The biggest office sale of the year in Los Angeles County has been delayed by the rancorous bankruptcy of businessman Ezri Namvar and his company, Namco Capital Group Inc.
Wilshire Bundy Plaza, a 307,000-square-foot West L.A. building, was slated to be purchased by Douglas Emmett Inc. for $111 million. But on May 12 a U.S. Bankruptcy Court judge denied the bankruptcy trustees’ request for approval.
It’s still possible that the Santa Monica real estate investment trust will end up with the 14-story, Class A property, but a bench trial may be required to resolve the matter.
Douglas Emmett beat out Cornerstone Real Estate Advisers LLC at a May 11 auction conducted by the Chapter 11 bankruptcy trustees. It would be the largest office sale in the county since MPG Office Trust Inc. sold its Lantana campus last year for about $200 million.
The 12121 Wilshire Blvd. building and its underlying one-acre lot are owned by 15 limited liability companies through a complex structure. Namvar has a majority interest in the property and his four brothers are also owners through various entities.
The sale has been strongly opposed by creditors of Namco and Namvar, 58, whose investment business collapsed in 2008 amid the economic downturn – wiping out investments he personally solicited from hundreds of Persian Jews in the Beverly Hills area. He was accused of operating a Ponzi scheme once his ventures soured and has been under federal investigation.
Namvar and Namco owe at least $866 million to 464 creditors, according to court filings and other documents from early last year, though both figures could be lower once formal tallies are released.
The creditors, several hundred of whom have organized into a group, believe the building should not be sold now because it will be worth significantly more once the economy recovers.
But it was the legal opposition to the deal by Namvar’s brothers that led Judge Barry Russell to block the sale, the proceeds of which would be used to pay creditors. The brothers expect some money from the sale as well.
One brother, Mousa Namvar, opposed the sale on similar grounds as the creditors.
“Mousa believes that the property should be held awaiting a turnaround in the real estate market,” said his attorney Brian L. Davidoff.
Three other brothers – Sean, Tony and Ramin Namvar – opposed the sale because they did not believe they had enough data to determine whether the price was fair.
“We don’t have the background of all the information,” said their attorney Christopher Reeder.
The parties are scheduled to hold a June 9 conference on the matter. If the issue is not resolved, a bench trial could be set for the fall, Reeder said.
Although smaller than the sale of Lantana, which is a collection of several low-rise buildings at Olympic and Exposition boulevards, the Wilshire Bundy deal has been closely followed by real estate professionals because of its pedigree. The building is a high-rise office tower spanning a block in the heart of West Los Angeles, and few properties of its stature have traded since the recession began.
“I’m very hopeful it gets resolved,” said Bob Safai of Madison Partners, who represents the Namvar and Namco bankruptcy estates in the sale. “I think the price is a great price for the market we are in.”
Wilshire Bundy is considered the crown jewel of the Namvar portfolio, which once included hundreds of properties. The portfolio was valued by Namvar as high as $2.43 billion in 2008.
Namvar purchased the building, which was on a ground lease at the time, from Lowe Enterprises Inc. for $75 million in 2003. He and at least one brother later purchased the underlying land for $11 million. There may be other investors in the land, but the ownership structure is unclear.
The building formerly housed the headquarters of Namco and Security Pacific Bank, which the businessman operated until it was declared insolvent and closed by regulators in 2008.
The dispute over the sale centers on the value of the building, which is 84 percent occupied. Among its tenants is National Bank of California, which signed a 10-year lease for the top floor in October. Real estate sources declined to estimate its worth citing the unprecedented flux in real estate values.
Namvar purchased the building and land for $280 per square foot; Douglas Emmett’s purchase works out to $362 per square foot. But during the real estate boom, premium properties were sold for more than $500 a foot.
In bankruptcy court filings opposing the sale, the creditors indicated that based on offers made for the property in 2007, the building could be worth as much as $180 million. About 200 creditors filed individual declarations opposing the sale.
Namvar bankruptcy trustee R. Todd Neilson said he believes the building should be sold now and he plans to advocate that position during ongoing talks with the brothers and their attorneys.
“Many creditors believe you shouldn’t sell this now because the value is going to go up in the future. My position is: Nobody can tell what is going to go on in the future,” he said.
George Haroonian, a leader of the group of several hundred creditors, said the attempt to stop the deal is part of a wider effort to remove Namvar and Namco from bankruptcy court and instead have repayments handled under a more informal plan controlled by the creditors.
“Instead of fire-selling the properties, so that it ends up a few cents on the dollar, we feel our traditional way of resolving community disputes would work here,” Haroonian said.
Namvar did not return e-mails seeking comment; Douglas Emmett did not return calls seeking comment.