The Harbor Restaurant and city of Santa Barbara have settled the lawsuit over rent and lease terms for the Stearns Wharf establishment, representatives said Tuesday.
Restaurant owners sued the city in December over allegedly “unconscionable” high rent, and the city’s attorneys filed a response essentially asking the judge to dismiss the case, calling it “meritless.”
After mediation, the two sides “resolved their disputes about the past and agreed to move forward together toward a brighter future,” according to the statement released jointly by City Administrator Kelly McAdoo and restaurant co-owner and attorney John Thyne.
“Over the past several years since the COVID pandemic, The Harbor Restaurant on Stearns Wharf has changed hands and recently modernized its venue, menu, service, and style,” the statement said.
“Now, with new leadership, the city and its tenants are finding ways to collaborate to restore this once thriving epicenter where locals and visitors can enjoy stunning views of our exceptional oceanside community.
The building is owned and leased by the city, and the current lease was signed in 2002.
Eugenio “Gene” Sanchez and Carolina Jimenez purchased the Stearns Wharf restaurant business, and Longboard’s Grill upstairs, in 2021. John and Olesya Thyne became co-owners in 2023.
In the lawsuit, restaurant owners argued that economic conditions have significantly changed since the lease was signed, and said the city did not share in remodeling costs and building repairs.
The restaurant was behind on rent, according to the city, and Tuesday’s settlement resolves payment of outstanding rent and credit for capital improvements.
It also restructures lease terms so the restaurant can “continue its rehabilitation and rebuilding process and ensure the successful redevelopment of this key property on Stearns Wharf,” the joint statement said.
Thyne said the settlement includes an interim rent of 10% of gross receipts. The current lease includes a base rent of $36,000 per month plus a percentage of gross receipts: 10% if they’re less than $3 million for the year, or 11% if they’re more than that.
The restaurant “will enter a new market rate lease based on similar terms to those offered to new tenants for the Anchor Rose space” in the harbor, Thyne said.
He said he and his partners look forward to working collaboratively with the Waterfront Department and the city.
“We believe this settlement represents a new beginning for The Harbor Restaurant and we look forward to ensuring the public is served not only by guaranteeing market rent is collected for the premises, but also ensuring a first-class restaurant is available in this Stearns Wharf location seven days per week,” McAdoo said in a statement.
“We are excited at the number of new business owners investing in the Waterfront District, and are eager to partner with The Harbor and others to ensure we maintain a vibrant and thriving business community at Stearns Wharf, the Marina, and the Harbor.”