The protracted battle between multifamily developer Neil Shekhter of NMS Properties and AEW Capital Management has drawn one step closer to the finish line.
A Los Angeles Superior Court Judge ruled on Nov. 15 that the sale of the embattled nine-property portfolio to SPI Holdings can move forward, closing the loop on a two-year dispute.
The seeds of the dispute date back to 2010, when NMS entered into a joint venture agreement with AEW to develop nine high-value properties. Seven are located in Santa Monica, while the other two are in Culver City and West Hollywood.
The court battles began in 2014, when NMS tried to buy AEW out of the partnership for $106 million. AEW said NMS forged the agreement that NMS claimed allowed such a buyout, then took over control of the properties and sold them.
In November 2016, a judge ruled in favor of AEW, allowing the firm sole discretion to sell the portfolio. That same month, AEW entered into an agreement with an ownership group consisting of SPI Holdings and San Francisco investor Dennis Wong — part-owner of the Los Angeles Clippers — to sell the portfolio for $430.5 million.
Since shortly after the ruling, the portfolio has been in the hands of an interim, court-appointed property manager. Shekhter’s lawyers appealed the decision, essentially barring the new buyers from taking full control of the portfolio.
In September, a California Supreme Court judge declined to hear Shekhter’s appeal on the issue, dealing yet another blow against the developer. A source familiar with the case said that decision reaffirmed that AEW had the right to sell the property, and paved the way for the most recent ruling.
“SPI has waited patiently for this legal process to play out,’’ Elliot Peters, a lawyer at Keker, Van Nest & Peters, who is representing Wong’s SPI Holdings, said in a statement. “The misconduct of NMS has been confirmed. SPI is now the unquestioned owner of these terrific properties.”
James Fogelman, a Gibson, Dunn & Crutcher lawyer representing AEW, said “NMS has lost its last attempt to interfere with the sale.” He added that “the real case that will go forward is the RICO case against NMS.”
AEW filed a complaint against Shekhter under the Racketeer Influenced and Corrupt Organizations Act, or RICO Act, in January 2017. AEW claims Shekhter acted as a “criminal enterprise,” and purposefully misled the courts and lied to banks, third-party vendors, insurance companies and “countless others,” according to the complaint. Six months later, Shekhter’s lawyers tried to get the court to dismiss the lawsuit, but were unsuccessful.
Shekhter’s attorney, Sasha Frid at Miller Barondess, said his firm is still pursuing a case against AEW, alleging claims of fraud. “We have the evidence in our lawsuit to prove that AEW defrauded our client by making promises that it never intended to keep,” Frid said.