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LONG BEACH, CA-Santa Monica-based developer O&S Holdings has emerged as the first bidder for the 40-acre Queen Mary development with an offer of $41 million, according to the bankruptcy trustee for the property and the brokers marketing the site. O&S now becomes the stalking horse bidder in a bankruptcy court auction where the development site will be sold later this summer.

At stake in the auction will be the 54 years remaining on the 66-year lease of the Queen Mary and its surrounding 43 acres of mixed-use waterfront property, known as the Queen’s Seaport Development. Partner Howard Ehrenberg of the Los Angeles-based law firm of SulmeyerKupetz is the bankruptcy trustee of the property, and a brokerage team from Coldwell Banker Commercial Almar is marketing the site.

The winning bidder will receive the potential for extension of the lease and rights to develop a site that is now occupied by parking lots, the Queen’s Marketplace retail center, containers, oil pumpers, a cruise terminal and a geodesic dome that once housed Howard Hughes’ Spruce Goose airplane. Tom Olson of Coldwell Banker Commercial Almar says that the buyer will gain “a one-time opportunity” to develop a mixed-use waterfront development anticipated to include hospitality, retail, restaurant, marine, office and entertainment components.

According to Ehrenberg, any other prospective buyers who want to participate in the auction “would need to overbid O&S Holdings’ current bid by at least $2.5 million.” Gary Safady, O&S Holdings’ managing member, sees the Queen Mary and the ship’s surrounding real estate as an unrivaled draw for Southern California tourism that no previous operator of the site has yet realized.

The Queen’s Seaport site includes more than 43 acres of land and more than 32 acres of water rights, along with the 72-year-old Queen Mary ocean liner, a hotel and tourist attraction drawing 1.2 million visitors every year. Olson leads the The Coldwell Banker Commercial team marketing the site. Other team members are Alan Scott of CBC Almar Group, John McKeown of Coldwell Banker Commercial REAG and Dan Richards of Coldwell Banker Commercial Inland Empire.

Queen’s Seaport Development Inc. filed for bankruptcy in March 2005, and Ehrenberg was appointed trustee in April of 2006. Since then, Ehrenberg has been overseeing the finances and operations of the company.

Olson says that with the bankruptcy court auction date still to be set, “this project is far from being off the market.” He notes that the property was appraised at more than $48 million in July.

Bidder O&S Holdings LLC was formed in 1992 by Gary Safady and his cousin Paul Orfalea, the founder of Kinko’s Copies. O&S Holdings and its affiliates own more than 80 properties in the US, including the 550,000-sf Louisiana Boardwalk in Bossier City, LA.

The bankruptcy court is expected to set a date for the auction within the next 60 days. The brokers say they expect that some of the prospective bidders who have shown interest in the property will participate in the auction.

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