When customers at the Sea Inn bar on the Redondo Beach pier complained about being cold, owner Steve Shoemaker would hand them a coat from a rack at the front door.
The bar had no heat because the bar’s barn door slid open 50 feet and the fire department required the door be open during business hours.
“To heat the bar, I’d have had to heat the whole harbor,” Shoemaker said.
That was 1972, when the City of Redondo leased Shoemaker 30,000 square feet on the lower level of the pier’s three story parking garage. His lease was $1 per square foot — per year.
“I was the only bidder,” Shoemaker said.
In 1974, Shoemaker converted his bar into a video game arcade after discovering the bar’s 25 cent video games were more profitable than its 25 cent beers. He called it The Czu (pronounced Zoo), after Redondo’s then mayor Bill Czuleger.
Today, many of the more than 300 games at the arcade, including Skeeball, are still 25 cents. The popular Tilt-A-Whirl is $2 on sunny days and 50 cents on rainy days.
The coat rack by the door is gone, the arcade is still unheated and the fire department still requires the doors be kept open. But it’s rare, Shoemaker said, that kids running around what is now called the Redondo Fun Factory, or the parents running after the kids, complain about being cold.
“If they’re cold, they can leave,” he said.
All of which is why Shoemaker is convinced something other than compliance with Section 1204 of the California Building Code is behind the Redondo building department letter he received in September ordering him to heat his cavernous arcade.
Shoemaker believes the city wants to terminate his lease early to make way for the CenterCal waterfront development. El Segundo-based CenterCal plans to level the existing pier and harbor buildings and replace with them with new restaurants, a market hall, a movie theater, new parking garages and a four star, 130 room hotel.
The hotel is planned for the top level of the parking garage, over the Redondo Fun Factory. But first, according to the waterfront Draft Environmental Impact Report released last month, the 50 year old parking garage needs to torn down and rebuilt.
In October, Shoemaker responded to the city’s order that he heat his arcade with a letter to the city council.
“To put it mildly and there are many other words I could use, I am extremely troubled by the ongoing City effort to destroy my business and devalue my leasehold interests at the Pier,” he wrote.
“Now, evidently anxious to renovate the pier and bring in new tenants, the City hopes to avoid its contractual obligations and avoid paying the fair value for my leases….”
He noted that the city is requiring him to heat his arcade, “while imposing no similar expenses or burdens on other nearby tenants.” Several of the restaurants on the neighboring International Boardwalk also have barn door entrances and no heat. The spaces were built as storage for the fishing boats docked in front of the boardwalk.
Waterfront and Economic Development Director Steve Proud responded to Shoemaker’s complaint to the council with a letter hand delivered to Shoemaker, dated December 18.
The letter begins by noting that the Fun Factory “is required per code to have adequate heating… With winter upon us, and large amounts of rain expected, it is important that your premises are adequately heated.”
Proud then writes, “Without revisiting the entirety of lengthy correspondence between the City and RFCC (Redondo Beach Fisherman’s Cove Company), the city denies your frequently repeated contention that its concern about compliance with applicable codes is a veiled effort to drive RFCC out of business and require the RFCC leasehold for the proposed CenterCal development.”
Proud elaborated on the issue in an interview this week.
“Shoemaker contacted our chief building inspector for advice because his insurance company had a problem with his heaters. He sought our counsel, and now he’s angry because we sent him the code provision. All businesses should be at code,” Proud said.
Redondo Mayor Steve Aspel, who counts Shoemaker as a friend, said he was surprised by Shoemaker’s letter to the city council.
“The city isn’t targeting him. He contacted the city in September saying his insurance company suggested he remove his [non working] heaters. So, the city just told him to bring his business up to code. He’s a businessman and wants top dollar for his business. I don’t blame him. But there’s no grand scheme to get rid of him. He just needs to negotiate with CenterCal.”
Reinventor
Shoemaker, now 78, majored in philosophy and literature at Claremont College, after turning down a scholarship to the California Institute of Technology. “I didn’t like engineering,” he explained.
“After college, I sold cars until I made enough money to start a business. Then, I’d go broke and sell cars again,” he said.
He was 35 and building fish tanks from jet canopies when he bid on the Redondo pier lease. (The fish tank behind the bar in the Poop Deck on the Hermosa Strand is his work.) He also owned the Art Barn in Old Downtown Redondo, where he sold his own seascapes and paintings by friends. One of those friends was Julian Ritter, who would become famous for his clown paintings. Ritter painted the clown mural at the entrance to the Fun Factory.
But Shoemaker’s preferences for art and entrepreneurism notwithstanding, his engineering instincts would determine his future fortune as an inventor and manufacturer of arcade games.
Most days, Shoemaker can be found at his North Francisca Avenue warehouse, two blocks up from the harbor, sitting at a workbench with a soldering iron in hand, peering through reading glasses at his latest invention. Like the clowns’ in the Fun Factory mural, his head is a big shiny dome fringed by wild, white hair. He wears denim shirts and shorts, whether working, addressing the city council, or attending civic functions, where he commonly stands by the bar buying everyone who approaches a drink.
“The mistake people make in gambling,” he said, “is going for the big jackpot. If you make 10 percent on a $1 million, that’s still pretty good.”
Currently, he’s working on a game he named 1 Shot (“one price, one try, one prize”). Players maneuver a crane with a vacuum instead of the usual claw to pick up postcards, gift cards or prize redemption tickets.
“It’s not just for arcades. It’s for any retail outlet. It makes about $300 per month, but its footprint is only one square foot. What else generates $300 per month per square foot?” he asked. A Chinese company recently bought 1 Shot’s worldwide distribution rights.
Shoemaker holds nearly two dozen arcade game patents, ranging from a laser gun shooting range to a bicycle chain-driven press that prints and perforates redemption tickets on paper that is thinner and cheaper than the familiar, cardstock tickets. Since the press’s invention in 2002, Shoemaker has sold over one billion tickets to arcades around the world.
Rough waters
Despite being one of the pier’s top attractions for nearly five decades, Shoemaker’s relationship with his landlord has been litigious, on a level with the millions of dollars he has spent protecting his game patents.
He traces the conflict to the 1988 El Nino storms and the pier fire that followed. On January 17, 30-foot waves, supercharged by a seven-foot high tide, swept over the 14-foot breakwall. The waves deposited a 40-foot barge in the Portofino hotel lobby, sank 12 boats and slammed a shipping container into the 155-foot-long fishing pier that connected the Monstad and Horseshoe piers. On April 27, a second storm brought down the fishing pier and ripped out the electrical that ran under under the other piers.
Exactly one month later, on the Memorial Day Weekend Friday, with over 2,000 visitors on the Horseshoe pier, a newly installed electrical vault sparked, setting the pier on fire.
Ken Handman, whose Specialty Maintenance company had the parking garage and pier maintenance contract, was on the pier when the fire broke out at 1:40 p.m. “My foreman and I rushed to the fire in a small vehicle equipped with fire hoses used to wash down the pier, Handman recalled.
“Standard procedure was to connect fire hoses to the fire hydrants for daily wash downs. My foreman had done it that morning and had years of experience with this procedure. He connected a hose to the hydrant nearest the fire and opened the valve. No water came out… The City fire boat was first on the scene. The crew was directing their single water cannon at the bottom of the pier, directly below us.”
Then Deputy Fire Chief Pat Aust was the incident commander on the May 27, 1988 fire. He later became Redondo’s Fire Chief and then served on the city council from 2007 to 2015.
Aust said the loss in water pressure was due to the collapse of a cast iron water pipe fastened to the underside of the pier.
“We arrived six minutes after the dispatch call,” Aust said. “Creosote, a protectant used on the pier, burns like gasoline at 400 degrees. It turned to liquid and was running down the wood pilings, making the ocean boil.”
“When the pier burned, the water pipe’s fasteners failed and the pipe fell into the ocean. But if there was a loss in water pressure, it was only a momentary, until we shut off the section valves at either end of the pipe,” Aust said.
The 1988 storms and fire destroyed 18 pier businesses and 400 jobs were lost.
The following year, Fun Factory revenue and that of neighboring pier businesses fell 50 percent and would never fully recover, according to Shoemaker. He attributes the revenue loss to the loss in foot traffic from the Horseshoe Pier businesses, which included the popular Breakers, Cattleman’s, Edge and Polynesian restaurants.
Following the fire, in hopes of rebuilding the Horseshoe pier businesses, Shoemaker and then partner Susan Christensen acquired the pier’s lease for $1 million. Shoemaker said he planned to bring in celebrity chefs, including Wolfgang Puck, whose Chinois on Main he frequently dined at. Shoemaker was an investor in Puck’s Eureka brewery and restaurant, “One of Puck’s few failures,” Shoemaker said.
But before he could build the pier restaurants the city needed to rebuild the Horseshoe pier.
The city council didn’t want to rebuild the pier. So Shoemaker joined other pier businesses in a law suit that compelled the city to rebuild the Horseshoe pier.
In June 1993, the city council approved a $1 million improvement plan for the new pier, “The Gold Book,” as the gold-bound proposal by prominent South Bay architect Edward Carson Beall was called, was to “incorporate historic and waterfront element of Redondo Beach into a contemporary design…”
The “Gold Book” was never implemented.
Today, the only business on the Horseshoe pier is Kincaid’s restaurant, which opened in 1999, a decade after the fire. The remainder of the Horseshoe pier is used for open air activities such as fishing, kite flying, car shows and concerts.
“Harbor Director Sheila Schoettger told us before the city started work, that the new pier and the new pier buildings needed to be treated as a single project. Otherwise, the new buildings would have to comply with the new CEQA (California Environmental Quality Act) regulations. But the city treated the two as separate projects. The result was Susan and I were blocked from rebuilding restaurants on the pier, as has been the city, ever since,” Shoemaker said.
When the empty Horseshoe pier was reopened in 1996, leaseholders Shoemaker and Christensen were not invited to the ribbon cutting, Shoemaker recalled, with evident bitterness.
By then, Shoemaker and Christensen were engaged in a lawsuit with the city over their Horseshoe pier lease. In a pretrial settlement that year, they agreed to sell the lease back to the city for $1.5 million, half a million more than they paid for it. An additional consideration was a 25 year extension of the Fun Factory lease.
More suits soon followed.
In 2007, Shoemaker sued the city for increasing his Fun Factory base rent (he lost) and for increasing his percentage rent (he won). More recently, he sued the city for failure to provide adequate handicap parking in the pier garage. The court ordered the city to correct the parking deficiency and pay Shoemaker $20,000. Last year, he tangled with the city over bike racks after the city ordered him to remove from the front of the Fun Factory. He sold the racks to the neighboring Captain Kidd’s restaurants, which installed them in front of their businesses, where they remain, without objections from the city, he pointed out in his October letter to the city council.
Shoemaker’s and the city’s relationship reached its lowest level in 2003, when City Prosecutor Mike Webb won a conviction against Shoemaker for child pornography, forcing him to register as a sex offender.
In the late 1990s, when the internet began showing financial promise, Shoemaker launched several websites, including a pornography web site. Redondo police found eight underage pornographic images on the site and took the case to the Los Angeles County District Attorney’s office. When the District attorney rejected the case, Mike Webb prosecuted the case as misdemeanor violations.
Shoemaker denies having had knowledge that the underage photos were on his site. The site was open for anyone to post to, he said.
“The case cost me $500,000 and probably cost the city more. They’ve tried to break me financially,” Shoemaker said. “But they couldn’t. And my parents had both died and I don’t have children. So they couldn’t embarrass me.”
“The issue might have been settled with a phone call and notice to stop but the city prosecutor doesn’t work that way. His reputation is built on prosecution, not settlement,” Shoemaker said.
The judge did not prohibit Shoemaker from continuing to own his arcade. But the case did block Shoemaker’s long held dream of bringing a carousel to the Redondo pier. In 2008, Shoemaker located the Charles Looff carousel that had been on the pier in the 1920s. He proposed placing it next to the Fun Factory on Parcel 10, the site of the Octagonal building, which had been largely vacant since the 1988 fire.
In rejecting the proposal, then-councilman Steve Aspel said, “If the city approved the operation of a carousel for kids by a registered sex offender, we’d have CNN, Reuters and every other news organization down here reporting on it.”
The Grove, with an ocean view
Current efforts to redevelop the waterfront date back to 2007 when the city retained Kosmont Companies to develop a plan for the pier and harbor. The Kosmont Report found that “significant portions of the harbor area are functionally obsolete.” The report stated that with the proper mix of new businesses, the Redondo waterfront could rival the popular Grove shopping center in West Los Angeles.
Kosmont predicted Waterfront Redondo would generate $2.4 million in annual net revenue to the city through rents and taxes.
After receiving the report, the city began consolidation of its pier and harbor leases with the intent of enticing a single developer to redevelop the waterfront.
In 2012, the city acquired the Pier Plaza and the International Boardwalk leases. The Plaza is offices and the boardwalk includes a dozen restaurants and retailers, including Naja’s, King Harbor Brewing, The Slip and A Basque Kitchen. The two leases border the southeast side of the proposed development.
Also in 2012, the city selected El Segundo-based CenterCal to develop the 36 acre waterfront.
In 2014, the city acquired the Redondo Marina lease on the north end of the proposed development. Redondo Marina includes the Samba’s, Captain Kidd’s and Ruby’s restaurants.
The Horseshoe pier, already acquired from Shoemaker and Christensen, borders the waterfront project on the south and west.
Waterfront standoff
Shoemaker’s 30,000 square foot Redondo Fun Factory lease is in the heart of the proposed waterfront development, surrounded by the city-owned leases. But in the years since the Kosmont report, the city has made no overtures to Shoemaker about acquiring his lease. The omission of Shoemaker’s lease from the city’s consolidation effort is significant today because of the 25 year lease extension he was awarded during the Horseshoe Pier suit.
The Fun Factory lease expires in 2027. CenterCal hopes to begin construction on the new waterfront hotel in 2018.
Aust, who advocated assembling the waterfront leaseholds when he was on the city council, said Shoemaker’s lease was discussed by the council in closed sessions. He is prohibited by confidentiality laws from commenting on those discussions.
But speaking generally, he said, Shoemaker has historically been difficult for the city to negotiate with.
“As deputy fire chief, I was assigned to work with him during the two years following the 1988 fire. I have never in my life dealt with a more contrarian person. If you said it’s black, he might concede it’s a light shade of gray, but never black,” Aust said.
Proud noted that the city has a number of leaseholders it has not reached agreements with, including Quality Seafood, whose lease expires in 2025. He said the city consolidated its largest leasehold with the expectation that the developer would negotiate buyouts or relocation plans with the smaller leaseholders.
CenterCal CEO Fred Bruning said that when he entered negotiations with Redondo to develop the waterfront, city administrators directed him not to negotiate with Shoemaker for his lease.
“They didn’t want us to muddy the water,” Brunning said. “But six months ago, the new team at the city, which doesn’t have an ax to grind with Shoemaker, said I could negotiate with him. I emailed him that day.”
“Our first meeting was very cordial. Steve said he didn’t want to be an obstacle to the project. That’s why I was surprised when I got his letter, asking $29 million for his lease.” Bruning said Shoemaker did not provide financial reports to justify what Bruning regarded as a wildly inflated price.
Shoemaker said the math is simple.
“I figure an arcade doing $3 million a year is worth $50 million over the 25 years of my lease. With half the lease remaining, it’s worth about about half that.”
He acknowledged that his lease’s annual revenue is roughly half the $3 million he uses in his calculation. But he contends the city owes him the difference for failing to rebuild restaurants on the Horseshoe pier following the 1988 fire.
“It’s like if you lease a shop in a shopping center next to Macy’s and the Macy’s burns down. If the shopping center doesn’t rebuild a comparable anchor tenant, it’s responsible for your loss in sales,” Shoemaker said.
He dismissed suggestions that the Fun Factory’s revenue decline is due to the advent of home video games such as Microsoft’s Xbox and the Sony Playstation.
“If that were the case my sales would have fallen slowly and not fallen off the cliff like they did the year after the fire. Saying people won’t go to arcades when they can play video games at home is like saying people won’t go to bars when they can drink at home. Or won’t go to theaters when they can watch Netflix. People come to arcades to socialize,” he said.
Redondo Waterfront Director Proud, in his December 18 letter to Shoemaker, indicated that the city is prepared to wait for Shoemaker’s lease to expire before building the hotel.
“So there is no misunderstanding in this regard, please keep in mind that the RFCC [Redondo Fisherman’s Cove Company] leasehold expires July 31, 2027… The city is satisfied with a staged redevelopment at the waterfront and the city as no interest in acquiring the RFCC leasehold for the CenterCal development,” Proud wrote.
The Draft Environmental Impact Report lists as an option delaying development of the south portion of the waterfront until 2018.
Aust said time is on the city’s side in its negotiations with Shoemaker.
“The longer Steve waits to sell his lease, the less it’s worth. And realistically, work on the waterfront project won’t begin until 2019.”
Bruning said he offered to relocate the Fun Factory in the new Market Hall, as he plans to do with other “legacy” tenants such as Captain Kidd’s and Quality Seafood.
Shoemaker declined the offer.
“The new location would be too small and I’m 78 years old. I don’t want to move,” Shoemaker said.
“We can build around him,” Bruning said. But sooner or later the parking lot on top of his lease is going to collapse. The Kosmont report gave the garage five years and that was more than five years ago,” Brunning said.
“The garage is only going to fall down if you build a hotel on top of it. It underwent an earthquake retrofit just 10 years ago,” Shoemaker said.
Proud said a report on the garage’s codition will be presented to the council at its January 19 meeting. “We’ll probably craft a more aggressive maintenance plan. But we really should be looking at replacing it,” Proud said.
“They can try using eminent domain, but the city will still have to pay me the value of my lease,” Shoemaker said.
“I’ll sell if they make me a fair offer. If they don’t, I have plenty of money to fight them. And the lease says the city pays attorney fees if it loses.” ER
