Auction of The One-LA’s biggest new mansion-delayed amid accusations of a power grab

Beverly Hills, CA - September 08: Court Judge Ted Lanes, who now controls the property and is responsible for finding a buyer and paying lenders and other creditors, gives a tour of The One, the 105,000-square-foot home on sale in Bel Air .  This is apparently the largest house for sale in the United States.  Developer Nial Niami & quot;  listed & quot;  it for $ 500 million, but got into financial trouble and was foreclosed on by Don Hankey.  Photo taken in Bel Air on Wednesday, September 8, 2021 in Beverly Hills, CA.  (Allen J. Schaben / Los Angeles Times)

A scheduled foreclosure for the Bel-Air mansion known as The One has been put on hold until later this month. (Allen J. Schaben / Los Angeles Times)

A planned foreclosure for the country’s largest modern home has been delayed after billionaire lender Don Hankey was accused of maneuvering to take control of the troubled Bel-Air project and leave other debtors out in the cold.

The One, a 105,000-square-foot unfinished mansion that was once marketed for $ 500 million, was set to be sold to the highest bidder on Wednesday. The auction was scheduled after developer Nile Niami’s joint stock company, Crestlloyd, defaulted on $ 106 million in debt to billionaire Don Hankey’s real estate lending arm.

But a Los Angeles Superior Court judge delayed the trustee’s sale until later this month after lender Joseph Englanoff claimed Hankey rejected an agreement to have the house completed and sold by real estate agents, and instead used the auction process to wrongfully take ownership of the mansion. or pig revenue if it is sold to a third party.

Englanoff, a Los Angeles doctor and real estate investor who lent $ 30.2 million to Crestlloyd in 2018 through his Yogi Securities Holdings, states in legal cases that he still owes $ 22 million.

He said in a statement that he had accepted Hankey’s proposal to appoint a recipient in July to complete the house so it could get a proof of occupancy and be sold through a traditional listing. The luxurious mansion at 944 Airole Way has several swimming pools, a beauty salon, a four-lane bowling alley, a multiplex-sized cinema, a rooftop green and other sumptuous facilities.

An 11-foot-tall contemporary sculpture sits on a rotating plinth.

An 11-foot-tall contemporary sculpture sits on a revolving pedestal in the foyer of The One. (Allen J. Schaben / Los Angeles Times)

However, he accused Hankey of pushing ahead with the auction for the billionaire’s own benefit, even after two realtors last month agreed to list the property for $ 225 million.

“While it is not expected that the sale of The One will generate $ 500 million, it is certainly believed to be able to generate at least $ 225 million,” Englanoff wrote in his statement. “With a potential sale price of $ 225 million, all secured debt would be paid and even [the developer] would net income. “

Hankey, 78, said in an email that he was trying to reach an agreement with Englanoff, and “we never reached an agreement.” He defended his decision to continue with the auction.

“The public sale represents a unique opportunity to own an iconic property in one of the most desirable locations in the world,” he wrote in the e-mail.

Don Hankey is photographed at the headquarters of his Hankey Group, the Westlake Financial Services office in Mid Wilshire.

Don Hankey, one of the largest lenders to The One, wants to continue a curatorial sale of the property. (Allen J. Schaben / Los Angeles Times)

In court papers, lawyers for Hankey Capital said the company’s actions were lawful, noting that there is nothing to prevent Yogi from bidding on the house itself.

Hankey lent an initial loan of $ 82.5 million to Crestlloyd in October 2018, but the showdown between the two lenders focuses mostly on two additional loans totaling $ 23.5 million that Hankey Capital made to Crestlloyd after Englanoffs Yogi had made its own loan of $ 30.2 million.

What kind of Brinks truck is going to pull up with a folder full of cashiers’ checks for over a hundred million dollars?

John Tedford, partner at Danning Gill

Englanoff said Hankey Capital’s two subsequent loans, one for $ 8.5 million and another for $ 15 million — as well as proceeds from a profit-sharing deal based on the sale price that Crestlloyd agreed to with Hankey — were not to be paid before his own loan. is satisfied.

Yogi also claims that the subsequent loans and an amendment to the original profit-sharing agreement invalidated the first priority position for the entire Hankey debt. In other words, should the house sell, Englanoff argues, Hankey should not see a penny until Englanoff’s own debt is repaid in full.

A view of a pool at The One.

Disputes between lenders resulted in a judge postponing an auction of The One. (Allen J. Schaben / Los Angeles Times)

The other major debtor is a unit called Inferno Investment, affiliated with Julien Remillard, a longtime friend of Niami, who lent Crestlloyd more than $ 10 million in 2015. It is the oldest outstanding loan that would typically give it seniority over all others. debt and let it be paid first out of sales revenue.

However, Hankey negotiated an agreement with Remillard to be the senior mortgagee in exchange for making his $ 82.5 million loan, which was needed to help complete the project. This deal puts Inferno next in line for the proceeds ahead of Englanoff’s Yogi. Other minor debts are attached to the property, as well as money to contractors.

Englanoff also claimed that Hankey, with all three loans and rising interest rates, would likely claim that his company owes more than $ 120 million on the trustee’s sale before any other lender is paid – about $ 38 million more than he has to pay.

The doctor said it would deter other bidders and could let Hankey own The One with a so-called credit bid, which is based on what he claims he owes and does not require a cash outlay. It would wipe out all the other lenders who would have their mortgage on the property cleared at foreclosure.

“Hankey would become the owner of the property and there would be no profit / surplus to pay plaintiff or any of the other younger lenders,” Englanoff said in the statement.

Hankey would then be able to do whatever he wants with the property, including continuing with a traditional sale that would possibly bring in more than $ 200 million.

John Tedford, a partner at Danning Gill in Los Angeles who worked for a client involved in a dispute with Hankey in another foreclosure case, said he did not think Englanoff would win with the argument that all of Hankey’s debt is subject to Yogi. However, he said the extra loans were another problem.

“The junior mortgagee probably has a good argument that their mortgage rights are high on the new stuff,” said Tedford, who is not involved in the dispute over The One.

Tedford said foreclosure sales typically leave little to nothing for junior mortgages, and one that may require a cash bid of $ 100 million or more can be particularly challenging to draw high bidders.

“What kind of Brinks truck would pull up with a suitcase full of cashiers’ checks for over a hundred million dollars?” he asked.

At the time of its ruling, Judge Mitchell Beckloff last week rejected a request for a temporary ban, but still delayed the sale until Oct. 27 to give the parties a chance to reach an agreement.

He also complied with Yogi’s request that Hankey Capital provide a statement showing how much is still due on the initial loan of $ 82.5 million, including interest and other fees. Englanoff has made an offer to pay off Hankey’s debt with that amount to complete the foreclosure process.

Tedford said if the trustee’s sale is delayed, Hankey could withdraw the foreclosure notice and continue with the $ 225 million listing. He could also at any time seek foreclosure again for a small amount.

The legal battle comes as referee-appointed receiver Ted Lanes continues efforts to sell the property. Last week, another judge approved an agreement with Kurt Rappaport of the Westside Estate Agency and Chris Adlam of Vista Sotheby’s International Realty to be joint listing agents.

The court-appointed recipient Ted Lanes steps across the floating lounge.

Court-appointed recipient Ted Lanes provides a tour of the floating lounge next to the private nightclub at The One. (Allen J. Schaben / Los Angeles Times)

Lanes said if Hankey continues to foreclose and take ownership of the property, he would have the opportunity to implement the listing agreement. Rappaport declined to comment. Adlam did not respond to requests for comment.

Lanes has also hired San Diego construction consulting firm Xpera Group to analyze whether the house was built to specifications by Niami after concerns were raised by Bel-Air homeowners about the quality of construction. Lanes said the company has already begun its analysis.

Niami declined to comment, but suggested in an earlier interview that he had trouble completing the house because the money lent to him was not paid out in time to pay contractors.

In the spring, after defaulting on his loan to Hankey, he proposed living in the house and turning it into an event venue with entertainment such as boxing matches and concerts. Hankey was not interested in the plan.

This story originally appeared in the Los Angeles Times.

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