A Parking Lot Conspiracy

Parking lots can be the most vanilla of commercial real estate assets, but they can be spicy when they’re at the center of a complaint about an alleged conspiracy.

Criscione Meyer Entitlement, which owns six downtown Los Angeles surface parking lots that total about 69,000 square feet, has sued three parking entities — all of which appear to be sister companies connected to Richard Ulemann Sr. — over a loan dispute involving said lots near L.A. Live off the 110 Freeway, and have entitlements for redevelopment as affordable residential.

Here are the twists and turns:

Plaintiff Criscione Meyer Entitlement (CME) purchased the six parcels from defendant 110 West Properties out of bankruptcy for $22 million five years ago. The purchase price was paid via a loan obtained by CME in the amount of $10 million and secured by a deed of trust. The remaining $12 million was paid via a promissory note payable to the seller, 110 West, and secured by a second deed of trust. Then, CME became a landlord to 110 West, and later to defendants Shamrock Parking and Classic Parking, which the complaint calls “co-conspirators” and “alter egos” of Ulemann.

Some time passed, some extensions on the debt was granted, and CME eventually negotiated a deal to pay off that $12 million loan for just $500,000, per the complaint. CME claims 110 West accepted the $500,000 payoff in writing but then sold its $12 million note on the property to Classic Parking. Classic Parking then refused to honor the $500,000 payoff agreement.

CME alleges this was a breach of contract and part of a coordinated effort to block the refinancing of five parcels and a sale of one to an electric vehicle fast charging company for about $11 million. (CME accused the lessees and defendants of illegally occupying the space because their lease is up and they owe rent, too).

“Each of them, knowingly and willfully conspired and agreed to cause financial hardship to CME by inducing 110 West to breach its discounted payoff agreement with CME and instead assign the $12 million note to Classic Parking,” the complaint reads. “Defendants, and each of them, furthered the conspiracy and lent aid and encouragement by directing 110 West to repudiate the discounted payoff agreement with CME and instead sell the $12 million note to Classic, thereby aiding and abetting the tortious interference with CME’s contractual rights.”

The complaint continues: “The conduct of defendants in conspiring was, and is, fraudulent, oppressive and malicious.”

CME wants the court to force defendants to accept $500,000 and release the $12 million deed of trust, keep them from foreclosing while the case is pending and evict them. It also is seeking $5 million in damages.

The attorney for the plaintiff and a representative for the three related parking entities did not immediately respond to a request for comment.

What we know beyond the litigation is that CME has been trying to sell the parking lots for years. The real estate came on the market in Aug. 2023 with an ask of $23 million. A source familiar with the matter said the parcels will trade for less.

One of the parcels is in contract and the others are in negotiations, per Patrick Sharples, a broker with Keller Williams via G&S Group, who holds the offering. They could all close later this year, but it’s unclear whether litigation will influence an outcome.

The real estate can be redeveloped and, because they’re near L.A. Live, there’s potential for apartments or a hotel. But neither pencil out, according to Sharples. He said he has talked with developers because the parcels are eligible for ED1, an emergency order by Mayor Karen Bass that streamlines the approval process for developments that are 100 percent deed-restricted affordable housing. The numbers didn’t make sense, he said. When it comes to a hotel, the lots aren’t zoned for that, so nothing would be completed before the World Cup or Olympics.

That doesn’t mean the lots won’t eventually be redeveloped, but they may stay just parking lots for a bit.

Hamlet-esque

Oceanwide Plaza creditors are having their “to be or not to be” moment. After a federal bankruptcy judge greenlit a settlement ending a lender-versus-lender war, creditors have a choice: Make their own or joint credit bids and attempt to complete the stalled mega-development or sell it off in hopes of recouping their losses, a person with knowledge of the matter told The Real Deal. That decision is imminent, the source said. LA Downtown Investment, funded via EB-5 investors, and Lendlease, the one-time general contractor, are the two major parties. We’ll see if they persist or ditch.

Kilroy trims exposure

Kilroy Realty reported earnings earlier this week, and a lot of chatter was about a big buy and sale in San Diego, but let’s take a look at Los Angeles. Chief Executive Angela Aman, on the fourth-quarter earnings call, said Los Angeles is where the real estate investment trust has completed most of its portfolio modification after selling 501 Santa Monica and Sunset Media Center in the heart of Hollywood, and buying Maple Plaza in Beverly Hills, which is still one of her best talking points to date. Going forward, however, expect more action as it rejiggers in L.A., where Kilroy still is facing a little more than 400,000 square feet in lease expiration this year.