After failed The One auction, lenders argue over who gets paid

0

When the megamansion known as The One sold at auction in March for less than half its $295 million list price, it wasn’t just a deal for the buyer: it paved the way to what turns out to be a nasty fight between creditors.

The $141 million sale of the 105,000 square foot property to LA fashion mogul Richard Saghian meant that some of the bankrupt Bel-Air project’s main lenders could be strapped for cash, given the claims against the estate totaling over $250 million. Now, one lender has filed a lawsuit alleging unfair business practices against another and alleging falsification of a document, making it the second line to repay.

The lawsuit was filed last month in US bankruptcy court by the investment firm of Julien Remillard, a former longtime associate of developer Nile Niami. The house’s bankrupt limited liability company, Crestlloyd, had sought court approval to pay nearly $104 million of the $138 million the estate received from the auction to another lender, the Los Angeles billionaire Don Hankey.

Hankey Capital is by far the largest creditor to the estate, having made three loans totaling more than $100 million to Crestlloyd from 2018 when Niami was looking for cash to complete the opulent mansion. This is the reimbursement of the first and related interest and costs.

The estate has already paid priority claims such as taxes and with such a large payment for Hankey, there would be little left for other creditors, including Remillard’s Inferno Investment, which claims it owes him $20.9 million. of dollars. Inferno says it and related entities loaned approximately $18 million to acquire the property on Airole Way in 2013 and begin construction on what would then be a 40,000 square foot home.

Although Inferno loaned out before Hankey Capital, the lawsuit acknowledges that Inferno signed an agreement in 2016 allowing Crestlloyd to repay subsequent loans needed to complete the mansion even before Inferno was repaid for its own investment.

However, that 2016 deal also required Crestlloyd to obtain approval from Rémillard, the scion of a wealthy Quebec family, for specific loans that would outweigh Inferno’s debt, according to the lawsuit. He alleges that never happened. Instead, the lawsuit claims Remillard’s signature was forged on an October 2018 subordination agreement allowing Hankey to be paid first.

Inferno asks a bankruptcy court judge in his lawsuit to move him to the front of the line for repayment among the estate’s major secured creditors.

The lawsuit does not allege who conducted the forgery, but says that Niami’s longtime notary falsely notarized that Niami and Remillard signed the document in his presence in Los Angeles when Remillard was actually in Montreal that day- the. The notary did not respond to calls for comment.

The lawsuit also accuses Hankey Capital of unfair business practices, including charging an exorbitant default interest rate. Inferno did not object to payment of $82.5 million in principal on the disputed payment of $104 million to stop the accrual of interest, although it reserves the right to recover all from Hankey. .

The lawsuit further seeks to have the 2016 deal declared null and void as it alleges that Crestlloyd inflated the bills of contractors and suppliers working on The One and that funds were diverted to Niami and his estranged wife, Yvonne, either for themselves or for other properties they were affiliated with.

He claims Hankey Capital failed to monitor its loans so it could do more that would end up in default, earning higher interest and putting itself in a position to foreclose on the property – which it did. last year, causing the bankruptcy filing.

The One’s auction did not raise enough money to repay all the lenders.

(Allen J. Schaben/Los Angeles Times)

Hamid Rafatjoo, Nile Niami’s lawyer, mocked the trial, which does not designate his client as the accused, as a simple ploy by the promoter’s former investor to cover his tracks. He said he was late in the game to assert that Hankey was not the first to be reimbursed given that the estate filed for bankruptcy in October.

“It has been described in a bankruptcy case since day one. And it is only after the sale closes and there is a disappointing sale price that these theories arise,” he said. “At the end of the day, you try to lift some dirt and see if there’s a settlement somewhere where you can get some money. My client did nothing wrong. He lost $30-40 million of his own money on this project. To say that signatures have been forged or that funds have been misappropriated is just a waste of time.

Yvonne Niami could not be reached for comment.

Hankey said he viewed the lawsuit as perhaps “just posturing to try and get something back.” He said he spoke to “a few people” at Inferno several years ago to work out the subordination agreement and “that’s not at all what they told me on an individual level.”

To pursue its case, Inferno hired prominent litigator Marty Singer, who said a private investigator investigated the transactions, leading to the trial. He defended his client’s decision to take legal action more than six months after The One was placed under bankruptcy protection.

He said Inferno hadn’t worried about the order of payments until the auction blew up in March, bringing in far less money than expected to repay creditors. It had also explicitly reserved the right to object to the distribution to Hankey.

“The anticipation was…they would be paid in full, so there would be no problem worrying about privilege priorities or anything like that,” he said.

David Golubchik, attorney for Crestlloyd, a defendant in the lawsuit, said the lawsuit halted any further payments to Hankey and would slow the liquidation of the bankrupt estate.

“We will deal with this through the legal process, with discovery and depositions and trials if necessary,” he said. “We found it strange to assert this position after many months in bankruptcy court.”

The auction of the marble-and-glass trophy property on a hill in Bel-Air was so disappointing that some creditors sought to have it canceled and resumed, noting that it was held for less than a year. week after Russia’s invasion of Ukraine, which sent markets into turmoil, potentially scaring off bidders. There were only five bidders who participated in the auction.

However, US Bankruptcy Court Judge Deborah Saltzman declined to do so, noting that it was also possible the situation was worse. His judgment turned out to be prescient. As the war faded from the headlines, inflation heated up, causing the stock market to fall precipitously and the housing market to cool, as the Federal Reserve raised interest rates in response.

Meanwhile, Saghian, the owner of fast fashion retailer Fashion Nova, has been working with city officials as he seeks to finish the home, resolve zoning issues and obtain a certificate of occupancy, has said a spokesperson.

The One is the largest new home in Los Angeles and possibly the country. It contains 21 bedrooms and 42 full bathrooms. There’s a 4,000-square-foot guesthouse, servants’ quarters, moat and multiple pools, wellness spa, beauty salon, four-lane bowling alley and multiplex cinema, among a list much longer with luxury amenities.

Byron Moldo, a Beverly Hills commercial bankruptcy attorney not involved in the case, said he expects the lawsuit to delay The One’s bankruptcy resolution by at least six months – while increasing attorney’s fees and creating pressure for the parties to reach a settlement, which might be the idea.

“I think there are going to be voluminous documents to review. I can see the need for a writing expert,” he said. “It’s going to get very, very expensive.”

Share.

Comments are closed.