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Santa Monica hotel developer fined $16M for “bait-and-switch” construction scheme

Sunshine Enterprises built its high-end Shore Hotel after permits expired for a lower-priced version

Coastal Commission Chair Dayna Bochco and the Shore Hotel
Coastal Commission Chair Dayna Bochco and the Shore Hotel

The developer of Santa Monica’s Shore Hotel had agreed to build a moderately-priced property, in line with the two it would replace. But what ended up rising at 1515 Ocean Avenue was a high-end hotel that would price out a large number of potential guests.

Now, the developer and owner, Sunshine Enterprises, has been slapped with the largest fine the state’s coastal commission has ever imposed for pulling off what one official called a “bait-and-switch” scheme.

The California Coastal Commission approved the $15.6 million penalty against Sunshine for building the high-end property without state approval, according to the Los Angeles Times.

Before building the Shore Hotel, the 12-member Coastal Commission approved permits allowing Sunshine to replace two lower-priced hotels at 1515 Ocean Avenue with another moderately-priced hotel.

Those permits expired, and Sunshine sought a permit for the upscale Shore Hotel. The Coastal Commission denied the permit because Sunshine didn’t plan to make up for the loss of affordable rooms, a requirement of the California Coastal Act.

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Sunshine built the Shore Hotel anyway and it opened in 2011. Rooms typically rent for between $300-$800 per night.

Sunshine’s fine will go to an environmental remediation account with the State Coastal Conservancy Fund, according to the Times.

The California Coastal Act was passed in 1976 and guarantees public access to the state’s coastline. The state used the Coastal Act to press wealthy homeowners into offering public access to Hollister Ranch, in what became a highly-contentious issue surrounding the 8.5-mile stretch of beaches near Santa Barbara.

Commission staff have recommended $9.5 million more in fees for Sunshine to obtain a proper permit that would legalize the hotel. That money would support building lower-cost hotel properties along the coast. Some commissioners also want Sunshine to take additional measures, like offering cheaper rooms at the Shore Hotel.

Representatives for Sunshine say owners are ready to comply with additional conditions. [LAT] — Dennis Lynch 

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Commercial Real EstateSanta Monica