The owner of a luxury hotel in Santa Monica will replace the moderately priced accommodations that were demolished to build the hotel.

Sunshine Enterprises LP told the California Coastal Commission Thursday that it will set aside 86 rooms at $180 per night in the Shore Hotel, which usually charges $300 to $800 per night. The rooms are intended to replace lower-cost rooms that were lost in 2011 when Sunshine Enterprises tore down two motels on the site to build the hotel without a permit from the commission.

The development company, which is managed by the Farzam family, obtained a permit from the Coastal Commission in 2009 to replace the motels’ 72 rooms with a moderately priced hotel, but let the permit expire and built a 164-room luxury hotel instead. 

The rooms that were lost comprise 35% of the affordable visitor accommodations that Santa Monica has lost in the past 30 years, according to commission staff.

The commission, which is charged with preserving affordable accommodations along the California coast, fined Sunshine Enterprises a record $15.6 million earlier this year after a Los Angeles Superior Court judge said the developer had pulled a “bait and switch” by building the Shore Hotel without a valid permit.

The developer paid the fine in August and applied for an after-the-fact permit that included a plan to replace some of the lower-cost rooms with a 34-bed hostel.

The Santa Monica City Council and multiple elected officials, including local representatives Senator Ben Allen and Assemblymember Richard Bloom, wrote to the commission before it considered the plan Thursday to express concern that 34 hostel beds would be an inadequate replacement for 72 motel rooms.

The commission took the same stance Thursday and told Sunshine Enterprises that it would only issue a permit if the Shore Hotel offered 72 rooms at a moderate rate. 

“The core mission for us is to protect the accessibility of the coast to all segments of the population, and here you had a place where working families could have access to Santa Monica State Beach,” said vice chair Donne Brownsey. “I believe that the only resolution is to replace those rooms on-site.”

Sunshine Enterprises responded by scrapping the original plan and said they would price 72 rooms throughout the hotel at $180 per night within 30 days. The $180 rate is based on what the two motels charged in 2009 adjusted for inflation.

Steve Kaufman, the attorney for Sunshine Enterprises, said the developer would still build the 14 rooms that were planned for the hostel. He said the hotel will waive the resort fee for all 86 rooms and charge a reduced overnight parking rate of $20 to $25, which is consistent with the price of public parking in the area.

Kaufman also said Sunshine Enterprises will offer the 14 smaller rooms at no cost to programs that bring youth from marginalized communities to the coast, a plan that was included in the developer’s hostel proposal.

The commission approved the revised proposal with a 7-5 vote and said Sunshine Enterprises will have to pay an additional $2.3 million in fees. The agreement includes a monitoring plan to ensure compliance.

“The coast is for everybody,” said commission chair Steve Padilla. “If you can afford millions of dollars in fines and in-lieu fees, you should be able to accommodate people of lesser means in your hotel.”

But for many of the commissioners who voted no and for several environmental organizations that testified during the hearing, the agreement did not go far enough.

Jennifer Savage, California policy manager for the Surfrider Foundation, said she thinks the commission should have ordered the hotel to shut down to send a strong message to developers that breaking the law would not be tolerated.

“I think it’s a better outcome than the original project and I appreciate the commission’s efforts to restore to the extent possible what was lost,” Savage said. “The message that is sent still can be interpreted by other developers that they can ultimately do business in an underhanded, irresponsible fashion that impacts the people of California in a negative way.”

Correction: The original version of this article incorrectly stated that Shore Hotel would price 72 rooms at $180 per night. In fact, the hotel will set aside 86 moderately priced rooms.

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