A
California real estate portfolio, valued at $360 million, is on the brink of liquidation due to a bitter dispute between its owners. The properties, which include a luxury hotel in Laguna Beach, were put into bankruptcy after one of the owners defaulted on a $195 million loan.
The court-supervised sale process has stalled because of a fight for control of the company that manages the real estate. US Bankruptcy Court Judge Brendan Shannon warned that dismissing the case could lead to chaotic court battles and value loss for the properties.
Entrepreneur Mohammad Honarkar assembled the portfolio, which also includes properties in Los Angeles' Koreatown and an apartment complex worth $65 million in Redlands. After a bitter divorce during the pandemic, Honarkar defaulted on the loan tied to the properties.
Honarkar formed a joint venture with businessman Mahender Makhijani and others in 2021, but the partnership quickly soured when Honarkar accused his partners of fraud. The dispute escalated, with Makhijani's side hiring armed guards to take over some of the properties and displaying mobile billboards accusing Honarkar of corruption.
A private arbitration ruling gave Honarkar control of the company, but he is required to wait until a detailed accounting report is finished before taking action. Meanwhile, Makhijani's side put most of the enterprise into bankruptcy with plans to sell the assets.
Judge Shannon refused to accept a loan proposal tied to Makhijani and his allies, citing concerns that they would gain control of the bankruptcy case. With Honarkar unable to come up with funds to keep the reorganization case going, Shannon is considering dismissing the Chapter 11 entirely or turning the case over to a bankruptcy trustee to liquidate the assets.
Bankruptcy trustees typically prioritize quick sales over longer marketing processes, which could lead to lower prices for the properties. Dismissing the case from court protection would also trigger a series of value-draining court fights over the properties.
