Stockdale sues Mark Weinstein’s MJW over Santa Monica hotel ground lease

Stockdale Capital Partners has started a legal battle over the value of the ground beneath the Le Merigot hotel, just steps away from the ocean in Santa Monica.

The investment firm, which owns the leasehold interest in the property, is suing MJW Investments, which owns the ground under the property, for allegedly artificially driving up the value of Le Merigot in order to charge higher rents to Stockdale, according to Los Angeles Superior Court filings. 

Stockdale acquired the lease in the 175-key hotel, located at 1740 Ocean Avenue, in 2021. The firm paid around $75 million and did not seek financing to do so, TRD reported at the time.  

The lease which Stockdale acquired dates back to 1987, according to the lawsuit. Under the agreement, the leaseholder would pay a fixed rate for 23 years. Starting in 2010, the rent would reset every five years, based on a fair market value appraisal. 

In 2020, the rent was scheduled to be reset. 

Instead of hiring an “independent appraiser,” Stockdale alleges MJW “knowingly hired an appraiser it had used before in order to orchestrate an inflated value of the property,” according to Stockdale’s complaint. 

MJW, a West L.A.-based investment firm run by Mark Weinstein, did not respond to a request for comment. The company has bought more than a $1 billion worth of real estate, according to its website, and developed more, including the 800,000-square-foot redevelopment of Santee Village in L.A.’s Fashion District. 

MJW allegedly gave the appraiser a commissioned plan for 88 condo units on the site of Le Merigot, even though zoning regulations at the time did not allow for the plan. 

MJW “nonetheless told the appraisers to value the property as if this use were legally permitted — when in actuality it was not,” according to the complaint. 

Stockdale claims because the valuation involved a hypothetical development, the land under the hotel was appraised at $62.2 million in November 2020, up from $35.9 million in 2019. Stockdale also did not respond to a request for comment.

Under the lease, Stockdale has to pay either 9 percent of the fair market value of the land or the annual base rental for the prior lease year, whichever is greater. 

“This enormous increase occurred at the height of the COVID pandemic when real estate valuations were plummeting globally, and is antithetical to what a ‘willing,’ ‘prudent’ and

‘knowledgeable’ buyer would have paid for the property in 2020,” according to the complaint. 

Stockdale has asked the court “declare that the 2020 appraisal process is null and void,” and that MJW pay back any excess rent once a new fair market value appraisal is conducted.