Will Ruling on Cigar Shop Snuff Out Deal with Builder?

Source from:  By Jeanette Steele UNION-TRIBUNE STAFF WRITER September 2, 2007  09/03/2007

San Diego's Redevelopment Agency has won its court case against the Gran Havana cigar lounge downtown, but it may be too late to make much difference. An appeals court Friday reversed a lower court's decision, throwing out a $9 million award given to lounge owner Ahmad Mesdaq, whose property was condemned by the city in 2004 to make way for a Marriott hotel. The case has attracted widespread attention as part of the national debate over the use of eminent-domain powers. Advertisement In theory, this decision should be an out-and-out victory for the city. But there's a wrinkle. Mesdaq and the hotel developer had already agreed in July to settle the appellate case for $7.8 million. The developer's attorney said Friday that deal is still binding, though the Redevelopment Agency has yet to sign off on it. Downtown redevelopment officials will go back to court to "resolve the settlement amount," Centre City Development Corp. President Nancy Graham said in a news release. But it is unclear if they will try to reduce the amount. The city still technically owns the land and has estimated its worth at $4 million. "If they want to stick to that deal (for $7.8 million), I'm not sure we would object. That's something we have to talk about," said David Allsbrook of the CCDC. "Our objective is to get the hotel built." Mesdaq's attorney said the city has no place butting in on the deal, which is between two private parties. The hotel developer, GRH LLC, wants to jump-start the project so it can begin recouping its $23 million investment at the site, attorney Cynthia Eldred said. Downtown redevelopment officials have grown frustrated with GRH because it is nine months behind on starting construction. The land is now being used as a parking lot. The developer wanted the agency to approve the $7.8 million settlement at a July 25 board meeting, but it didn't, and the agency didn't meet at all last month. The site is on J Street between Fifth and Sixth avenues. Mesdaq owned 5,000 square feet of the 40,000-square-foot parcel, which is slated to become a four-star Marriott Renaissance hotel with 334 rooms. Mesdaq bought his property in 2000 and, combined with renovations he made, put about $2.5 million into the former warehouse, turning the site into a showcase. The city long has maintained that Mesdaq knew the hotel proposal was coming when he bought the land. He says he didn't learn of it until he was in escrow. Mesdaq refused offers to sell and sued the city to stop the condemnation. In reversing the lower court's award, the appellate judges agreed with the city that errors were made in valuating Mesdaq's property and how the loss of business was calculated. They also cited an improper award of damages related to an environmental remediation notice. Enditem