Following a brief hiatus, the Shade Hotel project is back on track.
In August, contractors ran into a construction hiccup when they hit an underground seawall that complicated the plan to construct subterranean parking. But after negotiating with the city for an extension on its deadlines, developer Zislis Group is confident that the 54-room hotel will be operational by 2015.
“The City Council could’ve told me to pack sand, but they didn’t,” Zislis Group founder and owner Mike Zislis said last week from Maui, where he was overseeing the construction of another Rock & Brews. “We encountered an old seawall, a 100-year-old seawall, so we had to do some re-engineering. It slowed down the project for about 60 days but I must say, the city is so supportive.
“The mayor, Steve Aspel, is so supportive that he called an emergency council meeting the day before Thanksgiving, and all the members came in to sign a document to get the construction started the Monday after Thanksgiving.”
Foundation work began, for the second time, Dec. 2.
Zislis Group gained approval to develop another Shade – the same hotel brand it owns and operates in the Manhattan Beach Metlox plaza – on Harbor Drive back in 2008.
In 2012, the developer requested and received from the city an amendment to its lease, after encountering “challenging” soil conditions on the reclaimed lot. The project progressed, but encountered another obstacle later that year, so Zislis Group requested another extension.
“[Due] to the lessee’s difficulties with project architecture and in obtaining financing, they were not able to meet the deadlines established,” reads an administrative report prepared by city staff. “In recognition of the project’s importance, the City Council granted an additional extension to fall 2013 through a [third] amendment to the lease which also required that the lessee pay an additional $40,000 in extension fees and reimbursement of the city’s legal costs.”
In August, the contractor experienced another series of “delays in performing required soil remediation work on the site due [to] underground obstructions,” according to the report.
Tuesday night, the council approved a fourth amendment to the lease, which provides for additional, off-site parking on a parcel of city-owned land nearby, and sets down new construction milestones.
“Although this work is now 75 percent complete, the obstructions encountered in August caused significant delay and, as a result, the lessee was not able to meet the November 1 deadline for issuance of all permits and close of financing as established in the [third] amendment,” reads the report.
Tuesday’s decision extends the deadline by which Zislis Group must obtain all necessary permits to Feb. 28, 2014. The project completion date has been extended to April 30, 2015. Both amendments cost Zislis Group $10,000.
The newly amended agreement stipulates that the lessee will begin making rent payments of $17,000 per month — rather than the $8,500 per month proposed initially — beginning Jan. 1, 2014.
Zislis said last week he expects all building permits to be secured no later than Jan. 10.
“We have enough permitting by the city to continue on for the next six weeks until those permits are approved,” he said. “We have what they call Footing and Grading Permits, so if you drive by the site, we’re actually building. There’s a million dollars worth of gravel in the ground. We’re literally drilling 800 40-foot-deep, four-foot-wide stone columns, putting them in now. I’d say they’re about 60 percent done with that part of the job.”
Because the project’s King Harbor location, it is costlier to develop, he said.
“It’s on reclaimed land,” he said. “Fifty years ago, they pulled the sand out of the ocean and made artificial land. That’s why I have to spend so much money to put all that gravel in, because it doesn’t have any structural value. It’s just filched from the bottom of the ocean.”
The city has bent over backwards to accommodate Shade because it is expected to generate millions in income via ground rent payments and sales and transient occupancy taxes. It is also a mainstay of the waterfront redevelopment project being masterminded by El Segundo developer CenterCal.
“It’s a significant project catalyst for the broader waterfront revitalization,” the city’s harbor, business and transit director Pete Carmichael said at Tuesday’s council meeting. “Shade Hotel in a lot of ways is one of the first really significant private investors to come back into the waterfront in a number of years. We’re [seeing], in the last three or four years, the degree to which this has facilitated other private investment [in the area].”
After a series of long delays, the project is finally coming together, District 2 Councilmember Bill Brand at Tuesday night’s meeting.
“It’s been a long road,” Brand said. “It’s been years of Shade hanging in there and the city hanging in there and negotiations, rewriting of leases, extensions… It hasn’t been pretty [but] kudos to the Zislis Group.”
Zislis, for his part, is grateful to the mayor and council for their flexibility.
“They wouldn’t do this in most cities,” Zislis said. “It’s just as important for them that I open as it is for me. The city has been 100 percent responsive. It’s incredible, and that’s what it’s going to take to do a project this complicated.”
