Developer Christopher Sickels and two related entities have been dropped from a lawsuit brought by limited partner investors in the U.S. Grant Hotel against the hotel’s general partner and related parties.
In exchange for being dropped from the suit, Sickels agreed to pay $1.2 million to the investors pending certification of the suit as a class action by U.S. District Judge William Enright. The settlement is also subject to confirmation by U.S. Bankruptcy Court of the hotel’s plan of reorganization.
Also as part of the settlement, Sickels relinquished two junior liens on the hotel property as well as rights to develop a high-rise tower on the portion of the Grant property currently occupied by the parking garage.
As former owner of the Grant, Sickels directed a four-year, multimillion-dollar renovation of the downtown landmark before selling the property in 1985 to a limited partnership headed by Sybedon Corp. of New York.
The hotel experienced severe financial problems after reopening in 1985, culminating in the owners’ filing for protection under Chapter 11 of the federal Bankruptcy Code in February, shortly before a planned foreclosure of the property by lender Home Federal Savings.
In a lawsuit filed in December, 1987, hotel investors accused Sybedon, Prudential-Bache Securities, lender Home Federal Savings, Sickels and several other defendants of a variety of misdeeds including securities fraud, professional malpractice and breach of fiduciary duty.
The investors, many of whom paid $100,000 or more for their limited partnerships, alleged that Sickels misrepresented the true condition of the hotel to the partnership led by Sybedon.
Sickels denied the charge, saying he had made adequate disclosure. But this week Sickels said in a statement that continued litigation “is not a prudent expenditure of our time or funds.” The settlement amount was recommended by U.S. Magistrate Harry R. McCue who has been conducting settlement conferences among the litigants.
Home Also Settled
Last month, Home Federal Savings also made a settlement with the investor group resulting in its being dropped from the lawsuit. In exchange, Home Federal virtually guaranteed to underwrite the continued operation of the hotel through 1991, preserving the hotel investors’ tax benefits.
Sybedon, Prudential-Bache Securities, Pannell Kerr Forster, and several other defendants remain in the suit, said attorney Patricia Meyer, an associate of the investors’ lead attorney, Michael Aguirre of San Diego.
“What (the Sickels settlement) does is make this a securities (fraud) case,” Meyer said.