For most of the past decade, Barry Beitler and Jeff Katofsky were business partners and inseparable friends, eating dinner together almost nightly as they assembled a Westwood Village real estate portfolio second only to billionaire John Anderson's.
Those days are now a memory. The pair's interlocking partnerships and their friendship have unraveled. In lawsuits, each accuses the other of misdeeds.
Beitler says that Katofsky defrauded him and other investors by withholding their portion of leases and property sales and that Katofsky refuses to give him and other investors access to the books.
Katofsky filed suit to dissolve the partnerships, and he accuses Beitler of withholding salary and other compensation. Katofsky hasn't responded to Beitler's complaints, but he denied the accusations.
"We were best of friends," Katofsky said in an interview. But, he added, "We have a different opinion as to how business should be done and it's irreconcilable."
Katofsky, a lawyer who worked for Beitler's real estate firm before becoming his partner, won't discuss Beitler's claims in detail until he responds in court. Meanwhile, the partners have begun selling the 20 or so properties owned through the various partnerships that included Beitler.
That includes three retail buildings in Westwood Village and an office building on Santa Monica Boulevard. "There's a couple more in escrow," he said. "We have an obligation to our investors to do the right thing and that means having the buildings sold."
Dismantling the rest of the empire may not be easy. Most of the properties are cross-owned by a web of partnerships with names like Bark Like a Dog LLC, Show Me the Money LLC, To Be or Not to Be LLC and Squat Like a Hen LLC. Each entity will get a cut of the proceeds proportional to its ownership of the property, Katofsky said.
Beitler declined to be interviewed. He referred questions to his attorney, Richard I. Arshonsky, who reiterated the fraud accusations made in the lawsuits. "I don't know what is at the core of this argument as far as Jeff is concerned," he said. "But we want to see what has been happening in these LLCs and properties."
The dispute appears to have reached a boiling point just as the partners pursued their most ambitious plan: a mixed-use development at the corner of Le Conte and Broxton avenues that was to have included a Manns theater, a Trader Joe's grocery store and medical offices.
The two formed Atlantis Development Group nearly three years ago and hired a project manager, a team of consultants and Behr-Brower Architects to design the project.
During meetings at Jerry's Deli, where residents were served breakfast and coffee, architects and traffic engineers would discuss the project and make changes based on community comments. "I've never seen anything like it," said Sandy Brown, president of the Holmby-Westwood Property Owners Association. "They spared no expense at making sure we were involved from the outset."
But as the project won approval from the Westwood Design Review Board in December 2004, cracks began forming in the partnership.
Only Katofsky's name appeared as the applicant in the city approval process, indicating he was solely in charge. And Brown noticed that Beitler and Katofsky were never in the same meeting and appeared to handle separate functions.
Howard Katz, a senior vice president at Casden Co. who is building a large mixed-use project in Westwood Village, said getting city approvals can be easy compared to keeping all the factions in a partnership content. "Jeff seems to be a good guy and Beitler seems to be a good guy," Katz said. "But I'm not surprised they ended up in lawsuits because both have such strong personalities."
After the project was given Design Review Board approval, everything ground to a halt. Soon afterward the group fired its project manager, and the feud between Beitler and Katofsky began reaching a boiling point. The project has been stalled ever since.
Before the partnerships, acquisitions and development plans, Beitler was a commercial real estate broker who founded his own brokerage, Beitler Commercial Realty Services. By the 1980s, Beitler Commercial had become a dominant force on the Westside and in other markets, with its signs in windows of buildings along entire blocks.
The firm's influence began fading in the shadow of national firms such as CB Richard Ellis Group Inc. and Grubb & Ellis Co. By the early 1990s, Beitler began putting together his own real estate deals.
He also had gained a reputation for litigation and made a few enemies in the process. Matthew May, president of May Realty Advisors, once worked at Beitler Commercial Realty and he says he left because he said Beitler broke agreements. "Other people left because Barry didn't honor his commitments to them," said May, one of the only former Beitler associates who would comment for this story. "I left because he didn't honor his commitments with me."
Beitler denies May's allegations. "He left on his own account," he said.
Around the time Beitler began switching to investments, he met Katofsky, a Century City lawyer who had represented Beitler. The two hit it off. Though they attended different colleges, both had belonged to the same fraternity Delta Sigma Phi. They were both rabid baseball and basketball fans and went to games together. By Katofsky's estimate, they were having lunch or dinner together five days a week. "We had a lot in common," he said.
By the late 1990s, Beitler hired Katofsky as in-house counsel for Beitler Commercial Realty and began including him in his investment deals, which proved to be very lucrative. The two would collaborate on what to call their various partnerships. In real estate, it's typically the address of the building, but theirs came from their home and social lives. "You've got to be creative somehow," Katofsky said. "Most of the names have a baseball background or have to do with our kids, but you wouldn't know it because they're in code."
Community activists began to notice a pattern in the partners' business practices.
Beitler and Katofsky paid what appeared to be above-market prices for properties, then would raise the rent sharply or find new tenants who could afford the increase, according to Brown and others familiar with the transactions.
Still, several tenants contacted said Beitler and Katofsky had treated them fairly. One tenant, Leo Prats, hasn't paid rent for more than a year while he works through city approvals for a Cuban bistro he wants to open on Weyburn Avenue, a former Hamburger Hamlet location. "Some other landlord would have pulled the plug on us long ago," Prats said. "Who wants a building vacant for this long?"
Neither partner will say exactly how the feud started.
In 2003, Katofsky left as in-house council at Beitler Commercial Realty and started his own firm, JD Market Acquisitions, in the top floor of the building leased to Prats.
For the last two years, Katofsky and Beitler said they have been trying to settle the dispute out of court, hoping to avoid involving other investors. "It takes two to tango and I was the only one dancing," Katofsky said. "I waited a long time before filing suit but it had been going on for two years and it needed to be resolved."
Beitler said neither partner want to entangle investors in their legal disputes, and no investors have been named in the lawsuits.
Katofsky said he hasn't spoken to Beitler in months and he's moved his firm into a small Sherman Oaks office. Instead of going back to law, Katofsky continues to focus on real estate. So far this year, his company has closed about 18 deals not connected to Beitler.
Katofsky won't say whether he wants to revive the Westwood project. "That's one that Barry's suing me on," he said.
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