The way out: Developer cites coronavirus in suit to exit OC shopping center deal
Joshua Golcheh says the “current bleak conditions” brought on by the pandemic allows him to escape the contract to build the multi-tenant project
Add a developer looking for a way out of a planned Orange County shopping center project to the growing list of real estate lawsuit litigants using the coronavirus pandemic as their escape hatch.
Los Angeles developer Joshua Golcheh claims the pandemic triggered a “material change” in the property that allows him to exit a land purchase in the city of Tustin, where he planned to build the shopping center.
In a suit filed last week, Golcheh is demanding his ex-business partner Michael D. Kim release him from a contract to buy the nearly 2-acre parcel. Golcheh also wants the $531,000 he forked over in escrow deposits, according to the suit, filed in Los Angeles County Superior Court.
The filing is among the numerous coronavirus-releated real estate lawsuits that have emerged in the past few months, over issues including broken leases and contracts.
Golcheh is founder of Golcheh Developments and Investments, and owns retail space throughout L.A. and Orange County.
In 2015, Golcheh bought an empty parcel of land with Kim, a Manhattan Beach-based real estate investor and broker, for about $7 million. The two men had “plans to build a multi-tenant shopping center with at least one anchor tenant,” according to the lawsuit.
Three years later, Golcheh agreed to buy out Kim’s share, according to the complaint, and began placing deposits in escrow.
Golcheh had contacted KinderCare, a for-profit daycare center, about being the future shopping center’s anchor tenant. But on March 30, as the coronavirus was taking hold, Golcheh learned that KinderCare “was no longer willing or able to enter into any new leases for the foreseeable future,” according to the suit. The statewide stay-at-home order had “eliminated the need for outside childcare.”
The next day, Kim informed Golcheh that he could still develop the property, and that Golcheh could not void the deal, the lawsuit claimed. But according to Golcheh, the contract stipulates that a “material change” in the property’s value of more than $10,000 can let Golcheh void the deal. He claims that the property has lost more than that amount.
Golcheh argues the planned shopping center is now a pipe dream in the current economic market.
“It is impracticable, if not impossible, for plaintiff to procure financing of the development of the unimproved property into a multi-tenant shopping center in these current bleak conditions,” the lawsuit said.
Attempts to reach Kim on Tuesday were unsuccessful.
Golcheh’s retail developments include properties in El Cajon, Long Beach and Pomona. He received some pushback in Pomona for tearing down a half-century old Mission Family Restaurant, and replacing it with a 7-Eleven.