Casden Property Battle Hits Home

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Billionaire developer Alan Casden, who earlier this year made headlines with a surprising bid for the Los Angeles Dodgers, is once again struggling to maintain ownership of properties in his portfolio.

And this time the fight is close to home.

Lenders this month filed foreclosure papers on three of his Beverly Hills office properties, including his headquarters at Wilshire Boulevard and Doheny Drive.

Wachovia Bank Commercial Mortgage Trust alleges Casden has been in default on more than $63 million in loans, interest and fees on properties at 8942, 9150 and 9090 Wilshire Blvd., the last of which is the headquarters of Casden’s companies.

Casden issued a statement through a spokeswoman that maintained the foreclosure filing stems from a disagreement over payments on the debt.

“Casden Properties is in a dispute with the lender and has submitted a restructuring proposal. It is awaiting a response,” the statement read.

The filing comes amid Casden’s prolonged and nasty breakup with New York private-equity firm Cerberus Capital Management LP. Cerberus was his partner on seven developments in Los Angeles and Ventura counties acquired during the real estate boom.

After the partnership failed to develop all but one of the properties, they fell into foreclosure and Cerberus seized several of them from Casden last year.

Also, the Business Journal has learned that his high-profile West Hollywood Movietown property, which was wrested away by Cerberus, is about to be sold to a third party in a final blow for Casden’s development plans there.

However, the 66-year-old developer has had some successes. Last June, he was able to hold on to the 350-unit Westwood Palazzo, which he opened in 2008. He bought it from the partnership with Cerberus for roughly $280 million, according to a source. Casden also was also able to find a new money partner in the Canada Pension Plan Investment Board, which bought a 49 percent stake in the Westwood Palazzo.

Casden is now moving forward outside of the Cerberus partnership on a massive transit-oriented development in West Los Angeles along the Expo rail-line extension. A key environmental impact report was released this month.

New defaults

The three office properties under threat of foreclosure total more than 200,000 square feet of leasable space within a four-block stretch on Wilshire.

The 80,000-square-foot, three-story building at 8942 Wilshire was developed by Casden in 1986 and is across the street from the Academy of Motion Picture Arts and Sciences. It is home to entertainment tenants, including talent agency Safier Entertainment.

Also developed by Casden in 1990 is the building at 9090 Wilshire at Doheny Drive, which houses his offices on the third floor and medical tenants such as Tower Hematology Oncology Medical Group. The third building, at 9150 Wilshire and between Palm and Oakhurst drives, was acquired by Casden in the early 1990s and totals 85,000 square feet. It hosts entertainment company Brillstein Entertainment Partners, and several medical office tenants and law firms.

The Business Journal and other media previously reported that an affiliate of Cerberus took stakes in all of the properties, and from 2004 to 2006 the partners attempted several times to sell all three buildings as a package for $55 million to $60 million. But a sale was never completed and real estate records currently list Casden Properties LLC as the sole owner or operator of all three.

In June 2006, three Casden companies took out $47 million in loans secured by the properties, according to court documents. It’s unclear whether Casden drew down on the equity for other developments or to buy out Cerberus, which was not a signee on any of the loan documents.

Now, lenders allege that Casden’s companies missed payments on those loans last August and have not since cured the default. Casden has not yet responded to the foreclosure filing in court. Lenders are seeking to have the court appoint a receiver that would set a sale date for the properties.

In the meantime, it appears Casden will try to negotiate a restructuring of the loan. A source close to Casden told the Business Journal that the developer was angling for an adjustment on his payments.

“It’s a question of whether the financing and (rental) incomes match, and if they don’t, it’s just a business decision as to how he wants to deal with it,” the source said.

Losing the three office buildings would be a big blow, and would follow Casden’s loss of the Movietown property in West Hollywood to Cerberus.

Casden had received entitlements for 371 residential units and ground-floor retail on the property at 7302 Santa Monica Blvd. Early last year, his company indicated to officials in West Hollywood that it was on schedule to break ground that September. However, Cerberus didn’t sell it back to him, and the property was listed as “under contract” last week by Pittsburgh’s Holliday Fenoglio Fowler LP, which had previously listed it for sale.

The upscale apartment developer AvalonBay Communities Inc. of Washington, D.C., confirmed that it was moving to purchase the Movietown property.

“It’s in escrow. We’re just doing our due diligence now,” said Janice Pope in AvalonBay’s Newport Beach office.

AvalonBay owns several other properties in Los Angeles, including the 663-unit Avalon Woodland Hills complex in the San Fernando Valley and the 123-unit Avalon Wilshire on the Miracle Mile.

In January, Cerberus sold another of the partnership’s properties, the site of a Ross Dress for Less store across from the Grove mall where Casden had planned to develop 300 residential units. The Fairfax district property was sold back to Ross Stores Inc. of Pleasanton for $45 million.

The partnership’s other four undeveloped properties in Oxnard, Simi Valley, Ventura and Santa Clarita have foreclosure sale dates in June, but Cerberus has been trying to sell them or bring them out of default. A Cerberus spokesman declined to comment.

Moving onThe battle with Cerberus has taken a major toll on Casden. The Business Journal valued Casden’s net worth at $2.6 billion last spring, ranking him No. 12 on its Wealthiest Angelenos list. More recently, Forbes magazine dropped its own estimated net worth of Casden by $700 million to $1.2 billion, citing the breakup and loan defaults, which were first reported by the Business Journal.

However, Casden, who has developed or acquired some 90,000 residential units in his long career, continues to be an active and prominent businessman. He put together a bid to buy the Dodgers out of bankruptcy, but it was rejected by Major League Baseball and did not make the final six.

Earlier this month, the city of Los Angeles released a draft environmental impact report for his ambitious Casden Sepulveda project. The development, adjacent to a planned light-rail station at Pico and Sepulveda boulevards, calls for 538 residential units and 267,000 square feet of retail, including a Target store. That would make it one of his biggest projects. His Westwood Palazzo, by comparison, has 350 residential units and 50,000 square feet of retail.

City officials have not yet approved the Expo Line project, which is on the site of an existing cement plant. After a final environmental impact report is released, the next steps would be a public hearing and a decision on a proposed zone change by the Planning Commission, which could come before the end of the year.

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