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In Dana Point, Taking On the Ritz-Carlton : Development: Qintex Group is looking at a smaller, though plusher, resort than plans originally called for, but the city has bigger ideas for its prime coastline site.


Local governments hereabouts don't get many developers asking to build smaller buildings than the law allows.

But it may happen in the beach town of Dana Point. And, in an ironic twist, the town will probably oppose it.

This isn't just any construction project, either. At stake is one of the choicest pieces of real estate in California, a billion dollars or so and the reputation of a brash Australian financial wizard.

The wiz is Christopher C. Skase, the dapper chairman of Qintex Group, the Australian hotel and television conglomerate.

Qintex recently paid a king's ransom for the Dana Point land, where Hawaii resort developer Christopher B. Hemmeter had planned a huge, gaudy resort. Now Qintex says it has scrapped Hemmeter's plan. Instead it plans to build a smaller, plusher resort to compete directly with the Ritz-Carlton just up the road, which caters almost exclusively to the carriage trade.

But the town of Dana Point may not want a smaller hotel, which could mean less revenue from a room tax and more residential development.

And as Qintex's other big U.S. deal falls apart--the purchase of the MGM/UA movie studio at a price some analysts considered way too high--it raises questions about Qintex's financial ability to become a big player in the U.S. entertainment and leisure industry. Qintex insists the apparent failure of the studio deal won't affect the resort.

But both deals are similar in one way: The resort deal is almost as complicated as the intricate MGM/UA deal. And if a fight develops between Dana Point and Qintex over the size of the hotel, for instance, it could take a lot longer--and a lot more money--to get the hotel built.

Dana Point, at first blush, suggests nothing of high finance. It used to be a sleepy little beach town known for funky neighborhoods, cheap apartments and good surfing.

The surfing is still good. But Dana Point is known now as a place where a lot for a single house near the ocean can sell for several million dollars.

Supervisors Blamed

The town began changing in 1971, when a yacht harbor opened. Some of the resulting growth wasn't planned very well. The town folk blamed the five county supervisors 20 miles or so up the freeway in Santa Ana. Last year they'd had enough: They voted to incorporate and take control.

But developers managed to persuade the county supervisors to approve 1,700 new homes before the incorporation. (This in a town of 28,000.) So no matter where you go in Dana Point these days, you are never far from the skeletal frames of new houses and the drumbeat of hammers.

The biggest change, though, is the hotels. There are two of them perched on the bluffs above the ocean: the marble-laden Ritz-Carlton and the less stuffy Dana Point Resort.

With the hotels and the tourists and the construction and the bustle, the town is beginning to seem less like the funky beach town it once was and more like its trendy neighbors just up the coast: artsy-craftsy Laguna Beach and glitzy Newport Beach with its yachts and socialites.

It had to happen eventually: Dana Point was the closest place to Los Angeles that still had lots of empty land for sale right on the ocean.

Drive south down the coast from Los Angeles County and the first big open space that's not already spoken for is just behind Dana Point's Monarch Beach, namely, 232 empty acres on a bluff overlooking the Pacific. It is, says Christopher B. Hemmeter, a man with an eye for choice real estate, "one of the best pieces of land in the United States."

First on California Coast

Hemmeter should know; he has made a mint picking good spots, most of them in Hawaii, on which to put hotels. This was to be his first on the California coast.

It was 1987 when Hemmeter joined two local developers, David Stein and Barry Brief, to build one of Hemmeter's elaborate resorts. (Stein-Brief Group owned the land, and Stein-Brief and Hemmeter paid Stein-Brief's lender just $32 million to obtain the land free and clear less than two years ago.)

The hotel was to be a copy of William Randolph Hearst's grandiose castle in San Simeon. The old press lord probably would have liked the frills Hemmeter planned: a water ride through a Japanese garden, a theater big enough to stage an opera and an ice-skating rink.

The partners needed $450 million to build it. They hired an investment banker to find an investor who would put in $150 million in return for 50% of the hotel. The group would then borrow the other $300 million, according to David Stein.

The investment banker brought them Skase, and Skase surprised everyone by offering to buy the whole thing.

"They asked what price I'd accept," Hemmeter says. "I told them our bankers wouldn't let us turn down $100 million more than what we paid for it. They came back with an offer of $132 million. We couldn't turn it down."

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