Developers Still Lack Funding; Details of Key Negotiations Emerge in Lawsuit
The developers of Pointe Anaheim have purchased a vacant 4.4-acre parcel, the second of nine pieces of land they hope to assemble into the proposed 29-acre entertainment shopping center across the street from Disneyland Resort in Anaheim.
The Pointe Anaheim center, on Harbor Boulevard and Katella Avenue, is planned to include nightclubs, themed retail stores, three live theaters with 4,600 seats and three hotels with 1,050 hotel rooms.
Since it was first announced in May 1998, the Pointe Anaheim project has stalled as developers have yet to secure $500 million financing they need to push forward with the project. Additionally, a crucial 10-acre piece of property owned by Pyrovest Corp. has been tied up for more than a year in legal action.
The newly acquired parcel fronts on Katella and was bought for an undisclosed price. It is the first property acquisition by the group since April 1999, when Pointe Anaheim purchased a 30,000-square-foot site owned by the heirs of Norman L. Hasenyager, also for a price that was not disclosed.
Piecemeal Plan
“This project is too good to not occur,” said Robert Shelton, project manager of Pointe Anaheim. “We have decided we will acquire properties as they come up and work on the project until we raise the money necessary or see if we can proceed with a smaller phase.”
Pointe Anaheim has leased two other properties totaling roughly two acres and plans to buy the former Melodyland site early next year, Shelton said.
Pointe Anaheim’s development team,which includes Western Asset Management Group of Companies, Canada, Excel Legacy Corp., San Diego, Strategic Retail Advisors, Newport Beach, and Stanley Castleton, owner of the Hilton Anaheim,to date has invested more than $10 million, Shelton said.
Pointe Anaheim has said it plans to spend roughly $75 million to buy nine parcels from 15 property owners, including 10 acres owned by Pyrovest Corp. and occupied by the Anaheim Plaza hotel. A dispute between Pyrovest and the hotel, stemming from Pointe Anaheim’s first attempt to buy the land, is in litigation.
Court filings in the case detail Pointe Anaheim’s negotiation with Pyrovest.
Pointe Anaheim’s developers initially offered $35 million for the property in September 1998, but Pyrovest had to allow Anaheim Plaza LLC to exercise its first right of refusal. The hotel’s operator, Tushar Patel,chairman of Costa Mesa-based Tarsadia Hotels, which owns 16 properties including the Anaheim Marriott,initially chose to purchase the property, but backed out in November of that year, saying due diligence turned up environmental issues and deed restrictions stemming from a previous legal settlement with Walt Disney Co.
Pyrovest sued in July 1999, alleging Patel intentionally disrupted the deal to sell the property to Pointe Anaheim.
A countersuit filed shortly after by the hotel alleges that Pyrovest did not inform the Pointe Anaheim developers that Anaheim Plaza was no longer interested in the property, because it was using that interest as leverage to get a better deal.
The countersuit alleges Pyrovest “intentionally ‘torpedoed’ its own deal with Pointe Anaheim to use Anaheim Plaza as a foil against Pointe Anaheim to drive up Pyrovest’s asking price for the property.”
The countersuit says that Pointe Anaheim offered to “sweeten” the deal with an additional $1 million for a total of $36 million in September 1999, and in December offered the $36 million plus an equity stake in the project.
A judge threw out Pyrovest’s suit in August of this year, but the hotel’s countersuit still is pending. The hotel operators are asking for 12 months of rent, return of its $350,000 lease deposit and payment of 25% of its expenditures.
Attorneys for Pyrovest did not return calls seeking comment.
Shelton would not discuss whether Pointe Anaheim has since resumed negotiations for the Pyrovest property, but he said it’s been difficult raising the $500 million financing needed to push the project forward.
The city’s approval of the project required that Pointe Anaheim be built in a single phase, making it unattractive to many investors, Shelton said. Also, the approved plan calls for three hotels to be built as part of the project, but hotel financing is particularly hard to come by in the current market, he said. n
