Picus, Residents Soften Warner Ridge Position : Development: Group says it will accept a commercial project, but sets size limit. Meanwhile, the size is being negotiated in effort to settle suit.

A neighborhood group has agreed to accept a major commercial project on the controversial Warner Ridge site in Woodland Hills, a move reluctantly endorsed Friday by Los Angeles City Councilwoman Joy Picus.

Picus said she supported the Woodland Hills Homeowners Assn., whose board of directors Thursday voted to accept a 471,000-square-foot commercial project on the 21.5-acre Warner Center site. “I accept it reluctantly,” said Picus, who last Tuesday would admit only to supporting a project half that size.

The fresh concessions from Picus come after battering of the city of Los Angeles by adverse rulings in a lawsuit filed by the owners of Warner Ridge. The owners, Warner Ridge Associates, claim the city, led by Picus, has illegally blocked them from building a commercial project on their property.

The lawsuit also contends that Picus opposed the owners’ plan because she was afraid of losing the political support of the Woodland Hills neighborhood group as she prepared to run for reelection in 1989.

Picus revealed her new position Friday as the City Council emerged from talks about the Warner Ridge litigation, which also threatens to undo longstanding city land-use practices and provoke a spate of lawsuits from other frustrated developers.

In its closed-door session, the council talked about seeking a settlement somewhere between the homeowners’ 470,000-square-foot figure and the 690,000-square-foot figure presented to the council earlier this week, Picus said.

On Tuesday, city officials, including Picus and Councilman Hal Bernson, will meet to negotiate again with the developer in a mandatory settlement conference over which Superior Court Judge R. William Schoettler will preside.

At a settlement conference earlier this week, Picus reportedly told Schoettler that she would accept a 500,000-square-foot project on the site. But later that same day, Picus hotly denied those reports, saying the largest commercial building she could tolerate would be 235,000 square feet.

Council members confirmed privately that Bernson and Picus were not instructed Friday to settle for a specific development size or to make a specific counteroffer. They were given latitude, a source said.

Asked if he would simply be fighting for Picus’ position in these secret sessions, Bernson said: “I wouldn’t say that. We intend to give it our best effort to settle this in the best interest of the city.” He refused further comment.

Meanwhile, Robert I. McMurry, attorney for the developers, said, “We’re seeing a lot of movement” by the city, “but whether it goes far enough is the question.”

“This is the first time Picus has embraced a settlement that involves substantial commercial development,” McMurry said.

Picus said she preferred that any settlement be for a project “closer to 471,000” square feet than 690,000.

The councilwoman also expressed confidence that if a settlement cannot be reached, the city would fare well before a jury deciding the damages the city would pay. “I don’t think” the case for “big commercial developers would sit well with a jury,” she said.

In a three-page letter to the council, the Woodland Hills group said it could accept a 471,000-square-foot project, but no larger. The letter, signed by the group’s president, Robert Gross, warned that if the council negotiated a larger development, the homeowners would challenge the settlement in court.