Pustilnikov files suit over Redondo Beach power plant sale

Ahead of bankruptcy hearing, developer alleges breach of contract by energy firm

Leo Pustilnikov, rendering of rejected One Redondo, a 2,700-unit megaproject planned at the site of the AES power plant in Redondo Beach (Getty, Kevin Scanlon)
Leo Pustilnikov, rendering of rejected One Redondo, a 2,700-unit megaproject planned at the site of the AES power plant in Redondo Beach (Getty, Kevin Scanlon)

Two weeks ahead of a scheduled bankruptcy hearing, developer Leo Pustilnikov has filed a new lawsuit against the Virginia-based energy company AES, alleging breach of contract related to his complicated 2018 purchase agreement with the company to buy an aging waterfront power plant in Redondo Beach. 

The adversary suit, part of the larger bankruptcy case, was filed on Tuesday by 9300 Wilshire LLC, an entity Pustilnikov controls, and concerns a long-running dispute between the developer and the energy company over interest and environmental remediation payments. 

The two parties are tens of millions of dollars apart on the total debt figure: AES is claiming Pustilnikov’s entity owes $38 million, and Pustilnikov claims the correct amount is around $15 million. 

“How would you feel?” Pustilnikov said when asked about the suit. “Would you pay two and a half times extra of what you owe?” 

Additionally, the adversary suit also claims damages of at least $7 million, a figure calculated in part on what the developer described as interest from payments he made years early, because AES has not complied with contractual closing agreements related to the property deal. 

“I think there are reputational damages that are greater than that,” Pustilnikov said of the $7 million figure.

Builder’s remedy

With multiple investors, Pustilnikov closed the power plant purchase in 2020 at a price of around $150 million. The deal cemented the little-known, 30-something Pustilnikov as one of L.A.’s most prominent real estate players. Last summer, the developer filed a preliminary application to transform the industrial site into a village-style complex with plans that now include 2,700 residential units, of which more than 500 would be affordable; a 300-key hotel; and more than a half million square feet of office space. 

Because of the site’s zoning, Pustilnikov filed the application using builder’s remedy, the legal provision that has swept California’s development sector but remains untested in the courts.  

Pustilnikov’s project ranks among the most consequential in California, with the potential to reshape a part of Redondo Beach — a city with a long, sometimes nasty history of opposing development — and set a new benchmark for builder’s remedy.  

Sign Up for the undefined Newsletter

But Redondo Beach officials — who maintain the city was not subject to the penalty when Pustilnikov filed his application — have fought the developer tooth and nail; last month, after a caustic City Council meeting that featured sharp exchanges between council members and Pustilnikov’s lawyer, the council voted again to deny Pustilnikov’s application. 

It’s an incomplete application under the Coastal Act, under the city’s Local Coastal Plan, under the city’s own rules,” the city attorney said at one point during the meeting.  

Pustilnikov and AES have discussed or argued over the payment discrepancy essentially since the deal closed, but that dispute escalated in October, when the energy company filed a default notice claiming it was owed $37 million in back payments. That filing led a court to schedule a foreclosure auction for February, which Pustilnikov then forestalled by filing bankruptcy papers. 

“The debtor’s bankruptcy was filed on the literal eve of a scheduled foreclosure sale of its primary asset,” an attorney for the energy company wrote in an earlier filing, “solely to prevent AES as a secured creditor from exercising its remedies under contract and state law.” 

Pustilnikov has said he was left with no choice but to file for bankruptcy and push the issue into the courts because the firm became intent on collecting debts that he disputes. His talks with the seller also broke down, he said, in part because of shifting corporate leadership. 

“You know the saying, ‘A new pharaoh comes that doesn’t know Moses?’” he said. “Eventually you don’t know who you’re dealing with.” 

An attorney for AES did not respond to an interview request about the new adversary complaint.  

In the new complaint, 9300 Wilshire also claims that AES denied property access for environmental inspections and failed to make required payments to an escrow account for site remediation, among other allegations.  

A hearing on the bankruptcy case is scheduled in mid-June. 

Read more