67.1 F
Los Angeles
Friday, Sep 30, 2022

Partners Develop Only Bad Blood

The site of West Hollywood’s Movietown Plaza project, one of Los Angeles County’s highest-profile developments, has been listed for sale – a result of a dispute between its partners.

Entitled for 371 residences and ground-floor retail, the project is the brainchild of billionaire developer Alan Casden. But his estranged financial partner, an affiliate of New York private-equity firm Cerberus Capital Management, has wrested away control of Movietown and five other local properties.

Now, Cerberus, which generally isn’t in the business of developing properties by itself, has decided to put Movietown and two other properties up for sale, and is weighing what to do with the others.

The firm has contacted West Hollywood and four other area cities, where officials confirmed they had talked with Cerberus as recently as last week to discuss the future of the properties.

“The purpose of the call was to let us know they’re in charge now,” said Jeffrey Lambert, community development director in Ventura, where the partnership, Casden Properties LLC, has proposed a project. “They were doing research to figure out what their next step would be.”

The takeover happened in June, sources told the Business Journal, when Cerberus affiliate Blackacre replaced Casden as managing member of the partnership by exercising a contract clause giving it that right.

Movietown is the big prize of the six undeveloped properties. It was in line to be the next major project for a team that built Westwood’s mixed-use Palazzo complex, which at 350 residential units and 50,000 square feet of retail is of a similar scale.

Cerberus has now hired outside hands, including downtown L.A. development services firm Keller CMS LLC, to manage and evaluate the properties. A Keller consultant confirmed he was working with Cerberus on the properties, but declined to comment further.

Still, Casden isn’t out of the picture. Earlier this year, the Beverly Hills resident was able to buy the Palazzo from the partnership, and now he’s pushing to buy the Movietown site and one other property occupied by a Ross Dress for Less store in Los Angeles, sources said. But with bad blood between the partners, Cerberus has put the West Hollywood property on the market to find other potential buyers.

“Every opportunity Cerberus has not to deal with Alan, that’s their preference,” one source close to the matter said.

Representatives for Casden and Cerberus declined to comment for this story.

Breaking up

The dispute has its origins in the credit crunch and recession that followed the financial crisis. The partnership, which was formed in 2002, had expected to be well on its way with several developments, but has only been able to break ground on the Palazzo, which was completed in 2008.

In addition to Movietown, and the Ross and Ventura sites, there are undeveloped projects in Santa Clarita, Simi Valley and Oxnard. Complicating matters is a pending foreclosure lawsuit that lenders have filed on five of the properties due to alleged loan defaults.

Its under these tense circumstances that the partners are dissolving the partnership, in which Cerberus affiliate Blackacre has the largest stake at 60 percent. Stakes of 20 percent are held by Casden and Apartment Investment Management Co. (Aimco), a publicly traded company based in Denver.

Aimco already has written off $37 million of its original $50 million investment, and has filed a lawsuit that seeks to compel Casden to open the company’s books. An Aimco spokeswoman declined to comment, citing ongoing litigation.

So far, in addition to Movietown, properties entitled for residential development in Simi Valley and Oxnard have been put on the market. Those will likely be sold to third parties to help pay off the outstanding bank loans, sources said.

As for Movietown, its attraction for Casden is understandable. It’s the biggest of the partnership’s entitled developments and was the closest to breaking ground. It fits into what he does best as a developer: Like his prized Palazzo, it’s an upscale, mixed-use development in a high-traffic area. Analysts have said the Movietown condo and apartment project would be worth hundreds of millions of dollars upon completion.

Casden also had designs on the Ross site since the partnership bought it in 2002. With the Grove just across the street, it has become a prime location. Over the years, he has put forward several proposals, only to run into community opposition. The most recent proposal outlined a 300-apartment complex, with 150 of those units for senior rental.

More headaches

The winding down of the partnership has caused other headaches as well.

As part of the dissolution, about 25 Casden Properties employees were laid off in June, sources said.

Since then, 23 wage claims have been filed against the partnership totaling more than $480,000, most of it stemming from allegedly unpaid vacation accrual, according to public records.

The fallout has hurt Casden’s public stature as well. Last month, Forbes magazine dropped his estimated net worth by $700 million to $1.2 billion, citing the breakup and loan defaults, which were both first reported by the Business Journal.

Still, he may be down but not out. He completed the 276-unit Empire Landing complex in Burbank last year outside the partnership. And he managed to buy out the other partners on the Palazzo, which a source said was valued at $280 million at the time of the buyout.

Despite all the headaches, Casden appears not to have had much trouble finding a new money partner. The Canada Pension Plan Investment Board closed a deal in June to buy a 49 percent stake in the Palazzo.

“We are hoping to continue to form partnerships with Mr. Casden and his company, but that would be contingent on what opportunities arose,” said pension plan spokeswoman Linda Sims.


Featured Articles


Related Articles