Cash Infusion Extends Option on Hotel Site : Future of Project Unclear Despite Added $1 Million
An unidentified investor has paid $1 million to extend Fabulous Inns’ option to develop the 22-acre Stardust Hotel site in Mission Valley.
Chairman Jeffrey Krinsk said the contribution Wednesday by the investor, whom he would not identify, means that the company was able to “exercise our first step to take the property.”
Despite the option extension, Krinsk acknowledged Thursday that the “ultimate disposition (of the site) remains unclear.”
Among the options is for Fabulous Inns to sell the option to the unidentified investor, pocketing a profit that could total more than $750,000, according to real estate industry sources.
Krinsk would not discuss the company’s specific plans. When asked about the possibility of simply selling the option to the unidentified investor and abandoning Fabulous Inns’ plans to participate in the Stardust development, Krinsk said that would be a “course of action we don’t prefer.”
If Fabulous Inns did sell the option, added Krinsk, “it would only be a result of the burdensome injunction requirements that we’re forced to operate under. It would be a sizable opportunity that we wouldn’t be able to pursue.”
Under terms of the injunction--issued as part of the years-long battle for management and ownership control of Fabulous Inns--Krinsk and President David Yardley are prohibited from making large capital expenditures that are outside their normal business requirements.
The 22-acre Stardust site is owned by San Francisco-based Handlery Hotels Inc., former owners of the El Cortez Hotel in downtown San Diego. A 214-acre adjoining golf course is leased to Handlery by Levi-Cushman, a joint trust/partnership. That lease expires in nine years, when Chevron Land & Development Co. is scheduled to build a $750-million mixed-use development.
The project is lucrative now because Chevron would like to begin before the lease expires and is willing to buy out the remaining years on the lease.
Last month, the company’s deal to develop the property with Madison Square Partnership of San Diego fell through after Madison Square could not meet a previously agreed-upon financing deadline.
Meanwhile, in another Fabulous Inns development, attorneys representing the ousted management asked U.S. Magistrate Edward Infante to quash a subpoena issued to an Arizona bank that loaned money to former Chairman Henry Maxwell.
Infante took the matter under consideration.
Maxwell’s attorneys argued in their court-filed papers that the company’s attempt to subpoena the former Fabulous Inns executive’s financial records was designed to “annoy and harass” Maxwell.
Fabulous Inns attorneys, in documents filed in court, countered that Maxwell had attempted to use several hundred thousand shares of Fabulous Inns stock as collateral for a loan from Security Savings & Loan Assn. in Arizona at the same time that the company was legally “attacking the validity of those shares.”
The money was to have been used to pay off Maxwell’s $1.4-million debt owed to Fabulous Inns. In exchange, he would receive his stock, which the company had in its possession.
However, Fabulous Inns management demanded that the stock contain an indication that some or all of the shares was in dispute. Maxwell refused to accept the stock with such a designation.
A hearing on the issue is scheduled for Feb. 12.
