Curious on thought's behind motivations for this massive move by a prominent LA developer / landlord. Looks to me like one of the most significant portfolio's put up for sale in Los Angeles in decades but what would I know I'm fresh out of college.
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I don't have an RD subscription so I couldn't read, and I also don't develop in LA so I'm probably not qualified to talk about this. With that caveat out of the way, my guess is he'd rather take the quick cash on fully entitled development sites than construction and lease-up risk and put his cash elsewhere.
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Oh man this is going to be good. Intimately familiar with all of the nitty-gritty of the ownership dynamic so I’m just gonna sit here and enjoy my popcorn.
But on a more serious note…Pretty much they can’t raise any equity to get construction financing to go vertical because of issues they had standing back from an old JV with AEW where they did a bunch of shady shit. No institutional equity group will partner with them and if they do the governance will be heavy handed.
From what I gather, AEW was their first real institutional partner, and they felt like they got finessed in terms of the governance and specific covenants in the docs that gave the partner meaning full amount of control.
They went back to doing what many rags-turned-riches immigrants know how to do best – survival. Long story short there was a disagreement in the ultimate business plan or exit. Lot of arm wrestling in court, fraud and forgery.
These were legacy assets owned by the family and they’re partner was putting the “livelihood” at jeopardy.
They can’t raise any new equity thats on good terms now, in which case they’ll just sell the land instead.
What does it mean for the city of SM?
Any commentary on WD and how they might have gotten the deal? Seems slightly surprising to me that they would earn it.
Isn’t it basically impossible to get anything done in Santa Monica, development wise? We had a site for years that got blocked by citizen law suits. Eventually gave up and are now doing a massive project just across the city border in LA.
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Yeah, my firm does a lot in SM and it's pretty nightmare-ish. It doesn't help that they just elected three new City Council members who are openly anti-development. They also said they are just going to ignore SB1818 (for those who don't know it's the California law removing local control and adds density bonuses if the project meets certain requirements aka LEED and affordability component), which, and someone who is a lawyer please correct me if I'm wrong, is blatantly unconstitutional. But no one is going to go through the process of suing the city, having to take it through appeals, etc. for a single project, so they just work the normal channels, grease up other members, push stuff through by-right, etc.
If I had my way, I'd get a few developers who work in SM and put a legal fund together to sue over one project to clear the ground for the rest. I don't understand how it's not an open and shut case, but I'm not a lawyer.
That's from the text of the law itself, http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=200…. It goes on to say developers can sue if they city doesn't give them the density.
incredible, thanks for sharing this insight, i eat up stories like this
Shekhter is a grade A slimebag. Admire the guy for what he’s accomplished as an immigrant with limited formal education, but I’ve heard several tier 1 brokers and real estate attorneys in LA refer to the guy as scum of the earth, quote unquote.
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