The Santa Monica City Council on Tuesday authorized a lease with Santa Monica Brew Works for the former Rusty’s Surf Ranch space on the Santa Monica Pier, moving to fill a site that has sat empty for nearly two years after an earlier deal collapsed over worker protections.
The 7-0 vote allows City Manager Oliver Chi to negotiate and sign a lease with the local craft brewery, which plans a surf-themed, fast-casual restaurant with live music at 256 Santa Monica Pier.
The vote came less than four months after the city ended talks with California Roadhouse, the operator the council chose in April from nine proposals. Chi said California Roadhouse asked the city to remove the labor peace provisions that have been in every Pier lease for decades and sought several substantive changes to protections for former Rusty’s employees, “none of which comported with the council direction.” Talks ended in late June, he said.
The Brew Works lease keeps the standard labor peace clause, which bars tenants from impeding union organizing, harassing or wrongfully firing workers who seek to unionize, or violating labor law.
“This is immutable; it’s not proposed to be changed. It’s proposed to remain,” Chi said.
The lease also requires Brew Works to give former Rusty’s workers a path back. Eligible former employees, excluding managers, supervisors and confidential employees, would receive notice of a 30-day hiring window before the restaurant opens and an interview if they apply. Qualified applicants would get written job offers based on the company’s operational needs, followed by an introductory period of at least 90 days.
Councilmember Ellis Raskin asked whether those terms match the Pier worker recall and retention ordinances the council adopted in February. Chi said the provisions were modified slightly because the building is vacant but otherwise follow the ordinance language. A staff report says the ordinances themselves do not apply because Rusty’s closed before they took effect.
Raskin made the motion “with the understanding that the lease terms are substantively equivalent to the requirements in Chapters 4.66 and 4.69,” while noting the council takes no position on the staff report’s view of whether they apply. Mayor Caroline Torosis seconded.
Councilmember Dan Hall asked whether Brew Works was comfortable with the rules. Chi said the company had raised concerns but already operates at LA Live and is “familiar with how unionized environments operate.”
“We do believe, based on all the communication from Brew Works, this won’t be a problem moving ahead,” Chi said.
The financial terms are more generous than those offered to California Roadhouse. Brew Works would pay $5 per square foot in base rent on about 3,039 square feet of interior space, with 3% annual increases, bringing roughly $215,000 to the Pier Fund in the first rent-paying year. Roadhouse had agreed to $6.50 per square foot with $100,000 waived the first year, which Chi said would have produced about $225,000 that year and $325,000 annually after.
The city will also provide up to $750,000 for tenant improvements, up from $625,000 for Roadhouse; repair or replace the building’s base systems, including the roof, plumbing, electrical and HVAC; and waive city permit and plan check fees. Roadhouse would have taken the building as is. The lease runs five years with two five-year extension options, one more than the earlier deal.
Chi acknowledged the deal is “a little bit more advantageous for the potential operator” but called it appropriate “given all of the dialog and controversy that’s happened over the course of the last two years.” He said the city is shifting to industry-standard leases in which it maintains building systems, a model it is working to extend across the Pier.
Asked by Councilmember Natalya Zernitskaya about the cost of rejecting the deal, Chi said the space would remain shuttered.
“The building will continue to deteriorate,” he said, adding that the opportunity cost “becomes harder and more expensive the longer we wait.”
Brew Works was selected through a flexible process in the city’s Pier Leasing Guidelines that allows a direct proposal after notice to the Santa Monica Pier Corp. Councilmember Lana Negrete said she had heard from local businesses asking why they could not compete.
“I’m happy to fill the space. I just want to be clear that there’s some changes that have happened,” Negrete said. “I think a lot of people are under the assumption that we always do an RFQ.”
Brew Works, which opened in 2014 and which Chi called the city’s only craft brewery, also runs two Emmy Squared Pizza restaurants. Its co-founder and CEO, Scott Francis, is a former music publishing executive. The proposed restaurant, tentatively named “Surf Shack by Santa Monica Brew Works,” would be the only dedicated live music venue on the Pier, according to city staff.