Thursday, March 8, 2007

Council Sets Guides For Queen Projects

By Harry Saltzgaver,
Executive Editor

A set of “guiding principles” for development of property around the landmark Queen Mary likely will help rather than hinder efforts to bring the current leaseholder out of bankruptcy, according to the bankruptcy trustee.

Tuesday, the City Council approved a broad five-point statement about what would be acceptable across the bay from Downtown Long Beach. The recommendation, which came from Second District Councilman Suja Lowenthal, was designed to avoid a situation where someone purchases the long-term lease from Queen’s Seaport Development, Inc., in bankruptcy court with a plan that would not be acceptable to the city.

“It is in our interest to have an auction sooner rather than later,” said Amy Bodek, senior project manager for the city. “That way, we will forestall any further deterioration. These guidelines pave the way for that auction.”

QSDI filed for bankruptcy two years ago after a dispute with city officials about how rent credits were applied could not be resolved. U.S. Bankruptcy Judge Vincent Zurzolo appointed Howard Ehrenberg trustee for QSDI last April.

QSDI was granted a 66-year lease in 1989 for the Queen Mary and the 52+ acres surrounding it as an incentive to develop the property. The RMS Foundation, a nonprofit formed by Joseph Prevratil in 1992 to reopen the Queen Mary, continues to hold the sublease to operate the ship itself.

Ehrenberg said this week that two potential bidders are preparing final offer sheets, and he hopes to take a proposal to the judge in the next month to six weeks. Real estate brokers soliciting other potential bidders have said there is strong interest for a possible overbid, as well, Ehrenberg added.

“The guidelines make it easier in some ways,” Ehrenberg said. “Now I can describe in advance to potential bidders what type of development would be acceptable there. Knowing in advance will clear a number of hurdles.”

Prevratil, who retired at the first of the year as president and CEO of both QSDI and the RMS Foundation but remains as chair of the board for both entities, said he supports Ehrenberg’s approach.

“I’m very much in favor of guiding principles as long as they don’t chill the ability of the trustee to attract qualified bidders,” Prevratil said. “It makes a lot of sense.”

The city owns the Queen Mary and the property around it, taking the deed back from the Port of Long Beach in 1992. While Prevratil and QSDI have suggested a number of development plans, the single major change has been construction of the Carnival Cruise Lines’ cruise ship terminal and dock connected to the former Spruce Goose dome.

The principles approved by the council call for an understanding of the importance of the Queen Mary to the city by establishing uses to support the ship’s ongoing restoration. Any project must meet Tidelands Trust guidelines and be consistent with land use and zoning regulations.

Council members said they wanted to make sure any development takes advantage of the waterfront and views of downtown, capitalizing on the location and the lease with Carnival Cruise Lines. The guidelines also encourage use of sustainable building practices wherever possible and call for the highest possible architectural quality.

“I want to be clear that adoption of these guidelines is not equal to engaging the public in a dialog process,” Second District Councilwoman Suja Lowenthal said. “I want to assure the public that will take place.”

On the legal front, Judge Zurzolo turned away an attempt by creditors Bandero, LLC, to take control of the majority of QSDI stock. Bandero principal Lee Durst had sought approval of an agreement to purchase Paul Leevan’s stock in QSDI. Bandero already owns 24% of the stock.

But city officials had already turned back one effort, in 2004, by Bandero to exercise options and take over QSDI. The city has a say in who QSDI can transfer the lease to, and asked Bandero for financial and background material it wasn’t willing to provide.

Ehrenberg said the two potential bidders both have had talks with city officials. Judge Zurzolo has approved a settlement brokered by Ehrenberg between QSDI and the city that essentially will give the city all of the disputed rent credits back at sale of the lease, with the potential for up to $9 million paid, depending on the final bid.