in every little nook and cranny”, he said, “Forget money, nothing was available.”
His gain came at the pain of two failed companies.
Black Angus, which occupied roughly half the site near the intersection of Kiely and Stevens Creek boulevards, emerged from one bankruptcy in the past few years only to fall back into the red and ultimately close its restaurant for good; Carrows Restaurant abandoned its building, and Chrysler Corp.’s reorganization forced it to give up plans to expand in the same location.
“One guy’s bankruptcy is another guy’s opening a business,” said broker David Taxin, principal with the commercial real estate firm Meacham/Oppenheimer, Inc. Taxin, who represented Steven Creek Toyota, said he’s been talking with the owner of the sites, the Lopino Family Foundation, for years and was glad to sign a deal for the prized property.
"It's not all bad if you own good real estate," he said.
Colliers International broker John Machado, who represented the Lopino Family in the deal, cautioned against reading too much into the expansion.  It’s an opportunity to consolidate, he said.
“Is this a sign that the auto industry is doing well?  Absolutely not.  The rent Toyota is paying for two lots is less than they would have paid on one lot a year ago,” he said. “It’s twice as much real estate at a cheaper price, and it’s across the street.”
For his client, Machado said the fact that he won’t be forced to try to lease the two restaurants, both old buildings, in such an economy is definitely a boon.
“A bird in the hand is worth two in the bush. Plus, as a landlord, I don’t have to do anything,” Machado explained in the philosophy behind the deal. “I accept less rent because I want to rent it.”
Machado was quick to add that Stevens Creek Boulevard has not lost its luster as the dominant auto row in Northern California, noting that the property the Toyota dealership is leasing is on Kiely Boulevard. Rents have not declined nearly as much on Stevens Creek, he said.
“You’re either on Main Street, or you’re not,” he said. “There’s no other stretch of real estate in Northern California that produces the sales volume seen on Stevens Creek. I do not see a big trend other than a trend toward consolidation in the automotive industry.”
Thrifty Expansion
Ron Battistella, former owner of Silicon Valley Hummer, saw an opportunity to expand his new Thrifty Car Sales dealership onto a site abandoned by Stevens Creek Motors, across the street from his store in San Jose.
“I’m expanding, and I need more exposure,” he said.  “We’ve sold half a dozen cars at the new location in the past week.”  For Cornelius and Battistella, the location of the real estate sealed the deal.
Taxin said that lot near the intersection of Stevens Creek Boulevard and Saratoga Avenue rented for less than it had in 15 years.  "That's hard to pass up," he said.
Battistella said had the property been a couple of blocks away, he probably would not have signed the lease.  This allows him to expand his presence but not his management staff.
“In today’s market I like the name Thrifty because everybody is trying to be thrifty,” he said, explaining his switch from the expensive Hummers to selling used rental cars. “We went from the high line to accommodate what people are looking for today.” And used cars, he said, are very popular in today’s economy. He’s also Santa Clara County’s only authorized dealer to sell cars repossessed by banks.
“We’re seeing the hottest used-car market in our lifetime,” he said, adding it will remain so as long as new-car sales stay dormant.
Cornelius echoed Battistella’s remarks about used cars, but he said he has seen some uptick in the most recent monthly figures for new automobiles.
For Toyota, its new-car business was 52 percent off its peak in April compared with the previous year. But since that low, each month has shown a small but steady gain of 3 percent to 4 percent. In June, sales were down 39 percent, an “incremental improvement.”
He plans to demolish the Carrows Restaurant building to make way for cars and renovate the 9,000 square foot Black Angus building. “The used-car business is up substantially, and that has allowed the dealership to provide really good service,” he said.  “We’re doing OK.”

- Friday, July 24, 2009