LLCs linked to SB Properties object to Laguna Point’s lawsuit over $400M apartment sale

Previous owners of Downtown buildings challenge buyer’s complaint

111 W 7th Street (LoopNet, Getty)
111 W 7th Street (LoopNet, Getty)

Five limited liability companies linked to SB Properties have challenged a complaint brought by Laguna Point Properties over a $402 million apartment portfolio sale in Downtown L.A.

Laguna Point Properties purchased the portfolio in April from the LLCs connected to SB Properties. Then in August, LLCs managed by Laguna Point Properties sued the former owners of the Downtown apartment buildings, claiming they breached the sale contract by failing to disclose a threat of litigation from tenants and defects at the properties.

The referenced buildings are located at 215 West 6th Street, 650 South Spring Street, 600 South Spring Street and 548 South Spring Street. Together, they have more than 1,000 units.

SB Properties belongs to Barry Shy, a prominent L.A. developer, who signed the agreement to sell what the lawsuit calls the “Main Premises” to Laguna Point as a manager of one of the LLCs named as a defendant in the suit, Main SB. The suit did not name Shy, or any other individual, as a defendant.

Manhattan Loft and 600 Tower, two other LLCs named as defendants in the suit, list Barry Shy as manager, filings show.

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The defendants filed a demurrer last week, challenging Laguna Point’s complaint. The entities argued it had no legal standing, but did not challenge, dispute or discuss any of the facts of the case.

The entities run by Laguna Point “fail to state facts sufficient to constitute a cause of action,” the defendants said in the legal filing.

Given that the specific LLCs named as plaintiffs were not part of the original purchase and sale agreement for the five properties, the complaint should be amended, the defendants said.

Attorneys for Laguna Point have already agreed to give the defendants two extensions to file an answer to the complaint, according to court documents. So far, the defendants have not filed a formal response to the allegations.

In its complaint, the Laguna Point entities alleged the previous owners were still collecting rent from tenants for two months after the deal closed — at least $307,000 in payments — and failed to pay “significant utility charges to avoid payment.”

Laguna Point also alleges the entities failed to disclose a slew of faults and defects across all buildings and violated city fire codes.