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Saturday, Jan 28, 2023

Court Hits Pause on Judgment Stripping Real Estate Developer of Nine Properties

An appellate court agreed Tuesday to temporarily halt a trial court’s order stripping control of nine multifamily buildings from Santa Monica developer Neil Shekhter and his NMS Properties Inc. until the judicial panel examines the case more closely.

Issued by the 2nd District Court of Appeal, the stay puts a hold on L.A. Superior Court Judge Suzanne Bruguera’s November ruling, which found Shekhter committed fraud and perjury in a lawsuit over a real estate joint venture with AEW Capital Management, which went sour. The ruling and several follow-up orders essentially handed control of the joint portfolio to AEW, which sold the properties to a subsidiary of San Francisco’s SPI Holdings in November for more than $420 million.

Schekhter’s lawyer, Louis “Skip” Miller of Century City’s Miller Barondess, said the stay of that order was welcome news.

“We’re very pleased,” Miller said. “We don’t think the trial court order is valid and we’re glad the court of appeal put a stay on it.”

But it could be too little too late for Shekhter, who is trying desperately to keep control of the nine multifamily rental properties he claims are worth more than $500 million.

AEW’s lawyer, Century City-based James Fogelman of Gibson Dunn & Crutcher, said in a statement that the appellate court order would fail to prevent the sale and that the lower court’s ruling would ultimately be confirmed.

“The temporary stay issued by the Court of Appeal is not a reflection on the judgment entered by the trial court against NMS,” Fogelman said. “It will have no impact either on the sale of the properties last month or on NMS’ appeal from the judgment entered against it. AEW is confident the judgment will be affirmed.”

The battle for the properties, which include the Luxe apartment developments in West Hollywood, Santa Monica, and Culver City, is also being waged in a separate lawsuit filed by NMS on Dec. 1. In that case, NMS claims AEW illegally sold the properties to SPI Holdings. Golden State Warriors minority owner Dennis Wong, who allegedly controls SPI and subsidiary Verbena Road Holdings, is also named in the suit.

The complaint alleges that SPI’s agents planned an elaborate takeover scheme to coincide with Bruguera’s ruling and oust NMS’ property management agents from their offices at the nine apartment complexes.

At a hearing Wednesday, Miller said L.A. Superior Court Judge Gerald Rosenberg ordered the parties to meet and work out a plan for who would manage the properties by January or he would consider appointing a neutral party while the ownership interest was determined.

Lawyers for SPI did not immediately return requests for comment.

Deals & Dealmakers reporter Henry Meier can be reached at hmeier@labusinessjournal.com. Follow him on Twitter @henry_meier.


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