Oh, Canada! Tenant accuses Onni Group of trying to pilfer PPP funds

Marketing agency Mob Scene takes aim at Vancouver developer over “bad faith” lease renegotiations

TRD LOS ANGELES /
Jun.June 25, 2020 02:29 PM
Rossano De Cotiis, Tom Grane of Mob Scene, and Wilshire Courtyard (Credit: LinkedIn and Michael Maltzan Architecture)
Rossano De Cotiis, Tom Grane of Mob Scene, and Wilshire Courtyard (Credit: LinkedIn and Michael Maltzan Architecture)

Onni Group not only defaulted on a $408 million loan for its purchase of Wilshire Courtyard, it faces a lawsuit from one of the 8.7-acre Mid-Wilshire campus’s tenants.

Marketing agency Mob Scene sued the Vancouver-headquartered real estate developer for “bad faith negotiations” plus “fraudulent and intentional misrepresentation” following a months-long standoff over Mob Scene’s rent payments.

The fifteen-year-old company, which produces movie trailers and other spots for streamers and film studios, says Onni Group ignored city and state laws that let Mob Scene defer lease payments amid the coronavirus pandemic.

The Canadian landlord also “was looking for a back-door way” to access the federal government’s $600 billion in business loans under the Paycheck Protection Program, which the lawsuit states “was meant by Congress to help U.S. businesses and U.S. citizens (and legal residents) through the pandemic.”

The complaint is a twist on the growing number of lawsuits filed by landlords against commercial tenants who have not paid rent. It also represents another public conflict for Onni Group, which has purchased several properties in L.A. County over the past two years.

In a statement provided to The Real Deal, Onni Group said its leasing team “is in active conversations with Mob Scene, and we expect this to be fully resolved before any lawsuit progresses… We have worked closely with all of our tenants throughout this unprecedented period.”

According to the complaint, Mob Scene signed a lease deal at the 5700-5750 Wilshire Blvd. property in 2015 with then-property owner Tishman Speyer, agreeing to make monthly payments of $175,000 through 2029.

Onni Group purchased the property from Tishman Speyer last year for a reported $630 million.

Trouble began for Mob Scene in late March, according to the complaint, when the pandemic triggered a “near total shut down of its business” and a “more than two-thirds reduction in revenue.”

After extended talks, Onni Group allowed Mob Scene to pay just 75 percent of its April rent, the lawsuit claims.

But in May Onni Group allegedly asked Mob Scene for a full rent payment because Mob Scene received a Paycheck Protection Program loan. Onni Group also sought a “security interest” in any future Covid funds Mob Scene received from the federal government.

Mob Scene refused, with the complaint noting that Paycheck Protection Program monies are primarily to let companies meet payroll, not pay rent.

On June 11, Onni Group allegedly threatened Mob Scene with eviction proceedings, even though state, city, and California Judicial Council orders have each set eviction moratoriums.

Mob Scene filed its lawsuit against Onni Group last week in Los Angeles County Superior Court, asking for punitive damages and also a judge’s order that the company may defer lease payments.

The lawsuit coincides with Onni Group defaulting on a loan made by Nataxis to acquire the Wilshire Courtyard. The issue stems from a 335,000-square-feet lease with WeWork that Onni amended without Nataxis’s prior approval.

Onni Group has been a prolific presence in L.A. real estate of late.

It announced this week a new plan for a residential tower in the Arts District, announced plans last week for a 14-story office (yes, office) tower in Hollywood, and is slated to put forth a redesign plan of the 85-year-old former L.A. Times headquarters in downtown.


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