City pauses hotel development plans, extends lease for Let’s Get Tuned through 2027 at former Brannigan’s Reef site

The Morro Bay City Council was slated to grant a lease extension to the yoga studio currently operating in a city-owned building on Market Avenue, giving up — at least for now — on the dream of redeveloping the property into a large resort hotel.

Community Development Director Airlin Singewald brought the item to the council’s July 22 meeting, proposing to give Let’s Get Tuned, LLC a two-year lease extension for $5,528 a month, or $66,336 a year. That rate is comparable to leases on the Embarcadero, where the Harbor Department manages state-owned Tidelands properties.

“This is an increase of $3,744 per year, compared to the previous rent amount of $5,216 per month,” Singewald said. The property sits at 781 Market Ave., and for years was a major nightspot — at times offering live music and karaoke, and always drawing a packed house for happy hour.

The site’s history is a colorful one. It was first home to the original Breaker’s Café (now Dorn’s next door), then became the Hungry Tiger, later Ruben’s, and finally Brannigan’s Reef, the last nightclub to operate there. Brannigan’s Reef shut down around 1996 following a dispute between the business owners and the property owner, and Morro Bay’s nightlife hasn’t quite been the same since.

After sitting vacant for several years, the city purchased the building in the early 2000s, along with a former RV park on the Embarcadero and a small parking lot across Market Avenue. The purchases were funded with Parking In-Lieu monies and a windfall of tax revenues that came when Duke Energy bought the power plant from PG&E.

The late George Salwassar eventually bought the property from the city and undertook an extensive remodel of the upstairs portion. The downstairs bar was deemed unusable due to ADA compliance issues. Distassio’s Italian Restaurant, with a small wine tasting room next door, opened in the space, but Salwassar later declared bankruptcy.

At that time, Distassio’s owner Ken McMillan planned to purchase the property and pay off the city’s lien, but the City Council exercised its rights and took the property back through the bankruptcy. Distassio’s then relocated to a former Wells Fargo Bank building on Morro Bay Boulevard, where it remains today.

Meanwhile, the Market Avenue property sat empty and underutilized while the city sought developers to transform it — along with the adjacent parking lots — into a resort hotel. The city even hired a design firm to produce concept plans that included a remodeled Centennial Stairway and park.

For years, though, the space was largely unused, aside from a brief stint as a real estate office. More recently, the city was able to generate revenue by leasing it to Let’s Get Tuned, a yoga studio owned by Natalie Teichmann and Jon Nowacyzk. They first leased the property in August 2023, with the lease originally set to expire this August. The new lease now runs through Aug. 10, 2027.

The city has continued advertising the property for sale, and while there has been interest — notably from a local family that owns several motel properties — no deal has ever materialized. Now dubbed “Market Plaza,” the property has been discussed repeatedly in closed-session council meetings as offers came and went with changes in listing agents.

At this point, it appears the current City Council has chosen to put those ambitious redevelopment dreams on hold. “In the past, the city has considered various proposals to develop a full-service hotel, parking structure, and conference rooms at Market Plaza, which includes the subject property,” Singewald said. “Most recently, the council decided to postpone further solicitation of such proposals until after adoption of the Waterfront Master Plan, currently scheduled for completion in November 2026.”

The council had already pitched a conceptual plan that envisioned a multi-story parking garage and retail center on the Embarcadero, with a multistory motel on the bluff. That plan was met with widespread public criticism and was thought to be shelved, but it resurfaced a few years ago and has lingered ever since.

At one time, redevelopment of Market Plaza was viewed as a potential savior for the city’s budget woes and an economic stimulant, particularly through the promise of a conference center. But for now, only the top floor of the two-story building remains usable, as ADA deficiencies with the bottom-floor bar have never been addressed.

The Market Plaza concept includes an outdoor elevator adjacent to the Centennial Stairway. Altogether, Let’s Get Tuned is leasing a total of 3,726 square feet — though a large kitchen area is not part of the deal.

Feature Image: A new lease to a yoga studio, “Let’s Get Tuned,” to continue to operate in a city-owned building on Market Avenue. Photo courtesy of Let’s Get Tuned