Bumps on the Road to Warner Ridge : Development: Eight years and $50 million after Jack Spound began his effort to build the project, the site remains empty.

“I absolutely would not do it again, if I knew then what I know now.”

So says developer Jonathan A. (Jack) Spound, 34, about his eight-year effort to erect Warner Ridge, a $200-million office-condominium project planned in Woodland Hills across the street from Warner Center.

What Spound didn’t know eight years ago was that Warner Ridge would become a fierce, drawn-out battle between his partnership and a group of local homeowners and lawmakers who, fearful of increased traffic in the area, want a much smaller center than Spound envisions.

The once-unknown developer also didn’t know that his own partnership would eventually unravel and have to be reorganized, or that the issue of who should pay the $50 million that’s already been spent on Warner Ridge would wind up now being fought in the courts.

But because Spound couldn’t foretell all of this, he’s still trying to get Warner Ridge built. And he hopes to finally break ground in June, thanks to legal victories that effectively forced the city of Los Angeles to give him the green light, and thanks to the deep pockets of J.P. Morgan & Co. in New York, the nation’s fifth-largest bank holding company.

He also has a tentative agreement for 20th Century Industries, parent of 20th Century Insurance, to move a few blocks from its headquarters in Warner Center to become Warner Ridge’s main tenant.

Spound thus stands ready to fulfill what he concedes is now his “passion,” a quest that began when he was launching his career at age 26. Though he is unlikely to get sympathy from angry homeowners near Warner Ridge, Spound said the project also “has been a tremendous toll on me personally.”

“It has pretty much dominated my business and my personal life for the last seven, eight years,” he said. “Yet it’s still uncertain. I’m still sitting here, and I don’t know if I’m ever going to make money” on the project. “I hope to, I think I’m going to. But I don’t know.

“That’s a very scary thing after you’ve invested eight years of your life.”

The opposition to Warner Ridge has been led by the Woodland Hills Homeowners Organization and City Councilwoman Joy Picus, but their effort is waning. Two additional lawsuits filed by the homeowners, aimed at scaling back the project, were rejected by state judges last month.

“It’s not a matter of stopping it,” said Robert J. Gross, president of the homeowners group and a candidate to replace Picus in this year’s elections. “I would like to see an appropriate development,” meaning a smaller one.

As it is envisioned, Warner Ridge would include five office buildings of six or seven stories apiece, a 1,750-vehicle parking garage, a few retail shops and 125 condominiums, all spread over a 21-acre site next to the southwest corner of Pierce College. Total occupied square footage: 690,000.

The project would be built in two phases, the first being three office buildings and the garage, along with grading of the property and infrastructure development, such as improving nearby streets.

The first phase would cost roughly $100 million and be completed around mid-1995, Spound said. As for phase two, that won’t even be started unless there’s demand for it, he said. There’s also no specific plan yet for the condos, including what they would cost.

“We will not start any speculative office buildings in this environment,” Spound said, referring to the current glut of commercial office space in Southern California.

That glut, and the fierce local opposition to Warner Ridge, have hardly been Spound’s only problems with the project.

He has also had to deal with the breakup of his original partnership on the development, Warner Ridge Associates, which included not only Spound and his father, developer Albert M. Spound, but also Johnson Wax Development Corp., a real estate unit of the consumer-products giant S.C. Johnson & Son Inc. of Racine, Wis.

Privately owned Johnson walked away from Warner Ridge recently as part of a 1988 decision to unwind its real-estate portfolio, which had several problem properties. (Johnson also wasn’t happy about having its household name pummeled in newspaper articles by Warner Ridge critics, according to court records.)

Luckily for Spound, Johnson was not the project’s source of cash--that role belongs to Morgan Guaranty Trust Co. of New York, a unit of J.P. Morgan & Co.

Morgan has so far lent Spound’s group $43 million for Warner Ridge ($55 million including interest) and its attendant legal fight. The land itself, bought in 1985, cost $20.5 million.

Spound won’t disclose what his family and Johnson have invested in the deal, but court documents show that their initial investments were only $100 and $10,000, respectively, and that “Morgan’s financing has been the only significant capital put into the Warner Ridge project.”

Spound has previously said, however, that Warner Ridge has cost his firm “several million dollars” in overhead expenses and deprived it of income from missed business prospects elsewhere.

In any case, with Johnson bailing out, Morgan decided that “it was more appropriate that they control the future of the project,” Spound said. So Warner Ridge Associates was dissolved, Warner Ridge Partners L.P. was formed, and that new partnership took over title to the site.

At the same time, Morgan is suing Johnson in federal court in San Jose, alleging fraud and breach of contract.

Morgan claims that it financed Warner Ridge largely on Johnson’s promise that Johnson “would stand behind” the loan, but that when Morgan wanted to effectively call in the loan in October, 1990, Johnson refused to pay off. Johnson denies it made any such promise. Morgan is seeking its $55 million back and at least $129 million in damages. (Spound and the project itself are not involved in the litigation.)

Chemical Bank, another big New York-based bank, had filed a similar suit against Johnson over $76 million in loans to a Johnson partnership that was developing a San Jose office complex. Chemical’s suit has since been consolidated with Morgan’s action, which is scheduled to begin trial June 15.

Richard F. Levy, a lawyer for Johnson, said the case is “without merit and that’s what the court will decide.” Johnson spokesman Jim May declined comment.

Morgan, meanwhile, is also limiting its future exposure at the project. The bank as a matter of policy does not supply construction financing, so another lender must be found to write the checks for Warner Ridge’s brick and mortar.

“We’re actively pursuing the financing at this time,” Spound said.

Their pursuit is helped by the fact that 20th Century approved a letter of intent to be the project’s “anchor tenant,” with about 2,000 employees working there.

Is 20th Century troubled by Warner Ridge’s history?

“We wouldn’t consider this decision unless we believed very confidently in the project and the developer,” said Richard Dinon, 20th Century’s senior vice president.

But for now, nothing definitive is signed. So Spound, his partners, Morgan and their lawyers have already spent eight years and more than $50 million of Morgan’s money, yet they have no tenant and no future financing, and not a shovelful of dirt has been moved at Warner Ridge.

Why has Spound stuck with it?

“We had an obligation to both our partner and our lender to carry forward and not jump out the back door just because the heat was high,” he said.

“It was 20 times more difficult than we anticipated, and it’s been a long trail for us without compensation. But we think it’s going to be a good story at the end.”