Downtown Arena Plans in Limbo as Suits Are Filed : Building: Failure of developer Ron Hahn and Harry Cooper, who holds the Sports Arena’s lease, to make a deal clouds proposals to lure major league teams to San Diego.

Just four months ago, the San Diego City Council gave unanimous backing to developer Ron Hahn and his plans for a state-of-the-art, downtown sports arena. Harry Cooper, who holds the lease to the city’s existing Sports Arena, had nothing but kind words for Hahn.

A lot can happen in four months.

Just ask Ross Perot, or Hahn and partner Sam Marasco, whose deal to acquire the lease from Cooper--a lease that binds Cooper to the Midway District arena until the year 2015--suddenly fell through.

In that short a time, the memorandum of understanding between the city and Hahn passed from active to null and void. Hahn failed to acquire the lease from Cooper by the city-imposed June 30 deadline.

Thus, the city is free--technically--to negotiate with anyone. It isn’t limited to Hahn and Marasco, but as Assistant City Manager Maureen Stapleton said last week, it remains committed to the pair “in the hopes that everything can be resolved, and soon.”

In the meantime, Cooper has sued Hahn and Marasco, who, in turn, have countersued. So where does this leave the city in its pursuit of a downtown arena, fit for major-league hockey and basketball, as well as large conventions and concerts?

“I don’t know that I need to reassure anybody,” Hahn said in an interview last week. “Harry and I are making every attempt to resolve our disputes. Neither party has indicated an unwillingness to do so. We simply have to work things out.”

But, in a recent interview with The Times, Cooper said simply that Hahn had “missed the deadline” for acquiring the lease and that he intends to keep the 26-year-old, 13,000-seat arena for a “very long time”--or for another 23 years, when the lease runs out.

Hahn and Cooper declined to discuss the suits in detail, though Cooper said, “If one party wants to end negotiations, but the other party says, ‘No, we don’t want to end them,’ then you have to go to court.

“We just want to have a clear definition (from the court) of when their option was over. There’s no hard feelings--it’s nothing personal. It’s just business.”

Sources close to the two parties say one of the major conditions of the transfer of the lease from Cooper to Hahn was that Cooper’s lender, a troubled Midwest bank, had to give its consent before Hahn and Marasco could take over the stock of the San Diego Sports Arena.

With the passage of time, the bank incurred even bigger trouble, and absent its consent--and the lapse of the June 30 deadline--Cooper decided to rethink the arrangement, putting the deal in limbo. The two lawsuits soon followed.

Cooper has long hoped to build an arena on several hundred acres of property he owns in the Sorrento Hills, near the junctions of Interstates 5 and 805. That property has apparently surfaced as a reason for the impasse--and a card still belonging to Cooper.

“Collateral became a key issue,” said Pam Hamilton, executive vice president of the Centre City Development Corp., the city’s redevelopment agency and a force in the search for a downtown arena.

“Harry had agreed to use his property in the Sorrento Hills as collateral with respect to some of the obligations of the (existing) arena”--obligations Hahn would assume--”and now, he doesn’t want to do that,” Hamilton said.

“It’s just a business disagreement between Harry and Ron,” she added. “I don’t think in his heart of hearts Cooper really wants to run the existing arena,” Hamilton said. “So, when he says that, I don’t think he means it.”

Even if he does, some city officials say they want a downtown arena, in spite of the recession and with or without Hahn and Cooper. They see it as pivotal in a revitalized downtown--as a “missing link” in the sixth-largest city in the country.

With it, they say, the city has real hope of solidifying its status as a major convention site and of ridding itself of what some call an eyesore--the existing arena, which sits on land that could all but finance the new arena once the Midway property is itself redeveloped.

“San Diego is going to get a new arena, and it ought to be downtown,” Hamilton said. “As Ron Hahn is fond of saying, we’re the largest city in North America without a new arena or major-league hockey and basketball.”

Hamilton sighed and said, “If the new arena ends up in North County, I think a piece of our soul goes with it.”

Four months ago, other problems were unforeseen, such as the recent financial troubles not only of Ron Hahn but also his well-known father, Ernest Hahn, who ignited downtown redevelopment in the mid-1980s by spearheading the Horton Plaza project.

Ernest Hahn, like Gordon Luce of Great American Bank and Kim Fletcher of HomeFed Bank, was thought to be untouchable--one of the city’s most stalwart financial pioneers. But like Luce and Fletcher before him, Ernest Hahn is now himself a casualty of the 1990s economy.

In June, a partnership including Ron Hahn that built a huge office complex near University Towne Centre filed for protection under Chapter 11 of the federal Bankruptcy Code after defaulting on $170 million in loans.

Although the partnership is led by Ernest Hahn and San Diego developer Harry Summers, Ron Hahn is one of three general partners and as such could be personally liable for part of the $14 million in recourse debt that Bank of America maintains is due, in addition to the loans secured by the project itself.

Even though sources close to the project describe Ron Hahn as a “minor player” in the troubled office project, the filing cast doubt on his financial strength at a time when the image of strength was important in Hahn’s effort to line up financing as well as sports franchises for the proposed downtown arena.

But Hahn insists that, apart from the La Jolla project, his real estate development interests--mainly retail centers in California, Arizona and Texas--are holding up well in tough economic times. Most of those activities are done under the umbrella of Hahn’s Land Grant Development Co., a firm he owns with Marasco.

And a check of real estate records in Phoenix and Riverside, Orange and San Diego counties, where most of Hahn’s 20 or more developments are located, supported Hahn’s claim. The check revealed no apparent problems at Hahn developments in terms of notices of defaults or other foreclosure proceedings.

Lusardi Construction filed a lawsuit against Land Grant earlier this year, claiming that Land Grant had failed to make a year’s worth of payments on a 20-acre parcel of land in San Marcos. Hahn’s company had leased the property with the intent of building a retail center. But an attorney for Lusardi, James Testa, said the suit was settled last week.

Hahn, who said Land Grant still hopes to develop the San Marcos property, said the lease payments were held up partly because of a delay in a required Army Corps of Engineers study.

Despite the Hahn-Cooper litigation and the Hahn family’s financial problems in the Golden Triangle, city officials are still moving ahead with plans to develop a downtown arena with Ron Hahn as a major force.

The city has established a task force, made up of city staff members, community leaders and members of the Hahn-Marasco team.

The task force has met formally to discuss 11 potential sites, most in so-called CentreCity East, near the San Diego Convention Center, the trolley station at 12th and Imperial avenues and San Diego City College.

Stapleton, the assistant city manager, said the Hahn-Cooper litigation is “a concern,” but that the city has decided to try and move forward. But, if it isn’t resolved “and soon”--meaning 60 days--the city, in her words, has two options:

Allow Cooper to control the existing arena and still proceed with a new one downtown, or “regroup entirely and make a decision on how to proceed.”

The city could end up with three arenas--the existing one controlled by Cooper, a new one downtown and a new, 12,000-seat, on-campus arena soon to be constructed at San Diego State University.

San Diego could become even more like its northern neighbor, which has the Great Western Forum, UCLA’s Pauley Pavilion and the Los Angeles Sports Arena.

The picture gets even murkier if a franchise in either the National Basketball Assn. or National Hockey League wishes to relocate in San Diego before a new arena can be constructed downtown. The existing arena would be its only viable venue, with Cooper as landlord.

The next two months will be critical, Stapleton said, in shaping the city’s course.

But Murray Galinson, president of the San Diego National Bank and a member of the new-arena task force, said the city remains in Hahn’s corner and sees him as the best hope for siting, financing, building and opening a new, downtown arena that could turn around the inner-city’s eastern corridor.

“I’m very optimistic,” Galinson said. “I have a tremendous amount of respect for Ron Hahn and believe he’ll put together a group that’s financially very stable and very influential. He and his father have always been terrific community leaders.”

As for the lingering litigation between Hahn and Cooper, Galinson said, “It is, unfortunately, typical of the times, with everybody suing everybody. When anything goes bad or appears to be in trouble, the first thing people look to is lawsuits.”

And if it isn’t settled?

“It doesn’t mean Ron can’t head up a new arena without having the old one, but it makes it more difficult,” said Hamilton of CCDC. “For instance, if a franchise wanted to come here tomorrow, where would they play? They would have to play in the Sports Arena managed by Cooper.

“It isn’t a case of ‘build a new arena, and a team will come.’ The developer of the new arena has an obligation to the city to produce a major franchise holder. It would be suicidal to build it without at least one major team, and we hope to attract two.”

Without such a commitment, Hamilton said, financing a $100-million, state-of-the-art arena with a minimum of 18,500 seats would be almost impossible. And, more than ever, financing is the key component.

Even with a franchise on board, Hamilton said, “some infusion of public participation” will be almost imperative, although not in the form of a bond referendum. Parking, for instance, could be one example of a public-private financing plan.

Commuters could use such parking during the day, with arena patrons using the spaces at night. Regardless of who pays for it and how, it’s a tough time to talk about money. Hahn and Cooper are reticent not only about the lawsuits but the subject in general.

“In terms of financing, there are numerous ways for the public and private sectors to come together on this,” Hahn said. “We’ve outlined several sources of public and private financing, which we’ll start to apply when we finally get down to specific sites. “The first major goal is to get down to one, two or three good sites, and get the exact cost of those in line.”

As for the litigation that has stalled the momentum, Hahn calls it a product of “tough times . . . in San Diego and throughout California. Because they’re tough times, it produces conflicts. I have every reason to believe the conflicts will be resolved. I don’t believe they’re irreconcilable, or of any real consequence.”

Times staff writers Chris Kraul and John Geis contributed to this report.