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    At Yamashiro and Magic Castle, a Fight for the Hill

    Clockwise: Yamashiro sign, the restaurant entrance, Magic Castle; the developable Franklin Ave parking lot

    Later this year, a legal ruling will decide the fate of a Hollywood landmark, the 10-acre parcel that houses the Yamashiro restaurant and the Magic Castle. The site will either remain with its current owners, family members who’ve owned the properties for more than half a century, or it will go to Sean MacPherson, who sued the family after his $55 million deal to buy the site fell through. It’s no secret why anyone would want this coveted piece of real estate, a hill that rises steeply off Franklin Ave and overlooks the city. But what caused the family’s deal to go so sour?

    Let’s refresh. Three years ago, news broke that the family was taking bids for the site. Any sale stipulated the Yamashiro restaurant, and Magic Castle, leased by the Academy of Magical Arts since 1963, must remain operating, which meant there were only a handful of places a developer could build on the hill. Still, dozens of developers submitted offers, including MacPherson, the New York and LA-based wizard behind numerous boutique hotels and hip bars (Maritime Hotel, Jones, Bar Lubitsch, among others). Looking to restore some of the properties and perhaps add a hotel near Yamashiro, MacPherson signed a purchase agreement in summer 2008. Six months later, when the deal didn’t close, he filed a lawsuit against the family.

    “I’ve never sued someone,” says MacPherson in a recent phone call. “I’ve never sued someone in my whole life.” What MacPherson wants, he says, is to finish the deal. His lawsuit says as much–MacPherson sued for specific performance, which means he’s asking a judge to force the sale.

    But observers are wondering why MacPherson wants to pay a 2007 price in 2010, questioning whether his lawsuit is a strategy to renegotiate the original deal, or recoup his deposits. One source quotes a 2005 valuation that put the 10-acre site at $15 million. “No real estate developer would pay $55 million today,” while also agreeing that MacPerson is a “guy who sees his deals through.”

    As for the sellers, it’s been a grueling year for some of the 14 family members, who are not only dealing with MacPherson’s case, but with two unrelated lawsuits, including one by CIM Group against the Magic Castle and the city.

    The land has been in their family since 1948, when Thomas O. Glover purchased the hilltop and set about restoring Yamashiro, a replica of a Japanese palace. Later, the Edwardian-style Magic Castle would be acquired. Andy Ulloa, Glover’s grand stepson, now run operations at Yamashiro, and in a recent phone call, was asked what he wanted for the hill. “My hope for the site is that the current ownership can build it to its fullest potential,” he says. “We don’t think that Sean can close on the sale.”

    “We’re prepared to close with all cash and finance independently,” MacPherson replies, pointing out he did a similar deal with the Maritime Hotel in NYC, a reported $33 million project. He also sounds exasperated to hear Ulloa’s comment. “If they think that, why don’t they just show up with the title to the place and close? There’s not been a single letter from them, saying ‘Show up with the cash and you can have the site.’”

    According to sources and court documents, the deal fell apart for likely two different reasons: Either MacPherson, facing the financial markets of late 2008, couldn’t get the money together to close, or Thomas Y. Glover, son of the original Glover, changed his mind, and pulled out of the deal. The truth may contain elements of both scenarios.

    But if the family has at times had conflicting agendas for the land over the years–perhaps not surprising given the complexities involved in running a family business– MacPherson’s suit revealed the divisions. In legal papers filed last summer, eight family members in a group called the Magic Majority–and who are represented by their own attorney–say they have no idea why the deal didn’t close. Stating they want the purchase agreement to go through, they accuse Glover and Andy of thwarting efforts to close the deal.

    West Flanagan, one of the Magic Majority, has been flying back and forth to LA from her home in Vermont, staying at the Magic Castle Hotel while she deals with the legal issues. “We’re just trying to get to a point where everything is stable again,” says Flanagan.

    As for the neighbors? Not everyone is displeased litigation has halted any development of the hill. Malcolm McNeil, a local resident and former head of the Hollywood Heights Association, remembers when developers were bidding on the land back in 2007. One proposal put a 20-story condo tower on the Franklin Ave parking lot used by the Magic Castle, likely the most developable parcel of the site. A lawyer himself, he takes a long view of the legal action underway. “In high-stakes real estate deals such as these, parties bring litigation to gain an advantage,” he says. “Financial or otherwise.”

    Visiting the Hollywood site, you wouldn’t get a sense of the legal turmoil. At dusk on a recent Thursday night, couples wandered along the food and flower tents at the newly launched Farmers Market near Yamashiro, while down the hill, the magicians were performing one of their nightly shows at the Magic Castle, where decorum still insists that gentlemen visitors wear coat and tie to dinner. (In yet another lawsuit, Ulloa and Glover are battling the magicians aka the Academy of Magical Arts, a fight stemming from the Academy’s decision not to renew their lease with the pair’s food and beverage service.)

    A resolution in MacPheron’s case should come soon. An arbitrator–a term for a retired judge—will hear the case in about six months, according to Farid Novian, MacPherson’s attorney. More recently, the sellers seem united in their agreement to arbitrate, a process Glover had initially fought. But if MacPherson loses his case, what would happen to the site? Flanagan says she can’t comment on what might eventually happen to the land, and points to all the lawsuits. “As you can see,” she says. “Everything is very unsettled.”

    · Yamashiro: History [Official]
    · Magic Castle: History [Official Site]
    · Site of Hollywood gems eyed for development (LA Times reporter Roger Vincent’s 2007 story, written when the family announced they were selling) [LA Times]

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