(April 25, 2007) -- So...ya wanna buy the right under a long-term lease to operate the Queen Mary and get development rights to about 45 nearby acres? Come prepared to pay at least roughly $43.5 million...and hope you'll ultimately be the highest bidder in an auction.
That's the essence of a deal announced by LB City Hall today (April 25) in which the QSDI (Queen Mary-related) bankruptcy trustee now has a "signed purchase agreement for $41 million with O&S Holdings, LLC (O&S) for the Queen Mary Leasehold," setting the stage -- contingent on Bankruptcy Court approval -- for a sale auction date.
That sale auction would be for QSDI and its main asset, a long term-lease with City Hall to operate the Queen Mary...including valuable development rights (previously given to QSDI by the City Council) for adjoining property.
Once the sale auction date is set, "other parties interested in participating in the auction would need to overbid the minimum amount offered by O&S," City Hall's release says. (The minimum overbid for entry into the auctino is $2.5 million over the $41 million purchase agreement price, Principal Deputy City Attorney Charles Parkin tells LBReport.com.)
The release says: "O&S Holdings, LLC, was formed in 1992 by Gary Safady and his cousin Paul Orfalea, the founder of Kinko's Copies. O&S Holdings and its affiliates own more than 80 properties in the United Stated, including the 550,000 s.f. Louisiana Boardwalk in Bossier City, LA, and is currently developing several other large projects in the south and Midwest. In addition, O&S Holdings is a franchisee of the Westin hotel group, and is the developer of
Monaco Pictures, a high end specialty theater company."
LB Mayor Bob Foster says in a City Hall release, "This announcement represents another important step towards resolution of the Queen Mary bankruptcy."
City staff "will continue to meet with interested bidders over the next few weeks while the bankruptcy court approves the procedures for the auction. It is anticipated that an auction date could be held as soon as late summer 2007, with a successful bidder being determined immediately thereafter."
The City of LB owns the Queen Mary, which the City Council years ago leased to QSDI under the terms of a ground lease that includes approximately 45 acres of land surrounding the Queen Mary. The non-profit RMS Foundation runs the Queen Mary under a sublease from QSDI.
On March 15, 2005, QSDI sought Chapter 11 bankruptcy protection after City Hall demanded payment of back-rent City Hall alleged was due, and QSDI denied was due. City Hall's rent demand came after then-LB housewife Traci Wilson-Kleekamp used CA's Public Records Act to obtain documents leading her to question rent credits asserted by QSDI under its lease with City Hall...that had not been questioned by City Hall until then.
In November 2006, as previously reported by LBReport.com, City Hall announced a $9 million settlement with QSDI over the disputed rent credits and unpaid percentage rents. That settlement cleared the way for deal announced today (April 25) by resolving differences between City Hall and QSDI, allowing trustee Ehrenberg to proceed with a sale of QSDI and its main asset, the long-term lease with the City to operate the Queen Mary plus development rights.
Under City Hall's Nov. 2006 agrreement with the trustee, City Hall expects to receive a 4.9 million priority cash payment at the time of sale of QSDI, which would settle the City’s outstanding monetary claims from 2000 through December 31, 2005.
City Hall could also receive $4.1 million in an "unsecured monetary claim"...which City Hall would receive after all general unsecured creditors are paid, but prior to any disbursements of sale proceeds to any equity owners.
City attorney fees, accounting fees and consulting costs associated with the bankruptcy case from September 1, 2006, through the completion of the sale of QSDI in bankruptcy court will be added to the $4.9 million priority cash payment to the City.
The 2006 deal resolved all rent credit disputes between City Hall and QSDI alleged applicable prior to December 31, 2005.
In City Hall's April 25 release, 2nd district Councilwoman Suja Lowenthal said, "I'm very pleased that we are moving closer to resolution of the Queen Mary bankruptcy, which will finally allow for the restoration of the ship and the development of the surrounding property. I look forward to working with the community, developer and City staff on this exciting opportunity." The QM and the surrounding area are part of LB's 2nd Council district.
