Donald Koll Removes Self From Bolsa Chica Project

By E. SCOTT RECKARD

April 1, 1998 12 AM PT

TIMES STAFF WRITER

NEWPORT BEACH —

Developer Donald M. Koll, who waged an 8-year battle to build a housing project at the Bolsa Chica wetlands, said Tuesday he is severing his ties with the controversial development.

Koll plans to resign as chief executive of Bolsa Chica developer Koll Real Estate Group Inc. The company, which is facing further delays in the 1,235-home project, plans to sell its nonresidential operations for $30 million to a group led by Koll.

The sale gives Koll Real Estate a war chest as it tries to finish decades of legal wrangling and gets ready to prepare a mesa above the coastal marshes for 1,235 new homes.

The company’s chief financial officer, Raymond Pacini, will succeed Koll as chief executive and operate it under a yet-to-be-determined name. He said he hopes to settle the legal battles within a year.

“I joined this company in 1990 to see Bolsa Chica built, and I intend to see it built,” Pacini said.

Donald Koll and another Koll Real Estate executive, president Richard M. Ortwein, will form a new private company to oversee the commercial business being acquired from Newport Beach-based KREG. The commercial operation develops property for other companies and undertakes its own deals with various financial partners. It operates in Asia as well as domestically.

The new private company will be named Koll Development Co. LLC.

Donald Koll, one of Orange County’s most experienced developers, has mainly handled commercial projects over the years. He also has construction and resort development companies that are separate from KREG.

KREG once had hopes for 6,000 homes on the site near Huntington Beach, but the number was cut during bitter battles with environmental groups. Koll last year sold the wetlands themselves to the state for preservation and concentrated instead on the adjacent mesa.

The long struggles landed KREG in bankruptcy court last year as part of an arrangement with holders of $200 million in debt. Those bondholders wound up owning 90% of the company in exchange for canceling the debt. Although they controlled the board of directors, Koll remained as chief executive.

In the latest setback for the Bolsa Chica project, a Superior Court judge in February ruled that the state’s Coastal Commission had not allowed enough public comment before approving the project. KREG has appealed.

Alfred Gobar, a Placentia real estate consultant who has known Donald Koll for decades, said the long and tangled history of Bolsa Chica “has just been a lot of grief for everybody.”

Donald Koll said his acquisition of KREG’s commercial business “is a win-win situation,” giving the home builder funds to complete the litigation and install infrastructure at Bolsa Chica, and allowing him to take the commercial operations private.

“The two businesses never really fit together,” he said, complaining that Wall Street investors always wanted predictable quarter-to-quarter earnings--something he was unable to provide from the commercial side.

“I’ll know I’m going to sell an office building, but I can’t tell you if it’s going to be sold six months from now,” he said.

KREG said the sale of its commercial businesses was approved by a committee of independent members of its board. The committee hired the Blackstone Group, an investment banking firm, to assess the deal and provide and conduct further negotiations should other offers emerge before the deal is completed April 30.

Koll said he has had offers from several financial backers to provide the $30 million for him to buy the commercial assets.

He wouldn’t identify them, but one potential candidate was New York-based Northstar Capital Investment Corp., which has invested in some of his recent deals, including an international golf course operation.

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Koll Reorganization

Koll Real Estate Group is selling its commercial development business to a new firm headed by developer Donald Koll. Highlights of the firm’s commercial and residential projects:

Residential

* Undeveloped land: 1,700 acres in California and Michigan

* Warner Mesa: 200-acre site overlooking the Bolsa Chica Wetlands designated for more than 1,200 homes

* Rancho San Pasqual: master-planned development of 580 homes in Escondido

* Fairbanks Highlands: 392-acre project designated for 92 homes in San Diego

* Aliso Viejo: 1,300-home development under construction

Commercial

30 projects underway in the United States and Asia:

* Chia Tai Riverfest: 2.5-million-square-foot retail and entertainment center in Shanghai

* Nokia Inc.: 300,000-square-foot office facility in Las Colinas, Texas

* Lincoln Towne Centre: 251,000-square-foot development in Scottsdale, Ariz.

* Desert Palm Power Center: 425,000-square-foot retail center in Phoenix