Fabulous Inns of America has turned over its option to purchase the 22-acre Stardust Hotel site and a potentially lucrative lease on an adjoining 214 acres to businessman Donald K. Miller, Fabulous Inns Chairman Jeffrey Krinsk confirmed Friday.
Miller, a San Diego restaurateur and storage warehouse owner, paid $1 million to Fabulous Inns in January, and the Mission Valley-based hotel company used the money to buy a one-month extension of its option to purchase the Stardust property and the lease on the adjacent 214-acre golf course--which a major land company is seeking to develop.
Neither Miller nor Krinsk has revealed the conditions under which Miller pumped $1 million into the hotel company, but it is known that Miller now owns the option.
Krinsk said that if the project being planned "goes forward as currently constituted, the deal will represent a sizable profit" to Fabulous Inns.
The Stardust site is owned by San Francisco-based Handlery Hotels, the former owner of the downtown El Cortez Hotel. Handlery also has a lease to operate the 214-acre adjoining golf course, which is owned by Levi-Cushman, a joint trust-partnership.
That lease expires in nine years and Chevron Land & Development Co. has announced a planned $750-million, mixed-use development for the property. Fabulous Inns purchased the option because Chevron has been negotiating to buy out the golf course lease before it expires so that it can begin its project earlier.
Although Fabulous Inns secured the option to purchase the property last September, the hotel company's bid to complete the acquisition had been slowed by pending litigation over control of the small but profitable hotel chain.
Option Extended Twice
Fabulous Inns has twice extended its option to purchase the Stardust, using Miller's $1-million payment in January for the most recent extension.
Krinsk, a former dissident shareholder who alleged conflict of interest by Fabulous Inns officials, has been embroiled in legal action with former President Walter Palmer and former Chairman Henry Maxwell.
That litigation generated a court order that prohibited the company from spending corporate funds on non-routine business projects, such as the Stardust acquisition.
With the option now transferred to Miller, Fabulous Inns' association with the Stardust has been ended unless the company is selected to manage the Stardust, Krinsk said.
Miller was not available for comment on Friday. He reportedly plans to remodel the Stardust Hotel.