Builder resumes role in deal for downtown hotel.

Builder resumes role in deal for downtown hotel

Northview Corp., a subsidiary of Uri Sheinbaum's Calmark Holding Corp., last week declared Chapter 11 bankruptcy, unable to pay ground rents on at least two of the 40-odd Vagabond Inn motels it owns and operates, including one in Woodland Hills.

Northview, bought by Sheinbaum's West Los Angeles-based Calmark in late 1987, has been in default on $100 million of Drexel Burnham Lambert-underwritten junk bonds since September.

Despite not paying bondholders $6.5 million in interest, the bankruptcy filing was precipitated last week when Northview was unable to muster $635,000 in ground lease payments to the Woodland Hills-based Hotel Investors Trust, a publicly traded trust that owns land underneath Vagabond hotels in Woodland Hills and Sacramento, said Theodore Stolman, partner with Los Angeles-based Stutman Treister & Glatt, the bankruptcy law firm handling the case.

"The filing was caused by the inability of Northview to meet certain ground lease payments to Hotel Investors," said Stolman last week. "Northview filed to preserve equity in the motels they own." Hotel Investors was set to terminate Northview's leases on the two Vagabonds, and then would have owned the facilities, said Stolman.

Sheinbaum, a Music Center socialite who drives a Rolls-Royce and lives in the former Bel Air manse of publisher Larry Flynt, declined to return phone calls last week.

Sheinbaum's Calmark, a real estate development company, continues to negotiate with Northview bondholders, and has proposed a debt-for-equity swap and rescheduled payments to bondholders, said Stolman. The lawyer said the Northview bankruptcy declaration did not directly affect the finances of its parent company, Calmark Holding.

Separately, Stolman confirmed last week that Calmark Commercial Development, a subsidiary of Calmark Holding, was back in a deal to build the $450 million Pacific Basin Plaza hotel-office complex next to the Los Angeles Convention Center in downtown Los Angeles.

The 1.9 million-square-foot project is considered crucial to the success of a $400 million city-financed expansion of the convention center, scheduled for completion in 1993.

For decades, Los Angeles has not hosted major conventions, unable to lure conventioneers to a second-rate facility far from downtown's first-rate hotels. Private-sector studies have found a convention center must have first-class hotels within a short walking distance to succeed.

Three weeks ago the FCD Hospitality Inc., a Calmark partner, said that it had purchased Calmark's 50 percent stake in the Pacific Basin, a project slated to include the West Coast's largest hotel -- 1,781 rooms -- and 500,000 square feet of office space. Additionally, the project proposes 125,000 square feet of retail space.

But FCD Hospitality, led by downtown real estate developer Victor Lee, has not been able to pay Calmark for its 50 percent share, and so Calmark has re-assumed its position in the Pacific Basin project, said attorney Stolman last week.

Victor Lee of FCD Hospitality could not be reached for comment last week.

Calmark, FCD Hospitality and Ohbayashi America Inc., the domestic subsidiary of Tokyo-based construction giant Ohbayashi, went into a 270-day period of exclusive negotiations with the Los Angeles Community Redevelopment Agency in June to settle the scope of the Pacific Basin. Calmark has been asking for 500,000 square feet of extra development rights from the CRA, worth about $20 million.

To date, no agreement has been reached. The CRA declined comment on the negotiations last week, calling the talks "sensitive."

In letters to bondholders, Calmark said its role in the Pacific Basin has been endangered by its financial problems and the press. In a November communique to bondholders, Calmark said, "The company's contracts with public agencies such as school districts and the agency [CRA] overseeing the downtown hotel convention project are placed in jeopardy because of the adverse financial disclosures about the company."

The sudden departure of Mayor Bradley aide Art Gastelum two weeks ago raised questions in political circles last week about the Pacific Basin project.

Gastelum had been Calmark's contact in City Hall. According to his desk calendar, Gastelum met repeatedly with Calmark and FCD Hospitality officials in the past three years, and attended after-hours Calmark parties at the Bel Age and Sheraton La Reina hotels.

Gastelum, 40, while in the Mayor's office made repeated inquiries to the CRA as to the progress of Calmark's proposals, and arranged City Hall meetings between the Mayor and Calmark officials.

The Los Angeles County District Attorney's office is presently investigating Gastelum, who accepted $125,000 in payments from Hal Mintz, the former college professor who operated a West Hollywood house of prostitution.

Gastelum, a 17-year City Hall veteran, initially failed to report the payment on mandatory economic conflict-of-interest forms. He did not return a phone call from the Business Journal last week.

Separately, the Los Angeles City Attorney's office last week said it is still investigating $12,000 worth of contributions to Mayor Bradley's campaign warchest made by Calmark and related entities on Aug. 25, 1987.

Also raising questions about the Pacific Basin project are mysterious, noncommittal remarks made by Pacific Basin partner Ohbayashi, which now owns the land upon which Pacific Basin would be built. The Japanese construction giant would be the economic muscle behind the project.

In an interview two weeks ago, Aoto Kuni, vice president of Ohbayashi America, said he had made no committments to Pacific Basin and had no other comments.

Calmark owner Sheinbaum, a former real estate syndicator, emerged in the Los Angeles scene in 1986, when he bought Calmark for $5.75 million. He put $2 million down, but has not made any payments on the $3.75 million owed.

A former owner of Calmark, Michael Roe, a prosecutor in the criminal division of the San Diego City Attorney's office, is suing Sheinbaum as a private citizen over the lack of payments.

Sheinbaum has countersued, alleging that Calmark assets are not as represented at time of sale.

Sheinbaum's 1987 purchase of Northview was also contested by major Northview bondholders, including Los Angeles-based insurer First Executive Corp., which owns $18.9 million (face value) of the bonds and downtown-based thrift Coast Savings, which owns $15 million (face value) of the bonds.

Ivan Boesky, the convicted securities inside trader, was chairman and chief executive of Northview until he resigned in late 1986, after he agreed to plead guilty to felony securities charges.

Drexel Burnham had issued $100 million of junk bonds for Northview in 1983, to finance Boesky's activities in the stock market.

After Boesky stepped down, Northview shareholders, primarily made up of the Boesky and Slatkin families, bought back their own stock with Northview funds, and the company was merged with Calmark. A Los Angeles Superior Court judge dismissed First Executive's and Coast's suit against the merger.