Fabulous Inns Can Also Acquire Golf Course Lease : Firm Has Option on Stardust Site

Fabulous Inns of America on Thursday signed an option to buy the 22-acre Stardust Hotel site in Mission Valley and to take over the remaining nine-year lease on the adjacent golf course, according to sources familiar with the deal. The golf course is the site of a proposed $750-million development by Chevron Land & Development Co.

The 22-acre site is owned by San Francisco-based Handelery Hotels Inc., former owners of the El Cortez Hotel in downtown San Diego.

The 214-acre golf course is leased by Handelery from Levi-Cushman, a joint trust/partnership between two old-line San Diego families.

Chevron Land, a subsidiary of the oil company giant, plans a $750-million, mixed-used development that would include high-density residential units, commercial and retail space, office buildings and as many as four major hotels.

Chevron Land currently has an agreement with Levi-Cushman to develop the golf course area, but the project can’t be built until Handelery’s lease expires in 1994.

As a result, Chevron Land would like to buy out the lease and begin developing the land, according to sources familiar with the development proposal.

Fabulous Inns Chairman Jeffrey Krinsk would not comment on the Stardust Hotel option. Neither Handelery Hotels President Paul Handelery nor Chevron Land project manager Lance Burris could be reached for comment Thursday.

The deal could cost Fabulous Inns more than $20 million, hotel industry sources claim, but how the tiny Mission Valley hotel company would finance the venture is not known.

Fabulous Inns management is now hamstrung by a court injunction that prohibits it from major capital expenditures. The company has been in a legal tug of war for more than a year over which shareholders control stock.

Krinsk is a former dissident shareholder who alleged conflicts of interest by Fabulous Inns officials, leading to management ousters in 1983 and 1984. Since then, he and president David Yardley have been embroiled in litigation against former president Walter Palmer and former chairman Henry Maxwell, charging that the former executives obtained their stock illegally. They also claimed that a special shareholders meeting called by ousted management in 1984--at which some of them were reelected--was invalid.

Mediator C. Hugh Friedman, after 10 weeks of hearings, in May found that the disputed meeting was invalid and recommended that a new directors election be held. However, Superior Court Judge G. Dennis Adams rejected Friedman’s findings, ordering the ousted management to regain control but also ordering a new election.

Krinsk and Yardley appealed Adams’ ruling, and the issue is now before the 4th District Court of Appeal. Resolution of the dispute could take several months.

Industry sources said that the ousted Fabulous Inns management might temporarily waive the injunction if the Stardust Hotel purchase was deemed to be in the best interests of the company. A similar waiver occurred earlier this summer when the hotel company sold its interest in an Old Town hotel project.