More than three years after developer Richard Weintraub agreed to purchase a high-profile Woodland Hills property for a large apartment complex, the deal has fallen apart. The Malibu developer had been planning to build 600 apartments in nine buildings at the former Catalina Yachts site. But a dispute over soil contamination has scuttled the $21.5 million sale of the property at 21200 Victory Blvd. It’s unclear if the deal with Frank Butler, the founder of Catalina Yachts, has any hope of revival. Weintraub Financial Services Inc. has sued two of Butler’s companies alleging fraud and breach of contract after an extended escrow during which the company claims to have paid in excess of $550,000 as he sought entitlements for the property and the two sides attempted to work through issues on the deal. He is seeking damages of at least $20 million now that the industrial property is entitled for the project, according to the lawsuit filed Dec. 9 in L.A. Superior Court. The escrow was terminated by Butler in November, but Weintraub also is suing for injunctive relief and told the Business Journal that he views the escrow as still open. “I can’t really talk about it, but the project is still going,” Weintraub said in a December interview. He declined this month to comment on the lawsuit, which came to light later. Butler and his attorney, Russell L. Berney, also declined to comment on the litigation, but told the Business Journal last month that the escrow is closed and the deal is dead. At the core of the dispute is contamination of soil at the site by an industrial solvent called trichloroethylene, or TCE – and specifically the source of the contamination and which entities will bear the cleanup costs. Boeing Co. of Chicago has accepted some of the responsibility as the acquirer of Rockwell International, which operated an aerospace manufacturing plant on the site in the 1960s and 1970s. The lawsuit alleges Butler hid that his yacht operations were a source of some contamination, ruining Weintraub’s ability to get a loan for his planned development. Tim Martin is founding partner at CA Land Use Professionals LLP in L.A., a law firm that specializes in land use and environmental issues. Martin, who is not involved in the litigation, said he was not surprised by the dispute given the challenges of contaminated industrial land. “This is a common problem. And it’s very difficult and expensive to clean up industrial sites for residential development,” he said. Remediation issues Rockwell operated a Rocketdyne aerospace manufacturing facility on the site through the 1960s and 1970s. The company sold its aerospace and defense operations to Boeing for $3.2 billion in 1996, long after it ceased work at the site. Catalina Yachts took over the property in 1974, four years after the firm was founded. Over the next 10 years, it built thousands of boats there, including more than 10,000 of its Catalina 22, a popular sailboat with a nearly 22 foot hull. In 1984, Catalina Yachts bought Morgan Yachts in Largo, Fla. and began moving its operations to the state, leading to the closure of the Woodland Hills facility about five years ago. In November 2010, Weintraub agreed to purchase the site. As part of the purchase, Butler provided the developer with documentation associated with the state of the property. One of those documents was a 2005 report conducted by AEI Consultants of San Francisco, an environmental and engineering consulting firm, according to the lawsuit. In its report, AEI identified that Rockwell was the source of apparent TCE contamination at the site, but also found that various industrial chemicals were used by Catalina Yachts and that the boat maker had “poor management practices,” which Butler denied, the lawsuit states. The report recommended further testing of the property by soil borings. That testing, completed in September 2012, found the soil was indeed contaminated by TCE. Butler then sought to work out an agreement to have Boeing pay for the site cleanup, the lawsuit states. However, at an April 13, 2013 meeting with Boeing officials, the developer said he was provided documentation that Catalina Yachts was responsible for some of the TCE contamination. Steve Shestag, director of remediation for Boeing, wrote a letter to Butler proposing a solution. Boeing offered to complete a full environmental investigation of the land under certain conditions: The aerospace firm would fully fund any cleanup that was needed as a result of Rockwell’s presence; and Butler would pay for any cleanup that was a result of his time on the lot, among other stipulations. Boeing declined an interview request, but did verify the authenticity of the letter and added, “At this time, there has not been a full investigation of the site. We are committed to doing the right thing, and are currently assessing site conditions and developing a cleanup plan.” ‘Red flags’ Meanwhile, under the terms of the original 2010 agreement, the escrow was good through September 2012. The parties agreed at least three times to extend the deadline, but the complaint claims Weintraub was unable to get financing needed for the deal once lenders found out Boeing would not accept full responsibility for the cleanup. In May of last year, days before the deal would expire, Butler and Weintraub agreed to a final six month extension, if the developer paid a $21,500 “transfer fee” and a monthly payment of $105,000 that would be non-refundable and paid outside of escrow, not credited against the purchase price. There is no mention of any additional extensions from that point, suggesting the deal formally died in November. If Weintraub has to walk away, one of the most valuable pieces of land in the area would hit the market, despite any challenges about its clean up. With the October passing of the Warner Center 2035 Specific Plan, a developer could propose far more units and denser construction than Weintraub initially entitled on the property. According to one local broker, who did not want to be identified, the property would be worth “significantly more” than what Weintraub agreed to pay in 2010. What’s more, he said both brokers and developers are already after the listing. “Everybody would be after this deal. It would be a hot commodity,” he said. “It’s a prime location. If someone were to take it over as is, it’s still a home run. But if they wanted to rework the numbers under the new plan, you could even do more.” But Martin isn’t so sure the real estate community should be so eager. The attorney said developers should take a hard look to see if the opportunity is really worth the headache of a long and drawn out cleanup effort. “This is considered a major risk item,” Martin said. “I would be concerned by the history of this site. There are a lot of red flags.”
Catalina Yachts Project Sunk?
