By Amanda Frye & Mark Gutglueck
It appears the City of Redlands is moving to unbind itself from a relationship it entered into with Dr. Sharokh Shahabang six-and-a-half years ago which called for the conversion of the building he owns proximate to City Hall at 5 E. Citrus Avenue into a downtown venue for dining, brainstorming and innovation. That effort involved the city’s former redevelopment agency providing a family trust controlled by Shahabang with a $150,000 loan.
The project never progressed toward fruition and Shahabang did not perform as promised. He was continuously in arrears on loan payments. On repeated occasions, as the city was on the brink of calling in the loan, Shahabang, would come up with the funding to make a last-minute or post-due date redressing of the arrearage, get an extension and limp forward.
In a city document that accompanied the original participation agreement between the Shahabang-Hatami Family Trust and the city dated November 16, 2010, it is stated, “Dr. Shabahang proposes a multi-level 180-seat eating establishment featuring a 30-seat café on the ground level in addition to 150-seat dining area and lounge on the rooftop to encourage al fresco dining. The restaurant will offer guests locally grown artisan foods
in the California fusion style. The business concept promises to appeal to diverse and demographically desirable clientele. In addition to offering quality menu items in an appealing setting, the operators intend to feature a variety of entertainment such as live music, theatrical performances, and comedy or movie nights. Projects such as Dr. Shabahang’s are consistent with the [municipal redevelopment] program goals to attract quality sit-down restaurants in the downtown and create the critical mass necessary to stimulate economic activity.”
According to Heather Smith, who was then the redevelopment agency’s project manager, the project was expected to “net new sales tax generated to the city, net new tax increment generated to the redevelopment agency and meet the objectives of the new downtown specific plan.” She said “The proposal projects sales over $1 million in the first year alone, supplementing the city’s sales tax revenues.”
An understanding implicit in the participation agreement was that Shahabang would make improvements to the premises, including the demolition of three ceiling suites, relocating five existing air conditioning units, removing portions of the new roof and putting in a new two layer deck roof with new rolled roofing, installing a removable deck, and installing, at a cost of $50,000, a new kitchen. Shabahang committed to completing the project by August 25, 2011.
The participation agreement contained a provision that “The participant hereby agrees to execute a promissory note by which the participant shall agree to repay the agency the full amount of the agency loan, on or before September 1, 2031, the maturity date.”
The deal between the redevelopment agency and Shahabang, a dentist with a practice in the Victor Valley as well as within the confines of 5 E. Citrus, was carried out under the rubric of the participation agreement with the Shabahang-Hatami Family Trust rather than one of the other business entities with which Shahabang was affiliated, including Sekris Biomedical Corporation, as well as Blackhawk Alliance, LLC and Blackhawk’s parent company, Paramount Advantage, the latter two of which are Nevada Corporations.
Shahabang may have been reluctant to use Blackhawk Alliance and Paramount Advantage because Shahabang was a partner in both of those with Shahvand Aryana. Aryana had burned several bridges he once had with the City of Redlands. At one point, Aryana had disputed ownership of Pharaoh’s Theme and Water Park, and had put on a multitude of rave dance parties there which became a public safety concern for the city. Aryana had also, under the aegis of Blackhawk Alliance, occupied the city-owned Hangar 26 at Redlands Municipal Airport from November 2007 to April 2010. Throughout Aryana/Blackhawk’s entire occupancy of the hangar, the city had been stiffed of the $585 monthly rent. In 2010, when Blackhawk was served with the city’s suit to recover the back rent for the hangar, Shabahang had agreed to make good on the $11,700 his partner owed.
Shahabang’s lack of performance with regard to the 5 E. Citrus Street was apparent by the summer of 2011, when he missed the deadline for completing the project.
About a month prior to the scheduled August 25, 2011 completion of the project and seven weeks prior to the intended September 2011 opening of the restaurant, Shahabang in July 2011 told the city he wouldn’t meet that deadline. Shabahang requested the city extend that deadline until March 2012. Understanding city officials, anxious to see the project reach fruition, gave him that extension, conditional upon a requirement that the Shahabang-Hatami Family Trust would be required to repay the entire $150,000 loan if that timeline was not met. The Redlands City Council also imposed a requirement that he make monthly payments on the loan commencing in October 2011. But by March 2012, with the State of California having moved the previous year to close out all municipal redevelopment agencies, the City of Redlands resolved to pull the plug on Shabahang’s promised project. Shahabang idled thereafter, failing to make good on his March, April and May 2012 interest payments.
Before the city actually came in and foreclosed on the property, which was pledged as security for the loan, however, Shabahang made a further appeal to city officials. He said he had been unable to perform in no small measure because the restaurateur he had entrusted to get everything into place had been felled by health problems. In May 2012, the city council, over the objections of some city staff, extended the contract with Shabahang until December 2012 to meet the criteria in the agreement. Some city staff expressed their belief the time had come for the now-defunct redevelopment agency to map its way out of the deal, which was structured such that the repayment of the loan could be suspended until 2031 if all conditions stipulated in the original agreement were met.
Again, however, Shabahang came up short. Then, somewhat inexplicably, for the next four years, the city remained in a virtual state of suspended paralysis, even as the agreed upon rooftop restaurant failed to make its way into the world. At times, Shabahang made it sound as if he was yet committed to the project. He put out, for example, that the restaurant was intended as a place which would be a meeting place around which the other tenants he hoped to bring into the building would congregate. Shabahang said he was looking to attract biomedical industry innovators engaged in research and development to the 5 E. Citrus address’s suites. The promised restaurant would be a place where they could get together and brainstorm, he said. He indicated he had interested one of the owners of the Farm Artisan Restaurant, located a stone’s throw away on State Street, to come in and run the restaurant.
For three years, the city seemingly lacked the will to exercise its authority to end the relationship and take back the money that had been lost on the failed venture. Untoward suggestions about city officials having entered into side business deals with Shabahang abounded. Notably, one of Shabahang’s companies, Sekris Biomedical Corporation, employed the same lobbyist, Innovative Federal Strategies, LLC, which represents the City of Redlands.
Earlier this month, city staff and the city council appear to have summoned up the collective will to seize the day, and perhaps even seize 5 E. Citrus . On the April 18 city council agenda was an item for a closed session discussion by the council entitled “Conference with real property negotiators – Government Code §54956.8 Property: APN: 0171-121-04 (5 E. Citrus Ave.)” Identified as the agency negotiators on the item were city manager Nabar Martinez and city’s so-called director of quality of life issues, Chris Boatman. The item said they were to negotiate with the Shabahang-Hatami Family Trust. Under negotiation, according to the agenda, were to be “Terms of payment and price of participation agreement for commercial rehabilitation loan.”
While the proceedings of that meeting were not open to the public, the city subsequently, in bureaucratic language, reported that the city/successor to the city redevelopment agency is at last calling in the loan.
In the minutes for the April 18 meeting obtained this week by the Sentinel, the report of that closed session reads as follows; “Termination of Participation Agreement- Quality of life director Boatman presented the details of the request to terminate the participation agreement for the commercial rehabilitation program restaurant incentives loan between the redevelopment agency of the City of Redlands and Shabahang-Hatami Family Trust. On motion of Mrs. Gilbreath [i.e., councilwoman Pat Gilbreath], seconded by Mr. Tejeda [i.e. councilman Eddie Tejeda], the board of directors [i.e., the city council acting in the capacity of the successor agency boar to the redevelopment agency] unanimously agreed to terminate the participation agreement for the commercial rehabilitation program restaurant incentives loan between the Redevelopment Agency of the City of Redlands and Shabahang-Hatami Family Trust, declared the outstanding principal amount of the promissory note immediately due and payable; and directed staff to prepare a letter notifying the Shabahang-Hatami Family Trust of the termination and a collection notice for acceleration of loan repayment.”
By Amanda Frye & Mark Gutglueck