Only Trendy Tenants Urged to Stay at Mixed-Use Complex : ‘New Image’ Envisioned at Paseo del Mar

When city officials persuaded a developer to drastically reduce the scale of the Paseo del Mar building across from the Santa Monica Pier, then-Mayor Ruth Yannatta Goldway called the agreement a hallmark of her Administration.

Sitting in the courtyard of the newly completed pink Spanish colonial-style structure two years ago, Goldway predicted that its combination of shops, restaurants, offices and subsidized apartments would serve as a model for future developments.

In the case of the Paseo del Mar, however, the parts of the model have never seemed to fit. Although the offices and apartments have remained occupied, the ground-floor retail area experienced a series of business failures. And within 18 months, ownership of the three-story building had changed four times.

The latest owner is Paseo Realty Investors, a company that plans to dramatically change the retail design of Paseo del Mar, at 1541 Ocean Ave.

Richard Kite, the company spokesman, blamed the building’s troubles on poor planning. He said the company expects to remedy the problems by converting the ground floor into a Rodeo Drive-style conglomeration of pricey shops and restaurants.

‘Jewel of Santa Monica’

“That property should be the jewel of Santa Monica,” Kite said in a telephone interview. “The architecture is very unique. It has a Mediterranean feel and because of its proximity to the pier, overlooking Palisades Park and the ocean, it’s ideal for the types of tenancies I’m talking about.”

Kite’s optimism has been fueled by the success of the building’s newest tenant, Ivy at the Shore. An offshoot of the high-priced West Los Angeles Ivy restaurant, Kite said Ivy at the Shore embodies everything he’s looking for: style, popularity, trendiness and the ability to pay top-dollar lease rates.

Nearly half of the building’s remaining ground floor is available and Kite said he hopes Ivy’s success will lure other upscale merchants.

As new businesses locate at Paseo del Mar, Kite said he will encourage three existing restaurants that offer middle-of-the-road fare--Chopsticks, a cafeteria-style Chinese restaurant; Donuts and Hot Dogs, a 24-hour fast-food place, and the Cafe Club, a restaurant with a wide-ranging menu--to vacate.

“Some of the poorer tenants we originally had have already gotten out,” Kite said. “The Chinese place is leaving. And the others probably won’t remain. We’re trying to give the building a new image.”

At least one tenant, however, seems determined to stay. The owner of the Cafe Club said this week that he has no intention of vacating. Otto Berokhim said he and his partners are planning to renovate the popular restaurant, which has just received a liquor license.

The owners of the other two restaurants could not be reached for comment, but Berokhim indicated that Kite could face trouble from them too. “We are not leaving,” Berokhim said. “They might want us to leave, but we don’t want to go.”

People familiar with real estate noted, however, that merchants such as Berokhim may be forced out if their rents go any higher. Vince Muselli, the president of the Santa Monica Chamber of Commerce, said luxury commercial space in Santa Monica costs $2.50 to $3.50 a square foot, a rate that most merchants can’t afford unless they run a highly profitable business.

Muselli predicted that Kite will succeed with his plans to upgrade Paseo del Mar, and blamed the city for the building’s earlier problems.

“The requirements that the city put on the project impacted it very dramatically from a cost standpoint,” Muselli said. “As a result, they had to charge rents that were beyond what the market could bear at the time. As far as I’m concerned, the city programmed them for failure from the beginning.”

The developer originally envisioned an eight- or nine-story office building but city officials insisted on a smaller building encompassing a variety of uses including offices, low-income apartments and retail outlets.

A more moderate political faction has assumed control of City Hall since then. City Manager John Jalili said Santa Monica still encourages mixed-use development but declined to comment on Paseo del Mar.

“Whether it made sense in the marketplace at the time, I don’t know because I wasn’t involved,” Jalili said. “But mixed-use development in general is still very desirable and cities are still seeking it.”

Confused State

In its current state, however, most people agree that Paseo del Mar looks more mixed up than mixed-use. On the street side of the faded pink building the offerings include the high-priced Ivy, the medium-priced Cafe Club, the low-priced Donuts and Hot Dog and a Frusen Gladje ice cream shop. Several other storefronts visible from the street are vacant and have “For Lease” signs in the windows.

The courtyard area contains two other restaurants, the upper-range Cafe Roma and the low-range Chopsticks, as well as several empty storefronts. Offices occupied mostly by lawyers and the subsidized apartments are reached through special entrances on two sides of the courtyard. A sign facing Ocean Avenue advertises “distinctive offices for selective professionals.”

“I think we’ll have the building full by the end of the year,” Kite said. “I’m very encouraged by what’s happening in Santa Monica. Twenty years ago the growth stretched out to Beverly Hills. Now you have Century City and Westwood. The last prestige area of development to the ocean is Santa Monica. And I think there’s a lot of potential here.”