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Investors win right to run Queen Mary

The group has plans to develop the waterfront property surrounding the Long Beach ship.

August 15, 2007|Andrea Chang | Times Staff Writer

A group of investors won the right to run the Queen Mary and develop its surrounding Long Beach waterfront property at a federal bankruptcy auction Tuesday.

With a bid of $43 million, the group, called Save the Queen, picked up the 66-year lease to oversee the operations of the historic ocean liner. The only other bidder, real estate developer O&S Holdings in Santa Monica, did not submit a counteroffer, Long Beach city officials said.

The city, which owns the Queen Mary, had been trying to find a new partner for the ship after its leaseholder, Queen's Seaport Development Inc., filed for bankruptcy protection two years ago. The ocean liner, which has been permanently docked in Long Beach Harbor for nearly 40 years, offers a hotel, restaurants, exhibits and other attractions.

City officials said they were pleased with the outcome of the long-awaited deal.

"Our only interest is to see that the city was compensated, and the city made out very well in this auction," City Atty. Robert Shannon said.

Save the Queen has plans to develop a resort area with additional hotels, a marina and other entertainment, dining and retail attractions.

The transaction is expected to take as long as two months to complete, officials said. Save the Queen still needs to negotiate with the city for specific terms of the lease, including its development plans.

The city will be paid $8.3 million from the sale, which covers back rent and interest owed from this year, as well as attorneys' and accountants' fees.

O&S, which develops mixed-use retail and entertainment complexes, opened the bidding with a $41-million offer.

"We are obviously disappointed with the result of today's proceedings," O&S co-founder Gary Safady said. "We were the first and, technically, only qualified bidder."

In U.S. Bankruptcy Court proceedings before the sale, O&S argued that Save the Queen should not have been allowed to participate in the auction because its bid had not conformed initially to specifications. The investor group later revised that offer, which then became the winning bid.

The bankruptcy judge rejected that argument, as well as a claim made by a Queen's Seaport minority shareholder that it was a subtenant and entitled to a portion of the proceeds from the sale.

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andrea.chang@latimes.com

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