VESTAR BACKS OUT; BURBANK DEVELOPMENT DEAL COLLAPSES.

Byline: Lee Condon Daily News Staff Writer

Vestar Development's plan to build a massive retail-office complex on one of the largest pieces of undeveloped commercial property in the Valley is dead, Burbank City Manager Bud Ovrom said Tuesday.

Phoenix-based Vestar and Lockheed Martin had been attempting in recent weeks to salvage the deal after Vestar exercised its option to bow out in late December following a lengthy escrow. Lockheed Martin owns the property, which for years was used to build fighter jets.

``This deal is dead. They (Vestar officials) are out of it but they are eligible to resubmit, but they don't have the inside track,'' Ovrom said.

While Lockheed Martin officials acknowledge they are now talking to other developers, spokeswoman Gail Rhymer said the company still hopes Vestar may rejoin the project.

Vestar Senior Vice President Rick Kuhle could not be reached for comment.

Ovrom expressed confidence that a new developer could be brought in to take over for Vestar.

``This is a fantastic piece of land. It's more than 100 acres in the San Fernando Valley along the Golden State Freeway. I'm 100 percent confident this property will be developed,'' Ovrom said.

Vestar, which started working on the project in the spring of 1997, had ambitious plans for the 103-acre site, located just southeast of Burbank Airport.

The project included 585,000 square feet of retail with so-called big box stores for tenants like Target and Home Depot, 10 car dealerships, two hotels and a 300,000-square-foot office park.

While neither Burbank nor Lockheed Martin officials could offer an explanation for the breakdown, it's clear that plans for the office park had fallen through. Vestar was sued by one of its major partners in the project just a few weeks before the company nixed its contract with Lockheed Martin.

Kilroy Realty, which had signed a deal in October 1997 to buy 30 acres of the site to build a 300,000-square-foot office park, filed suit against Vestar in Los Angeles Superior Court on Dec. 4, alleging breach of contract and fraud. In the suit, Kilroy said that Vestar only tried to get approval from the city of Burbank for 18 acres of office park property and was planning to sell the remaining 12 acres to another developer.

Kilroy is seeking $2 million in compensatory damages and unspecified punitive damages ``to make a public example'' of Vestar, the lawsuit states.

Neither Kilroy officials nor their lawyer returned calls seeking comment.

Ovrom said the Kilroy pullout must have been major factor in Vestar's decision, along with delays in the traffic study and securing entitlements, and real estate values that have risen considerably since the project was first proposed.

This isn't the first time the property has been in the middle of a lawsuit. In 1996, Lockheed Martin paid $60 million to 1,300 Burbank residents as part of a secret settlement after they claimed their health and property were damaged by toxins released by Lockheed in the ground and air.