When Something Old is Very New
By Nick Welsh
The mother of all motherships appears poised to land at the intersection of State and Mason Streets in downtown Santa Barbara, less than two blocks from the Pacific Ocean. Santa Barbara will never be the same. At the helm is Los Angeles developer Michael Rosenfeld, who in his own low-key, unassuming, yet exceptionally definite way is about to reap a whirlwind of political and personal melodramas that has taken 20 years to play out on Santa Barbara’s stage. All this has profound implications for the future character, flavor and function of the city’s downtown. That’s because sometime this summer, Rosenfeld turns the lights on at his new Hotel Californian—121 rooms of a high-end Spanish-Revival-glitz-accentuated-with-designer-Moroccan-glam hotel that spans three parcels and 2.14 acres of high-octane real estate located barely spitting distance from the beach. Such numbers tell only part of the story. Included in this package—roughly valued at $120 million—are three restaurants, multiple bars, an outdoor community plaza space, a gym, a spa, a grand ballroom, multiple meeting rooms, a roof-top pool and an outdoor lawn terrace.
The impact of Rosenfeld’s new hotel is analogous to heaving enriched uranium into the core of a nuclear-power generator. Right next door to the new hotel is TV producer Dick Wolf’s architecturally extravagant—at least by Santa Barbara standards—MOXI museum, catering to young minds (also dubbed The Wolf Museum of Exploration and Innovation, as Wolf and his wife, Noelle, were the nonprofit MOXI’s largest donors) plus Tony Romasanta’s new 35-room hotel development. Spanning nearby Mission Creek and Cabrillo Boulevard is a brand-new multi-million-dollar wide-sidewalk pedestrian bridge. Along Cabrillo, Virginia Castagnola-Hunter is building her new high-end seafood restaurant next to the faux lighthouse. And local home-boy developer Ray MahBoob has yet to unveil his grand plans for the two waterfront properties—the former Surf Museum on Helena and the former El Torito restaurant on Cabrillo—that he just managed to snag.
That Rosenfeld’s new hotel complex rubs up against Santa Barbara’s semi-mythic Funk Zone is fraught with synergistic implications that commercial real estate brokers dream about with unabashed prurient delight. Not all that long ago, after all, this neighborhood was the embodiment of urban blight: oil-soaked used car lots, Lei Lani Room and the boisterous party-hearty emporium, Rocky Gallenti’s. As these changes unfold, Santa Barbara’s more traditional brick-and-mortar central business district has found itself struggling with the same intractable existential crisis afflicting major retail centers everywhere: why go to downtown malls when you can shop online? With the arrival of Hotel Californian imminent, no one knows for sure what’s going to happen next. But whatever it is, most insiders agree it will happen fast. One thing is certain, however; Santa Barbara’s commercial center of gravity is sliding inexorably down State Street in the direction of Rosenfeld’s new hotel.
In person, Rosenfeld smiles easily and is quick to extend a handshake. Conspicuously—unlike several other high-profile developers—he does not sport French-collar shirts. Instead, he gravitates toward blue blazer casual, no tie, his shirt unbuttoned at the top. Rosenfeld grew up in Santa Monica, the son of exceptionally successful residential developer Eugene S. Rosenfeld, and attended UC Berkeley where he studied classical literature and business finance. Rosenfeld fell into real estate development on his own—via the finance side up in the Bay Area—and never worked with his father. Today, Rosenfeld focuses mostly on luxury hotels, explaining that he buys properties in gateway locations with “high barriers to entry” and where “high value can be added.” All elements clearly apply to the new hotel project.
Rosenfeld may or may not qualify as a bona fide business genius, but in the context of Santa Barbara commercial real estate, he’s the next best thing. “The third time’s the charm,” he says with a quick laugh during a recent interview. By that, Rosenfeld means he’s the property’s third owner. The first one, Bill Levy—charismatic and controversial in large and equal doses—spent roughly $100 million leasing the land and securing the permits needed from the Santa Barbara City Council and California Coastal Commission. Levy first started beating the drum for the project—he initially envisioned something far more audacious—as far back as 1994. At the time, he boldly—and absurdly—predicted it would take just five years to get the project approved and built.
By 2001, Levy had managed to obtain the permits needed to build a 56-unit time-share condo project—dubbed Entrada de Santa Barbara or “La Entrada”—that the Ritz-Carlton empire would run. But along the way, Levy ran terminally afoul of Santa Barbara’s environmental watchdogs and many of his own longtime investors, who took to the courts demanding to know where their money went. Levy found himself waging a two-pronged war; the ensuing opera was grinding and crippling. By 2007, Levy—who at one time was paying himself $60,000 a month—was forced to declare bankruptcy. His chief creditor, Mountain Funding—a South Carolina lending outfit specializing in crisis loans to distressed developers—took over. Its agents, however, had no clue what to do with Levy’s project. As a result, they did next to nothing. For years, city hall was furious and embarrassed by the festering hole in the ground, not to mention the loss of potential revenues. Before the recession, Mountain Funding had rejected offers to buy the project—land and permits—for as much as $36 million. After the recession, however, it was desperate to unload. In 2011, it sold to Rosenfeld and his company Woodridge Capital.
The cost was about $7 million.
That coup was the first indication that Rosenfeld might be close to a genius. The second and third were the efforts he took to resemble neither Bill Levy nor Mountain Funding. By any reckoning, he succeeded wildly. “There’s been no drama, no pressure, no big changes,” says City Administrator Paul Casey. “He’s done everything he said he would and everything we’ve asked him to.”
In fact, Rosenfeld did propose some changes when he took over. Instead of spreading the parking throughout all three parcels, he proposed concentrating it in one spot. He also proposed reducing the square footage set aside for commercial outdoor plaza spaces. In so doing, he ran headlong into the buzz saw of the city’s design review process. One committee member disparaged the “postage stamp” allotment of open space he proposed, while dissing his new designs as “boring.” Rosenfeld listened. And he got it. In Los Angeles, he’d tussled with historic preservationists over his $2.5-billion proposal to radically redevelop Century Plaza Hotel—an architectural icon of 1960s jet-setting modernity. In that showdown, Rosenfeld backed off plans to demolish the Century Plaza outright, winning in exchange the preservationists’ support to build two new 46-story towers on either side of the hotel. In Santa Barbara, by the time Rosenfeld got his final changes approved, even his most outspoken critics had come to sing his praises.
By the numbers, Rosenfeld’s project occupies about 40,000 fewer total square feet than the Entrada project approved in 2001, but offers about 40 more parking spaces and a few more hotel rooms. Conspicuously expunged from the new plans—or from any of the publicity materials for the new hotel—is any reference to “Entrada” or the toxic smoke that name conjures. More fundamental, however, is the shift away from Entrada’s time-share—“fractional ownership”—strategy and quasi-gated community feel endemic to such operations. Instead, Rosenfeld and his team stress the need to invite, welcome and encourage the broader Santa Barbara community to visit the hotel complex’s many bars, restaurants, meeting rooms, lawns and other amenities. They have embraced the original name of the hotel—built in 1925 right before the city’s defining earthquake—rebuilding and preserving Hotel Californian’s existing façade. Even if the hotel draws 40–50 percent of its visitors from the rich SoCal tourist market—as is the strategy—its economic game plan depends on robust interaction with the local market. To the extent that Rosenfeld’s hotel offers a porous entry to and from the Funk Zone, so much the better. While many debate the time and place when the Funk Zone ceased to be “funky,” Rosenfeld says it remains still very much a creative space. “We see this as very much an arts district, a place where you can have culinary adventures,” he says. “We do not see what’s happening there as traditional.”
It’s clear that Rosenfeld has a serious case of the Santa Barbara itch, but it’s too soon to say he’s succumbed to the bug. Yes, he and his wife were married here in 2013—at Lotusland—but he has yet to buy a Santa Barbara home. He is, however, expanding his range of local investments. He’s already bought—for $30 million—the Chapala One mixed-use condo project in the 400 block of Chapala Street, another of Santa Barbara’s most troubled and troubling developments. He’s currently working to redevelop the old Craviotto warehouse in the 600 block of Anacapa Street into a three-story 30-unit rental project. And he’s negotiating with Bill Wright to lease a large swath of beachfront property—now a commercial storage yard—where he hopes to build a mid-range franchised hotel, such as a Marriott.
In the meantime, Michael Rosenfeld—engineer-operator-owner of the Hotel Californian mothership—is enjoying Santa Barbara, hanging out when time allows and munching at such places as Three Pickles sandwich shop or La Superica taqueria. “In Santa Barbara, you can see someone on the street, grab a cup of coffee and have a conversation,” he says. “That’s one of the things I value. In L.A., people are more in a hurry.”
This story was originally published in the Summer 2017 issue of Santa Barbara Seasons Magazine.