Santa Monica Mega-Portfolio Coming to Market

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.

https://therealdeal.com/la/2020/12/22/city-for-sale-shekhter-looks-to-unload-mega-portfolio-in-santa-monica/

Comments (10)

 
Most Helpful
  • VP in RE - Other
Dec 23, 2020 - 7:45pm

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.

 
  • Intern in RE - Comm
Dec 23, 2020 - 9:10pm

Any commentary on WD and how they might have gotten the deal? Seems slightly surprising to me that they would earn it. 

 
  • Director in RE - Comm
Dec 23, 2020 - 9:21pm

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.

 
Dec 24, 2020 - 2:00pm

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. 

This bill would revise the above-described provision to require ... when a developer seeks a density bonus for a housing development within ... the jurisdiction of the local government, that the local government provide a density bonus or other incentives or concessions for the production of housing units and child care facilities, as specified. By increasing the duties of local officials, this bill would impose a state-mandated local program.

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. 

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