With its proximity to downtown, Hollywood and the Miracle Mile as well as easy access to transit hubs, Koreatown has become one of the most sought-after neighborhoods for real estate investment.

Investors from near and far have bankrolled a flood of development – from hotels to apartments to retail – which has been transforming one of the city’s most densely populated neighborhoods. But as three out-of-town doctors found, it takes more than a hot market to guarantee profitability.

Each plunked down $500,000 for a 7 percent stake in Arapahoe Plaza, a six-story mixed-use development near Olympic Boulevard east of Vermont Avenue, back in 2005. After a series of delays, the 45-unit condo project finally opened in 2010. But instead of taking 21 percent of Arapahoe Plaza’s net profits as planned, the three say they are out a total of $900,000, a loss they say is due to fraud.

Their dispute with Yong Won Kim, an L.A. doctor who put together the investors and acted as the project’s developer, points out some of the pitfalls that can face investors who venture far from their areas of expertise – and their home markets.

“From the outside, being in the real estate world, it looks easy. But when you’re actually in the real estate world, it’s very difficult,” said Edgar Khalatian, a partner at the downtown L.A. office of law firm Mayer Brown. He regularly represents real estate developers and investors but was not involved in the Arapahoe Plaza development. “Everybody thinks real estate is a no-brainer and sometimes people get lucky, but I can point to many who have lost everything.”

Khalatian said he advises all clients to ensure they establish a solid relationship before even considering to invest in a project.

“If my uncle was a doctor and said there was a great opportunity to invest in Seattle, my first question would be: Do you know them?” he said. “There needs to be regular involvement; you can’t be a passive investor in an out-of-state project.”

Early troubles

Arapahoe Plaza was originally praised for its plans to breathe life into a deteriorating part of the neighborhood, but at the outset it was beset by problems.

The condo development started in 2005 when Kim, a California-licensed medical doctor, teamed up with dentist Rodney Beckett and orthopedic surgeon Francis Paul DeGenova, both from Ohio, and Reffak Abofreka, a former OB/GYN doctor in Virginia.

None of the investors returned messages seeking comment on the deal.

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