Friday, December 15, 2006 2 builders in running for lease on Queen Mary   By Wendy Thomas Russell Staff writer Winning bidder would earn right to develop city-owned land surrounding ship. LONG BEACH - The company that leases the Queen Mary has received two $40 million bids from developers looking to build on the land surrounding the historic ship, a company official said Thursday. Howard Ehrenberg, the bankruptcy trustee and acting CEO for Queen's Seaport Development Inc., filed a status report with the court, discussing the bidding process, legal settlements and other general observations. In it, he alluded to the first bidder on record - a Southern California firm whose plans include a mix of uses including hotels, office and retail space, entertainment, restaurants and a marina. The second bidder, whose proposal was finalized just last week, is based on the East Coast and has experience in public-private partnerships with government agencies, Ehrenberg said. That firm's proposal, he said, focuses strictly on an entertainment use for the land. He declined to name either developer, citing confidentiality agreements. Ehrenberg was appointed, in part, to find an acceptable buyer for QSDI's lease after the company declared Chapter 11 bankruptcy last year and failed to identify any buyers itself. The purchase will be made in a quasi-auction, wherein any chosen bid will be subject to overbid in U.S. Bankruptcy Court. Among other things, Ehrenberg's report said: QSDI and the RMS Foundation, the nonprofit organization that subleases operation of the city-owned ship, are "completely intertwined" - a revelation that may have created a "suspicion of wrongdoing" in the past but, in reality, has not led to any improper distributions of funds. QSDI's only remaining legal dispute involves Bandero, a minority shareholder in the company whose claim that it owns development rights around the Queen Mary is, according to Ehrenberg, "so farfetched that I have found it hard to even articulate." So far, 17 qualified bidders have executed confidentiality agreements and have been given full access to QSDI's finances and legal information through a secure Web site. Looking to create a bidding war, QSDI has hired Coldwell Banker Realty to seek "overbidders" for QSDI on a success-fee basis, meaning that the firm would receive a 10 percent commission on amounts in excess of $40 million. QSDI, which leases the ship and surrounding land from the city, declared bankruptcy in 2005 after a series of financial setbacks placed it millions of dollars in debt. Since Ehrenberg came on board, however, QSDI has released a steady stream of good news. Most legal disputes, including a long-standing and contentious battle over rent credits owed to the city, have been resolved. The company has managed to increase revenue 6 percent over the previous year, according to the report. And operational changes are afoot: The English Market Place, an unsuccessful strip of stores abutting the Queen Mary parking lot, is being reborn as an "artist colony," Ehrenberg said. The owner of an African art gallery has already signed on as its first new tenant. As for the two bidders, Ehrenberg said the first came forward in September and requested a 120-day due-diligence period. The second placed its bid Dec. 8 and has not yet met with city officials. Both bids, Ehrenberg said, cover the full amount of the secured debts against QSDI, which is about $40 million. Amy Bodek, manager of the city's Project Development Bureau, said she knew nothing yet of the second bidder but believed the first bidder could potentially win the city's approval. "What we're really looking for is a competent developer who is able to understand such a project," she said. "From what we've seen, we believe that they would qualify." Ehrenberg said he was confident the lease was heading toward a successful transfer, although he couldn't say when. "It's less important exactly when it happens," he said, "than that it just happens." He requested that another status conference be set for June 2007.