Queen Mary Lease Sale Back On Track

By Harry Saltzgaver
Executive Editor

Creditors, attorneys and agents will make a little less money now on the sale of a lease for the Queen Mary and surrounding property, and the buyer will pay a bit more, but the deal apparently is done.

U.S. Bankruptcy Court Judge Vincent Zurzolo is expected to rule today on a deal to buy out the interest of a group called AAC Shoreline for $1.15 million in order to allow the sale to go through. Bankruptcy Trustee Howard Ehrenberg brokered the deal, with nearly dozen entities — including the city — chipping in to make the payment.

Queen’s Seaport Development Inc. (QSDI) had held the 66-year lease on the landmark ship and surrounding 55 acres, but declared bankruptcy more than two years ago. A firm called Save The Queen, led by Orange County developer Jeffrey Klein, bid $43 million in August to take QSDI’s assets and pay off all secured debts.

But the Friday before escrow was to close, the Ninth District Court of Appeals granted a stay to allow AAC Shoreline to pursue its claim. That group claimed it had paid $500,000 for rights to develop concessions on a small parcel next to the ship to Bandero LLC, a minority partner in QSDI.

Ehrenberg said all parties agreed to the buyout to complete the sale rather than fight AAC’s claim in court.

“We paid them a substantial amount of money,” Ehrenberg said. “We had won in bankruptcy court and in the first round of appeals, but when the appeals court granted the stay, so É

“We had to get the sale closed. The appeal hearing wasn’t until the end of November, and there could have been appeals beyond that.”

Assuming that Zurzolo approves the settlement today, Ehrenberg will go back to the Court of Appeals in San Francisco to have the stay lifted. Then Save The Queen will have three business days to close escrow.

The remaining fly in the ointment is Bandero LLC, the firm that did business with AAC Shoreline. It still has a pending lawsuit for damages, although Zurzolo already has denied Bandero’s claim to development rights and eliminated any sublease — a move Bandero did not contest.

“The only thing left is the lawsuit for damages, and I’m assuming they would settle,” Ehrenberg said. “I would think so since once the sale is complete, there are no further assets. I would hate to see the estate spend more money on litigation.”