November 4, 2005

Deal on QUEEN MARY gets closer....


Adler Realty Wants
To Take Over QSDI

By Harry Saltzgaver
Executive Editor

A plan to sell QSDI’s assets, primarily the long-term lease on the Queen Mary and the 55 acres surrounding it, to Adler Realty Investments, was filed Friday. QSDI had filed for bankruptcy protection in March.

Now the company’s fate is in the hands of District Court Judge Vincent Zirzullo. There will be a 30-day review and due diligence period before any action is taken.

Zirzullo must determine if the deal with Adler is the best way to bring the development company out of bankruptcy. That ability would include satisfying creditors — including the city — continuing operation of the landmark Queen Mary and moving forward with development of the property surrounding the ship.

Friday was the deadline Zirzullo had set for QSDI’s period of exclusivity, meaning they had sole right to offer a way to reorganize. It could be challenged, QSDI President and CEO Joseph Prevratil admitted.

Other groups could come forward and try to better the deal once it is made public through the bankruptcy court. That could include parties not currently part of the mix publicly.

“There’s a 30-day period for review now,” Prevratil said. “If someone came to us with a better deal, we would be obligated to review it and take it to the creditor’s committee and the judge. That could only be interested parties — not just anyone could come in now and bid for it. But right now it is in the judge’s hands.”

Adler is one of four groups that have been identified as negotiating to either take over or partner with QSDI. Adler owns the International City Bank building and the 100 W. Broadway building downtown.

Principal Michael Adler is partnering with music executive David Arden in his Queen Mary proposal. Details of Arden’s and Adler’s development concept were not available.

“We can’t share anything regarding our plans at this time,” Adler said. “We’re in a process now where we could be outbid. About all we can say is our bid is to acquire QSDI.”

Adler said his firm has been meeting with city officials regarding their participation. The city owns the ship and surrounding property, but are not directly involved in the bankruptcy proceedings.

“We’re in our 30-day due diligence period now,” Adler said. “We’re planning on moving forward and closing on this.”

Other publicly acknowledged suitors included Queen Mary Partners, a group organized by minority shareholder Bandero, Inc., which unsuccessfully attempted to take over the operation last year. City officials essentially blocked Bandero’s attempt to exercise an option to buy out QSDI, which came along with its 24% purchase of QSDI stock in 2003.

Developer Edward M. Czuker, president of EMC Financial Corp. and an unnamed consortium of Asian investors were the other identified potential bidders. At least one other party reportedly was added to the mix late in the process, and could remain a player as the settlement is played out, a source close to negotiations said.

The judge now will review the proposal and rule on related issues, including the disputed $4.4 million in rent credits QSDI has taken from the city over the last three years. The rent credit dispute reached a peak in March, when the city issued a notice of default, claiming the credits had been taken improperly and demanding repayment. Prevratil responded by taking QSDI into bankruptcy protection.


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