LA developer sues First Republic over construction loan
Bank failed to monitor supplier and subcontractor disbursements, lawsuit alleges
Facing claims from subcontractors, the developer of a Central L.A. project has blamed First Republic, alleging in a lawsuit the failed bank breached its contract on a $13 million construction loan the lender provided for the project.
The suit was filed in L.A. County last week by an entity called Serrano Square, a company managed by Abolhassan Arefi, and relates to a project Serrano pursued at 1120 South Serrano Avenue, a few blocks south of Koreatown’s Olympic Boulevard and Western Avenue corridor.
Serrano purchased the site in 2016 for $2.4 million, and then planned a 52-unit apartment project using L.A.’s popular Transit Oriented Communities density bonus program.
But after work was underway, Serrano ended up facing mechanic’s liens and lawsuits from suppliers and subcontractors who said they weren’t paid, including one claim from a materials supplier for $840,000 plus interest.
The developer, in turn, blames First Republic and its loan management partner for issuing the loan but failing to monitor disbursements to the project’s construction company.
“The disbursement procedures described important safeguards that First Republic was to implement in order to ensure that the work billed for had been performed and to verify payment of all invoices submitted by Serrano, Serrano’s subcontractors and suppliers,” the suit states.
Those safeguards included promised site inspections, document reviews and lien waivers.
“All of those lawsuits against [Serrano] are a result of suppliers of materials for the project not being paid due to First Republic’s breach of the agreement,” the suit alleges.
Serrano is seeking damages from First Republic to cover the claims leveled against the developer by the subcontractors, which total more than $900,000, as well as interest and attorney’s fees.
A representative for First Republic did not respond to a request for comment.
Earlier this month JP Morgan Chase, which recently took over the collapsed San Francisco-based commercial lender, announced it would close 21 First Republic branches by the end of the year.