It’s been two years since Richard Meruelo’s Meruelo Maddux Property Inc. – the largest landlord in downtown Los Angeles – filed Chapter 11. Yet there’s no exit in sight from bankruptcy as a bitter fight has unfolded over whether Meruelo and his lieutenant John Maddux should retain control of the company.
Meruelo’s bankruptcy exit plan – which calls for the current ownership to remain intact – would repay creditors through the sale of properties and/or the refinancing of debts. But the plan has been stalled as he has been battling with a group of minority shareholders who have put forth their own exit plan that calls for his ouster and that of Maddux.
The minority shareholders – New York investment firms Charlestown Capital Advisors LLC and Hartland Asset Management – own about 2 percent of Meruelo Maddux shares. Their plan would put $38 million into Meruelo Maddux, including $17 million to purchase 55 percent of the company’s shares and a $15 million loan to the company.
According to Christopher Prince, partner with Santa Monica-based Lesnick Prince LLP, which represents Charlestown and Hartland, the plan would have the court name two interim executives to run Meruelo Maddux as it exited bankruptcy; then the board would select new leadership.
Charlestown and Hartland contend in court filings that Meruelo has engaged in misconduct that makes him unfit to lead the company.
Among the allegations in the court filings is the contention that Meruelo used the company’s financial resources for his personal gain through “self-dealing transactions.” These transactions included the issue of a $1.9 million cashier’s check – ostensibly to demonstrate the company had enough funds to purchase a note but allegedly in violation of the company’s internal control policy. Also flagged was a $100,000 wire for a Florida foreclosure auction that the shareholders allege was for the purchase of property for Meruelo’s personal use.
Charlestown and Hartland contend that Meruelo’s bankruptcy team has resisted requests to produce documents related to these and other transactions.
Meruelo’s attorneys, in subsequent court documents, argue that these transactions were for “legitimate business purposes,” that relevant documents related to these transactions have been produced and that the minority shareholders have tried to bury Meruelo Maddux in document requests as part of a “war of attrition.”
U.S. Bankruptcy Court Judge Victoria Kaufman has presided over an evidentiary hearing for the exit plans. As of last week, the court was still taking evidence for the Meruelo Maddux exit plan and had yet to hear the Charlestown/Hartland plan. As the case is being squeezed in amongst several other cases, the hearing is expected to last several more weeks, if not months.
This grinding progress caught some by surprise, since a settlement was reached in January with a major creditor group, which had put forth its own exit plan that called for Meruelo’s ouster.
Game Show Deal
Game Show Network, which has a lineup that includes “Wheel of Fortune,” “Jeopardy” and “Deal or No Deal,” has renewed its lease for seven-and-a-half years at the Arboretum Courtyard complex in Santa Monica.
While financial terms of the lease were not disclosed, brokers familiar with the Santa Monica media office market pegged it at between $13 million and $16 million.
Game Show Network first signed at the 144,000-square-foot Arboretum complex at 2150 Colorado Blvd. in 2002 as a sublease tenant from IBM. Then it renewed on its own in 2006 for 45,000 square feet with building owner Equity Office Properties.
According to Brian Davies, principal with Cresa Partners, which represented Game Show Network, the television and online gaming company decided to renew its lease slightly early last December to take advantage of relatively cheap rents in the current market. The company scouted other Westside locations but decided to stay put.
Game Show Network also expanded its space to 48,500 feet to position itself for future growth, Davies said. Dave Toomey, another Cresa principal, also worked on the deal.
Scott Rigsby and Jim Jacobsen of Industry Partners represented Equity Office Properties.
Howard Fine can be reached at email@example.com or at (323) 549-5225, ext. 227.
For reprint and licensing requests for this article, CLICK HERE.
Stories You May Also Be Interested In
- Is Big Downtown Property Player on the Way Out?
- Kingpin Booted From Downtown
- Downtown L.A. Heavyweight to Lighten Its Load
- New Meruelo Maddux CEO Appointed as Reorganization Takes Effect
- Investor Courts Creditor Clash
- L.A. Investor Likes Sound of Koreatown Quartet
- Deal Removes Challenger to Meruelo Maddux's Exit Plan
- Meruelo Maddux Project Files Chapter 11