San Diego Business Journal

A friend of James Brennan's literally laid it out on the table , $5,000 said the 32-year-old self-made millionaire wouldn't get his new nightclub, the Stingaree, open on time.

Brennan took the bet, but the odds were not in his favor. Converting an 87-year-old brick building that served as a produce warehouse into a posh, ultra-hip, 23,000-square-foot, tri-level nightspot in a matter of four months would ultimately take its toll on Brennan, draining both his emotions and his wallet.

The Stingaree opened on time, debuting during a splashy, celebrity-filled weekend in early December. But it didn't come easy.

Construction crews worked round the clock in the final frantic days leading up to the Dec. 3 gala.

When the doors opened, paint was still wet; the floors had some bare spots. And Brennan has yet to tally the cost overruns for hiring additional help and paying overtime.

"It was a roller coaster ride from one minute to the next," said Brennan, who at one point during the construction literally shut off his cell phone and fled to Puerto Vallarta with his family to clear his head.

"Just when we'd think we were in the clear, something would go wrong. We had trouble getting SBC to come and connect our phone lines, and we couldn't have operated our security system, meaning we couldn't have gotten a temporary opening permit, without the phones."

Brennan spent $6 million to open the Stingaree, $2 million more than originally projected. But it paid off.

Conducting a tour of construction at the building at Sixth Avenue and Island Street in mid-November, Brennan, bleary eyed and complaining of insomnia, relayed that the friend with whom he'd placed the bet told him there was "zero chance" he'd meet his projected deadline.

"I will. I have to," he said. "My reputation is on the line. But I'll never do anything like this again. It certainly hasn't been good for my health."

After working well beyond the city's construction curfew in the weeks before the opening, crews numbering as many as 200 at any given time had completed installation of the interior walls, flooring, electrical wiring and plumbing. But with less than three weeks to go before the scheduled opening, none of the fixtures was in. Finish work had yet to be started, and since a tarp still covered the exterior front of the building, it seemed that it would take a Herculean effort to complete the remainder of the work on time.

The main issue, Brennan explained, was that he and his "sweat equity" partners, Demien Farrell and Matthew and Dean Mellos, sons of the building's owner John Mellos, had set a nearly impossible opening date for the club.

Plans for the Stingaree , named after the city's infamous red-light district that operated for almost a decade before the police shut it down in 1912 , were solidified in May 2004. But the lease agreement with the Mellos family wasn't finalized until August of that year.

"We broke ground for the demolition in June, which was overzealous, and we couldn't do much more than that since we hadn't gotten all of the plans approved for renovating the historic building," he said. "We didn't get the structural steel in place until late August this year."

In the interest of saving money, the Stingaree partners took on the role of being the project's general contractor , a decision Brennan says cost them valuable time.

Following the construction tour, Brennan, who started his first business selling logo T-shirts to fraternities and sororities to pay his way through the University of San Diego, said that he and his wife and infant daughter were going to fly to Mexico.

Within a day of his return, however, he said he felt as though he'd never left and he'd begun to have serious doubts that the club would open on time.

But it did, on Dec. 3, at 7 p.m. for a press reception. A half-hour later a crowd of invitation-only guests began to arrive , some 1,500 in all.

The night was not without a couple of hitches, Brennan said, yet none disrupted the festivities. Construction workers who painted, plastered, hammered and sawed until the last minute were hustled out the back door as early-arriving guests made their way through the front door.

With the sweat, toil and stress behind him, Brennan, the son of a Manhattan pest exterminator, was $5,000 richer as he welcomed the exclusive crowd to San Diego's newest and arguably hottest new nightclub.

According to Jamie Sigler, a partner in J Public Relations, the publicist for the Stingaree, response to its opening night gala was extremely encouraging.

"You could smell paint, and there was still work to be done on the interior," Sigler added. "But the customers couldn't tell. The night was a great success. Table reservations (with a minimum per-bottle charge ranging from $300 to $450) are booked up for three months."

The Stingaree was built to resemble high-end nightclubs in Miami, New York and Las Vegas, Brennan said. Davis Krumins of Davis Inc. was the architect. The interior design could be called curvilinear modern, save for a giant Plexiglas-encased waterfall that runs the extent of two floors and forms the centerpiece of the d & #233;cor. The club's restaurant will serve dishes prepared with influences of Italian, French and Latin cuisine. There are bars on each floor, including the rooftop deck. Marketing is aimed at drawing a crowd between the ages of 30 and 40 and at drawing corporate functions.

There Were Believers

To raise initial capital, Brennan formed Sixth & Island Investments, LLC, a group of 40 investors. He said he isn't sure of the rate of return or how quickly they'll get their money back. But he projects that it will be in less than two years.

"We're hoping for a 40 percent rate of return on the Stingaree, or better," he added. "It depends on the profitability." He anticipates that the club's sales on Saturday nights , the busiest night in the Gaslamp Quarter , will be about $100,000.

When he and his partners realized they were short on cash to complete construction, Brennan said he borrowed $1 million from Security Business Bank of San Diego. Another $1 million came from the sale of "Sting Cards," or VIP cards and deposits on future group bookings.

Going for $2,000 per person, the cards cover an individual's admission for a year and include a 5 percent discount on their tab. Corporate cards, which are good for three people for a year, may be purchased for $5,000 each. The regular cover charge is $20 a night.

Brennan recalls the day that John Mellos and his son Matthew came calling at the trendy Side Bar, his first nightclub venture on Sixth and Market streets in February 2004 to inquire if he would be interested in opening another.

"The manager called me and said, 'James, there are a couple of guys here who want to know if you'd like to lease their warehouse at the corner of Island and Sixth.' I pulled back my curtains and looked at the building from the window of my 19th floor office on Broadway and said, 'Tell them I'll be right over.' "

Petco Park, located in the East Village adjacent to the Gaslamp Quarter, was due to open in two months, as was the 511-room Omni San Diego Hotel. Another prominent hotel, the 235-room Solamar, was under construction across the street from the Stingaree. Meanwhile, the nearby Clarion was under renovation to become the 306-room Marriott Gaslamp Quarter. The timing and the location, Brennan said, were perfect.

Brennan was ready to take on another business venture. After graduating from USD, he used the profit from the sale of his T-shirt company to acquire a partnership in a mortgage-lending firm. With the money he made during the recent boom of refinancings, he bankrolled Halcyon Cos. LLC, which has converted some 100 residential apartment units into condos in San Diego and Las Vegas. The firm has also acquired three commercial buildings in Phoenix with a total of more than 100,000 square feet and converted them into individual office condos that businesses buy for their own use.

He opened the Side Bar and the adjacent Ciro's Pizza in January 2003 with financial backing from 20 investors. All were paid back a year and a half after the establishments opened. Each invested varying amounts, Brennan said, adding that their rate of return was 55 percent. Many of the original group also invested in the Stingaree.

Indulging A Changing Demographic

Some complain that the demographic of the Gaslamp Quarter has changed from people in their 40s and 50s seeking a relaxing night of fine dining to a younger, more hip crowd in search of the "in" place to party. However, Carl Winston, director of San Diego State University's Hospitality and Tourism Management Program, said the younger group "definitely has disposable income and spends a lot of it on entertainment."

Admitting that he lacks statistics to back his claim, Winston said he has learned anecdotally from his students that "it's all about disposable time and disposable income and doing the popular thing."

"It's an indulgence for them. So what these nightclub operators do is make their place exclusive. That creates a buzz and makes getting in all the more desirable."

Downtown has several large nightclubs, the biggest of which is the 30,000-square-foot On Broadway with a capacity for 1,700 people. Winston says the Gaslamp Quarter could support more nightclubs, since it's still diversified in terms of hotels, restaurants, retail shops and other entertainment offerings.

Two weeks after the Stingaree's opening, Brennan was receiving kudos for a job well done.

"Before, if Las Vegas had been taking odds, we'd definitely have been the underdog," Brennan said. "Now people in the nightclub and construction industries are telling us they can't believe what we got done in the time frame we had and for the amount of money we spent."

He said that sources have told him that the going rate to build and open a nightclub in Southern California is about $350 per square foot , far more than the Stingaree, which he expects will come in at roughly $260 per square foot.

Also on the plus side, Brennan said he got a good deal on the lease. He pays a monthly rate of $3.20 per square foot on 10,000 square feet , the original size of the building. He does not pay a lease on the expansion.

"The average lease rate in that corridor is now more than $4 per square foot," he said, referring to commercial buildings at the southern end of the Gaslamp Quarter.

Would he open another nightclub if he had the chance?

"Yes," he said. "But I wouldn't make the same mistake. I'd never try to do a project of that size in that short amount of time."