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Business

Dargan’s Pub Owner Takes Control of His Own Destiny with Building Purchase

Paul Dargan uses small-business financing to turn a longtime dream into a reality for his Ortega Street restaurant

Sure, the opportunity for Paul Dargan to buy the building he rented for his namesake pub had come up once or twice in 15 years.

Purchasing the building at 18 E. Ortega St. in Santa Barbara that houses Dargan’s Irish Pub & Restaurant had always been part of the plan.

Dargan aimed to follow in the footsteps of his grandfather and uncle before him, who owned and operated a pub of the same name in the family’s home country of Ireland.

The down payment needed to secure the space, however, cast the dream in a less realistic light.

Dargan’s goal was realized late last year through the Small Business Administration program, a federal financing assistance that helps well-established local business owners secure financing.

Instead of putting down the more typical 30 percent for a loan, Dargan paid 10 percent. Now he’s his own landlord and “can be in control of my own destiny.”

“The 10 percent is hard enough,” Dargan told Noozhawk. “That’s a bit hairy. They walk you through it. Why not invest and build equity? Plus, you take away the unknowns.”

Dargan wasn’t the only local business owner to take advantage of low-interest rates and the ability to set his own rent — which in his case had gone up 70 percent in 15 years.

Hayes Commercial Group helped 14 businesses on the South Coast become “owner-users” in 2012, half of which used SBA loans to purchase commercial property.

Dargan's Irish Pub and Restaurant is at 18 E. Ortega St. in Santa Barbara. Owner Paul Dargan recently bought the building with the help of a federal program. (Gina Potthoff / Noozhawk photo)
Dargan’s Irish Pub & Restaurant has become a fixture at 18 E. Ortega St. in Santa Barbara. (Gina Potthoff / Noozhawk photo)

Moreover, more than 50 percent of all commercial sales in Santa Barbara last year were to owner-users, according to Hayes Commercial Group broker Francois DeJohn, who was involved in seven of those sales, including Dargan’s.

He attributed the increase to lower rates and lower property values, which are down 15 to 20 percent from several years ago.

“(SBA) finances 90 percent of the purchase,” DeJohn said. “You don’t have a landlord. You’re able to control your costs better. A lot of these small-business owners want to build up equity for the future, for their kids, their family.

“It’s kind of a no-brainer to buy your own building if you plan on being in it for a long time.”

In Dargan’s case, as in most others, owners were considered for SBA financing because they had been in the community at least five to 10 years, and used at least 51 percent of the property. The program is not for investors or start-up businesses by any means, DeJohn said.

A main drawback, he said, is that an owner is pretty much stuck in a 20-year loan agreement instead of a lease contract that comes up every few years.

DeJohn said he expects the owner-user purchasing trend will continue into next year and beyond, since most business owners are putting money they would spend on rent into a mortgage.

Dargan said an owner’s building upkeep isn’t much different than when he was leasing because he paid a landlord to fix the occasional problem anyway.

He is looking forward to his 16-year anniversary in November, only this year he has more peace of mind knowing his business will be in its great location — just off State Street adjacent to one of the city’s busiest parking facilities — for years to come.

That will give him plenty of years to acquire more loyal locals who like to sit around the fireplace or at the bar relaxing with a pint of Guinness.

“I intend hopefully to be around 20 years,” he said. “I think the time was just right.”

Noozhawk staff writer Gina Potthoff can be reached at .(JavaScript must be enabled to view this email address). Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.

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