Riordan, Chick Seek to Salvage Warner Ridge : Development: A bank’s refusal to provide $100 million cripples the Woodland Hills project.

As new details of the collapse of the massive Warner Ridge office complex project emerged Tuesday, Los Angeles Mayor Richard Riordan and City Councilwoman Laura Chick scrambled to deal with the fallout, which included the possible loss of 1,500 jobs in the San Fernando Valley.

The Times reported Tuesday that 20th Century Industries, the parent company of one of the state’s largest auto insurers, would not lease three mid-rise office buildings in the Woodland Hills project as planned. Almost two-thirds of the firm’s 2,400 employees work in the Valley.

It was learned that the project was dealt a crippling, if not fatal, blow last week when Morgan Guaranty Trust, a New York City-based bank, notified Warner Ridge Partners, the developers, that it would not provide $100 million in permanent financing for the project.

Morgan Guaranty, according to sources, had always been a reluctant financier for the project. The bank does not specialize in real estate lending and became involved as a favor to its client, Johnson Wax Co. A subsidiary of Johnson Wax was an early partner in the project.

“They only became a partner by default,” one source said.

Ellen Barry, spokeswoman for the lender, refused to comment Tuesday.

Morgan Guaranty reportedly lent the real estate partnership $50 million to $60 million to buy the land and footed the bills for a lawsuit filed against the city of Los Angeles by the developers. The city, led by former Councilwoman Joy Picus, had sought to block the project through a zone change, later declared illegal in a series of court rulings.

After learning of Morgan Guaranty’s move last week, 20th Century, now headquartered in Warner Center, announced that it was dropping its plan to be the anchor tenant at the proposed 690,000-square-foot complex.

A desperate and angry Jack Spound, a principal with Warner Ridge Partners, appealed to 20th Century to lend him the money in exchange for an equity stake in the project, sources familiar with the situation said. But 20th Century’s board of directors rejected this proposal, leaving Spound without financing and a tenant.

Until these developments, groundbreaking for the project, which has involved the costly lawsuit and more than eight years of Byzantine City Hall maneuverings, was believed to be imminent.

Meanwhile, Riordan’s interest in salvaging the Woodland Hills project and preventing 20th Century’s possible departure was complicated because the mayor’s former law firm, Riordan & McKinzie, represented Morgan Guaranty.

The mayor planned to meet with the city attorney’s office to see if his involvement would constitute a conflict of interest. “If it’s legal, we want to be involved,” said Annette Castro, the mayor’s press secretary.

Chick, who represents the West Valley, called Riordan and 20th Century President James O. Curley on Tuesday in an attempt to keep the company in the city.

“That’s my No. 1 priority,” Chick said in an interview.

Curley, Chick said, was “unfortunately oblique” about what the company’s plans were. “I think they’re kind of at Square 1. But I certainly didn’t get any reassurances or concrete responses.”

Richard Dinon, senior vice president at 20th Century, confirmed that the company’s president had received calls early Tuesday from Riordan and Chick offering their assistance. “But I cannot disclose the content of the calls,” Dinon said.

He said 20th Century is willing to consider moving out of Los Angeles.

During last spring’s election, candidates Riordan and Chick vowed to resuscitate the area’s flagging economy and reverse City Hall’s reputation of hostility to business. Riordan, as the city’s chief executive officer, in particular, has been challenged recently to make good on his pledge to enact a job-creating agenda.

Just this week, Packard Bell, a Chatsworth-based computer manufacturer, announced that it was relocating part of its operations to Utah and was contemplating other moves. The firm employs 1,500 workers at its Chatsworth plant.

Another business considering leaving the area is Coast Federal Savings Bank, which has a major Granada Hills facility.

Within the past few years, the Valley has suffered as General Motors closed its Van Nuys plant and firms such as Lockheed Corp. and Transamerica Insurance Groups transferred some of their high-wage workers to other locales.

George Mihlsten, an attorney for major real estate interests throughout the region, said the city will have to move aggressively to deal with business flight.

“Other jurisdictions are offering everything from free land and job-training opportunities to tax breaks to lure business to them,” he warned. “That’s what L. A. is up against.”

One source close to the Warner Ridge situation predicted that it would take outside mediators such as Riordan and Chick to save the project. Such intervention might not work, but certainly the situation will remain unchanged without “some new chemistry,” the source said.

Chick said that if the Warner Ridge project is not built, she wants to review any new plans for the site.

“I want to ensure that the community gets the best project possible . . . whether that involves a reduction in its size or not,” Chick said. The project was to have been custom-built for 20th Century, and it remains unclear if it could be adapted for use by other tenants.

A spokesman said 20th Century was convening a committee to find an alternative site. The firm now leases space from Tishman West in Warner Center, but has outgrown its headquarters and had planned to move into the Warner Ridge project before November, 1995, when its current lease expires.

The insurer had agreed to a 20-year lease with Warner Ridge with an option to buy. But the deal was contingent on Warner Ridge obtaining permanent financing by Jan. 6.

Tishman West President Bob Shibuya said Tuesday that he is hopeful of retaining 20th Century as a tenant, calling the company “one of the best tenants in the market, anywhere.”

The repercussions of the busted Warner Ridge deal were also being felt at Pierce College in Woodland Hills, which had counted on $1 million in cash in exchange for accepting 425,000 cubic yards of dirt from the planned development. The money was to have been earmarked for teacher salaries.

The school will offer most of the spring semester classes funded through the deal, estimated at nearly one-third of the curriculum, said William Norlund, Pierce vice president of academic affairs. Most likely, he said, the college will operate at a deficit this year and pay the Los Angeles Community College District back during the next three years.

“It’s not possible to lose this kind of revenue without cutting some classes, but we don’t want to do a disservice to our students by cutting one-third of our classes,” Norlund said. “The impacts of this will be felt next year and the year after and the year after that.”

John Schwada is a Times staff writer and Kurt Pitzer is a correspondent.