Kuleto restaurants delayed, over budget

Pat Kuleto's two waterfront restaurants, WaterBar and Epic Roasthouse, have fallen two months and at least $2 million behind schedule, I reported in the Business Times on Friday (free link!).

Also, some of the ceilings are going to be pretty low (8 feet).

On the plus side: lots of outdoor terrace seating, high ceilings over the dining room, and both restaurants are pretty far along.

The project was already dropping jaws at its $18 million cost, now the cost is somewhere over $20 million.

Charles Phan only now realizing he opened his new restaurant in the MALL FOOD COURT. Ahem.

Apparently people are minting money at the year-old expansion of Westfield SF Centre mall, but not poor Charles Phan of Slanted Door, who has a restaurant in the basement food court called Out The Door.

Bloomingdale's made a year's worth of money in nine months at the mall, but Phan is all, :-(

As he told my colleague Sarah Duxbury last week:

... his Out the Door concept is only doing OK.

"People are not embracing the mall in the evening as much as I'd like to see," he said, adding that his 150-seat, 5,000-square-foot restaurant gets only one dinner seating and is not meeting his projections.

See? No turns at dinner!

Imagine that. People not wanting to eat dinner in the mall food court. Hmmmm.

Phan's expectations may be just slightly inflated by his experience at the Ferry Building, where since opening in 2003 he has made close to $12 million per year. There, he does two or even three turns each night at dinner.

Besides Westfield, Phan now has spinoffs in the works in Pacific Heights, mid-Market and at the California Academy of Sciences.

Business Times: Westfield dazzles (free link)

Google computer nerds to teach children how to eat healthy. Oh holy God.

Google invites you to bring your children to its Mountain View headquarters next month for pizza, soda and television so it can teach them how to not be obese.

If you're afraid your kids are going to grow fat watching television on their computer or chatting with friends on the computer or surfing the Internet all day on the computer or deciding to become computer programmers who marry their computers and eat chips and Mountain Dew until the day their startup gets bought by the world's biggest computer, probably the best way to allay your fears is to march them down to Google headquarters.

Go there on October 20, when the company is fighting childhood obesity by holding a benefit for a TV show aimed at children.

The show is called "DooF" -- "food" spelled backwards -- and airs on PBS.

The benefit basically is a day of eating and walking around the Googleplex, but hey it's not as bad as I make it sound: the pizza is from an organic "make your own" workshop deal that will be led by Steve Sullivan of Acme Bread and by Google's pizza chef.

The soda is Italian soda from a "Euro Cafe" so, uh, probably still not healthy.

The TV is just a big screen showing interviews with kids at the event itself so it will not keep your kids glued.

You also get to tour an organic garden, sip smoothies, learn about "raw foods," taste apples from Donner Trail Fruit, do a food spelling bee, have a cheese sniffing contest with Cowgirl Creamery, and listen to some hip hop dudes called "Felonious." Fair enough.

Just make sure you don't accidentally come on some other day, or your impressionable youth will instead learn how to set up a webcam, start a blog and immerse herself in software development so that she can someday work in a giant computer that controls her transportation, laundry, diet, hair style, dating options, etc.

And bring some cash because Google can't just be letting anyone in the door for free, it's not like they are made of money.

Business Times: Hey kids! Come pig out at Google!

SF hotels face capital famine

Hi!

Hope you had a GREAT summer!

Did you have a GREAT summer?

Hope so!

Because now the money is gone!

Yup!

Gone!

Probably not a big deal. The money went away for the month of August, and may return in September, or October, or sometime in the fall, or maybe next year, or maybe not quite ever, but everyone expects it will probably come back.

But for now it's taken a little vacation. Or an extended sabbatical. Whatever.

Don't want to overstate things. By "the money," I just mean the commercial paper that underwrote 80 percent of all hotel finance. And by "gone," I just mean not being given out to anyone, anywhere, anymore.

This really is not a big deal, unless you're a hotelier. Or a restaurateur. Or in the construction industry.

Or a broker, or in interior design, or an architect.

Or in the hospitality industry. Or in a business impacted by the hospitality industry. Or in a business that touches in some way on real estate.

Or in a business that needs, like, capital.

In a nutshell, the problem is that most commercial lending was done through supposedly very safe "commercial paper," or short-term loans to reliable businesses.

But Jim Cramer's hedge fund buddies took some of these loans and invested them in subprime mortgages, junk bonds and probably high-grade Columbian cocaine, no is really sure at this point because we're only talking about hundreds of billions of dollars and who really tracks that sort of pocket change.

Mainstream banks like the one that runs your checking account thought this all sounded swell and started borrowing and lending money this way too.

No one worried too much because as soon as someone made one of these insane loans he could then chop it up into a million pieces and sell the pieces to other investors who didn't know or care much about what they were buying.

They just cared that the loan had been stamped "AAA" by the ratings agencies, who of course valued the loans using computers, esoteric math no one understood and inputs no one could agree on.

About a month ago, everyone finally realized that some of this paper was not backed by operationally sound businesses but instead by people lending money to typical American homeowners which, as you might imagine, is a batshit crazy business to be in. Then they realized they couldn't tell which commercial paper was being used badly and which was sound. Then they stopped issuing commercial paper, which is a way of saying they stopped loaning anyone any money.

Commercial paper underwrites 80 percent of hotel deals, according to Jones Lang LaSalle. Ha ha, pretty hilarious madcap situation, right?

So now hotels, who by the way were sort of supposed to be the saviors of the hard-pressed local restaurant industry, can't get cash and have lost about 20 percent of their total value in like a month or two.

A small fraction of the top hotels can still get money from what are known as "balance sheet lenders," aka people who actually have cash money to lend and aren't counting on reselling the debt to others to offload the risk and aren't like panicking or whatever. Also, if you had a deal closed -- truly closed, not just nonrefundable -- before the meltdown, it will generally still go through, which is why you will still see deals being announced.

The whole capital crunch nearly derailed the recent Hotel Palomar sale a couple of times, all the principals told me, but luckily it was far enough along to make it to the finish line.

More in the ...

Business Times: Credit crunch leaves S.F. hoteliers hungry (free link)

Aqua taking Fifth Floor in 'very French direction,' source says

Griffin Capital's $58 million acquisition of Hotel Palomar from Kimpton included a detailed agreement on how the Fifth Floor restaurant would evolve, a source close to the deal told me, including Aqua Development Corp. running the restaurant, a female chef who has already been specified and an overhaul that takes the restaurant in "a very French direction."

This is all from my Business Times story Friday.

More and more hotel managers are entirely outsourcing restaurant operations. Ducca at Westin Market Street is being run by Puccini Group, who will also run Eno, the wine, cheese and chocolate bar in the Westin St. Francis.

Kimpton also plans to tweak the menu under the new executive chef at Scala's, Patrick Robertson, and as reported here previously, at Grand Cafe to renovate the bar and take the menu in a more French and casual direction.

Business Times: Kimpton spices up hotel restaurants (free link)

Ogden has 'less active role' in Lark Creek Restaurant Group, Dellar says

My coworker Elizabeth Browne at the Business Times reports in this week's issue on all the growth at Lark Creek Restaurant Group, and interestingly gets co-founder Michael Dellar to admit that his partner, chef Bradley Ogden, has taken a big step back from the business.

It seems Ogden is especially uninvolved in Bay Area restaurants like Yankee Pier and Lark Creek Steak, according to money man Dellar. From the story:

The 8,000-square-foot Bradley Ogden opened at Caesar's Palace in Las Vegas in 2003, and was named best new restaurant for 2004 by the prestigious James Beard Foundation. Ogden moved to Las Vegas to start the venture and has since taken a less active role in the company, Dellar said, with culinary efforts now headed by Adrian Hoffman, former chef at One Market.

I asked Dellar about his relationship with Ogden in February. He said Ogden was still with the company but had pulled back:

He's just not here very much ... He's here occaissionally -- he makes regular visits here, but his time is spent more and more with our business partners [for example in Las Vegas].

In the Meantime, Dellar is growing the company from 11 restaurants now to 13 in 2008 and 16 in 2009, in the greater Bay Area and "Southern California, Phoenix, Scottsdale, Ariz. and the Seattle area." Revenue companywide will be around $45 million this year.

Business Times: Lark Creek is flowing into new locations (subscriber-only link for three weeks)

Chow eyeing Jack London Square in Oakland, even as food hall shrinks

San Francisco restaurant Chow is interested in a location in Oakland's Jack London Square, the East Bay Express reported Wednesday, even as the square's developers struggle to attract other food tenants.

Meanwhile, the developers have cut way back on the restaurant and food component of the so-called "Harvest Hall" at the center of the Jack London Square expansion, I reported Friday. It was going to be 185,000 square feet of sit-down restaurants, food stalls, produce shops, meat markets, a cooking school, exhibitions and other food attractions.

Now it's two-thirds offices, with only the lower two of six floors dedicated to food. Apparently this was allowed under the entitlements approved by the city council a couple of years ago.

The changes were put forward after the developers closed on $200 million in construction financing for the first half of the development. Office is easier to fund these days than food, particularly if you are taking a Slow Food approach.

Business Times: Oakland's Harvest Hall will be mostly offices / Developers line up $200M to begin (free link)
East Bay Express: Back to Square One

UC Berkeley to finally get a decent hotel

Chip Conley's Joie de Vivre Hospitality is opening its first hotel in the East Bay following its takeover and planned $9 million renovation of the historic Hotel Durant, one block from the UC Berkeley campus.

Joie de Vivre is also poised to takeover the Waterfront Plaza hotel at Jack London Square in conjunction with Ellis Partners LLC, which owns Jack London Square.

Based in San Francisco, Joie de Vivre is expanding aggressively throughout California. It entered the Los Angeles market just two years ago and now has four hotels there, including the recently-acquired Sportsmen's Lodge in Studio City. Conley told me the company is finishing negotiations with two more LA-area hotels. (None of this LA stuff made it into my story).

The Durant in Berkeley is an interesting buy for Joie de Vivre. The company may finally give the University of California the hotel it so richly deserves.

I have lived in Berkeley for 13 years, including 9 years within a block of this hotel, and my wedding guests lodged at the Durant this past June. The hotel has a lot of potential, with great bones, a rich history and a bustling bar.

But like the other major hotel near campus, Hotel Shattuck, it lacks in both amenities and service. The Durant is 80 years old and it shows, from the creaky elevators to the lack of air conditioning to the unreliable plumbing.

If you want a better hotel, you have to go to the Claremont, an expensive resort up in the hills, or to the DoubleTree at the Berkeley Marina. Neither are within easy walking distance of the campus.

The Faculty Club on campus has just 10 spartan rooms. The Bancroft Hotel across the street from campus looks nice from the outside but only has about two dozen rooms.

The university wants to partner with Carpenter & Co. on a fancy hotel and conference center just west of campus, a better location than the Durant from both the freeway and BART, but there is skepticism over whether this plan will ever happen at all.

Business Times: Hotel firm Joie de Vivre makes first East Bay foray (free link)

Straits looking to conquer world, cash out

Chris Yeo of Straits, who mints money out of his Santana Row and Westfield SF Center locations, is closing on a lease in Las Vegas and is in talks with Host Hotels about a hotel in Newport Beach, a deal that could potentially lead to a partnership or acquisition.

Yeo wants to get bought or go public in four years, so brought in nightlife and front-of-the-house restaurant guru Parnell Delchan, who, random trivia, at one point was Matthew McConaughey's boss at Kwanzaa in New York. [Can we play this up for our LA readers?? -ed.]

He's also looking at mall deals in the Midwest and some other deals in Vegas. Not bad for a former hairdresser.

More in the ...

Business Times: Straits owner brings on manager to grow chain (free link)

San Francisco tourism boss heals the lame, fills city with homosexuals, foreigners

In his first year running San Francisco's tourism office, Joe D'Alessandro has filled the city with fabulous travelers like gays and event planners, created consensus and peace at the Board of Supervisors, brought labor and management together in harmony, conjured tens of thousands of dollars out of thin air, bought you a pony, invented the iPhone and got the whole city a round of cocktails.

Someone please send me something negative about Joe D'Alessandro, because if I have to write another one of these stories where every single source, including friggin' Supervisors, for chrissake, has glowing things to say about Joe, I'm going to lose my journalism license.

HA HA HA JUST KIDDING WE AREN'T LICENSED THAT'S WHY NEWSPAPERS MAKE THE TRUTH CRY EVERY SINGLE DAY AND THERE'S NO STOPPING THEM EVER!!

Full glowing profile of Joe D'Alessandro, which believe it or not I was not in any way bribed to write: Selling the City / Convention and Visitors Bureau chief D'Alessandro says it's time to put some edge into S.F.'s marketing

SF cooks vs NY cooks -- guess who wins, hippie

Hey, hippie San Francisco cook dude, put down the ganja reefer weed for a second and try to focus on something other than your own navel!

Danny Myers apprentice Sarah Schafer has come to San Francisco from New York, and she brought some opinions with her about YOU! So wake up and sober up and detox or whatever!

"I don't want to sound like I'm putting any West Coast chefs down," said Frisson Executive Chef Sarah Schafer, 10 minutes into a discourse on the virtues of New York cooks. "I just don't think they are as disciplined as East Coast chefs."

Oh yes, she did!

She totally just did that!

That might sound rough, but Sarah has some constructive, practical advice to go with her criticism:

• Try not to be a total flake, especially if you have an interview scheduled!
• It's called discipline. Have you heard of it?
• Did you know there are other cuisines other than California Cuisine!? Hard to believe, I know!
• You are not a television star so please just stop.
• Work in New York and, if possible, make sure your schooling and childhood were in New York
• Try to do something other than smoke ganja weed and sleep all the time!

It turns out there are a lot of other chefs around town who favor cooks from East Coast kitchen culture, which is basically "Shut up and get yelled at and do as you are told," very military except even meaner.

And it turns out that if you want to work in certain top kitchens and have a problem with this, go eat some tofu or to yoga class or surfing or just drop some ecstasy and sleep for 16 hours on your stupid futon or whatever, you dirty hippie, and deal with it The End.

Full story in the ...

Business Times: S.F. chefs seek cooks with N.Y. state of mind / They're used to higher pressure, work load (free link)

Bijou for sale

Joie de Vivre and its partners have put the 65-room Bijou on Union Square on the market for close to $10 milion, I reported in Friday's Business Times.

Kimpton still has Palomar on the market, and the Crowne Plaza future flag or owner is still up in the air.

Subscriber-only link until July: Bijou the latest to ride the wave of hotel sales

Scrappy hotelier starts green hotel chain

Remember the name Wen-I Chang; I think he's going to leave a mark. He's the first hotelier I met who brought art and poetry to our initial meeting, bound into a book he had published himself.

Originally from Taiwan, Wen made his money on Central Valley franchise hotels, and did battle with franchisers like Holiday Inn, who he said wanted to charge him more than $150,000 to install their hotel management software (he bought one for $18,000), and Hilton, who said (according to Wen) the conference facilities at his Garden Inn were twice as large as allowed. Wen suspected Hilton wanted to keep Garden Inn from competing with his other brands.

He put in the large, along with a second entrance (also verboten) and within a year was named a model property. He also claims to have started a trend toward putting three flagpoles out in front of a hotel, since psychologically many customers associate that with four-star properties.

Wen's company, based in South San Francisco, has opened what it hopes will become the first LEED-Gold certified hotel in the U.S. in American Canyone (an application is in with the US Green Building Council, which makes its rulings only after construction is done).

There are two more of these green "Gaia" hotels in the works, in Merced and Anderson, and the chain should have eight properties within four years.

Business Times: Hotel owner envisions string of eco-hostelries (free link)

Hilton's new GM likes to watch travelers degenerate into terrifying savagery, and also the TV show 'Lost'

San Francisco's downtown Hilton, a 1,900-room hotel that has become ominously self aware, has had three general managers since November, and the latest is named Michael Dunne and everyone is nervously hoping he survives.

The monster hotel is the largest on the West Coast and it dispatches its "managers" for sport. A tough German named Holger Gantz kept the giant hotel in check for 17 years before retiring. His successor, John Mazzoni, lasted about three and a half years, a rough feat of endurance sufficiently impressive that his superiors gave him a job at corporate negotiating with the unions.

Karima Zaki came in to replace Mazzoni, but left after nine months to return to Southern California and open a new manager-feasting giant Hilton in San Diego.

Mazzoni replaced Zaki and lasted less than two months before accepting a promotion to a corporate job.

Now comes Dunne. Let's figure his tenure based on trends:

• Gantz: 17 years
• Mazzoni: 3.5 years
• Zaki: 9 months
• Mazzoni again: 2 months
• Dunne: Three weeks (projected)
  

Dunne comes from the San Jose Doubletree but was hotel manager for the downtown Hilton for three years.

I was invited to meet Dunne at a special screening, in a special Hilton "home theater" room, of the network television series Lost, in which stranded tourists fight mysterious forces and disappear only to sometimes reappear on their beastly island, which apparently has a voracious appetite for human panic.

And get this: I COULD NOT FIND THIS SPECIAL SCREENING WHEN I WENT TO THE HILTON, AND NEVER HEARD FROM DUNNE AGAIN TO THIS DAY!! HE IS STILL IN THAT HOTEL SOMEWHERE!

Business Times: S.F.'s downtown Hilton gets its third GM since November (free link)

Copia opening in San Francisco

My colleague Sarah Duxbury has the scoop in today's Business Times on how Copia, a sort of food museum in Napa Valley, is opening a satellite office in San Francisco at Ghirardelli Square.

The SF Copia will share space with Cellar 360, a Healdsburg wine retailer than will offer tastings and small plates of food. Cellar 360 is a division of Australian spirits firm Foster's Group, which owns wine brands like Beringer and Stag's Leap, but the tastings will be run by people from Copia.

Copia will offer everything from a half-hour tasting course to a two-year certification from the Wine & Spirits Education Trust, Sarah writes. Copia is the only entity on the West Coast to offer such certification.

The 6,000-square foot facility is joined in Ghirardelli Square by Fairmont's fractional ownership hotel, set to open in thee fall.

Sarah's Copia story is not online; this may change on Monday but I wanted to post something today because I see the press release is going out.

Late at night, restaurants struggle to make money

Who would have thought: paying restaurant workers time and a half on a $9.14 minimum wage does not do much for the bottom line, especially when everyone is sitting around twiddling their thumbs because it's one in the morning and no one knows your kitchen is open, so the place is empty.

Also, everyone did their heavy drinking and eating earlier in the night, somewhere else, so your margins are shot.

"In total, it probably is a wash," said Laurence Jossel of Nopa, the 11-month-old Western Addition hotspot that keeps its kitchen open until 1 a.m. every night. "Some people start this and fade out, because it's a commitment -- in terms of time, in terms of lots of things, especially financially."

Of course, this is the dark view of late-night dining. On the bright side, San Franciscans are slowly but surely becoming trained to expect certain restaurants to stay open well past 11 p.m., so business is ramping up for late night places.

I give a taste of the economics of open-late restaurants in a story from Friday's Business Times: Eateries bite into the night (free link)

The story is sort of dollars-and-cents coda to Amanda Berne's excellent story on late-night dining in the Chronicle in October.