[This morning's public auction at Los Angeles County Court in Norwalk]
A courthouse in Norwalk may be a loooong way from Hollywood Boulevard, but that's where the long-stalled Palihouse Vine hotel ended up this morning. The crimson-colored Hollywood hotel, planned as a companion to the West Hollywood Palihouse Holloway, was put up for public auction after Avi Brosh's Palisades Development Group (the firm later changed its name to By Palisades) defaulted on their loan. But since no one showed up at the courthouse (pictured above; all these crazy auctions take place on the steps of the building) to bid on the hotel, Palihouse Vine automatically fell into the possession of CIM Group, which bought the construction loan on the project late last year. And today's auction was attended by a small group of CIM staff, who showed up to make sure their new Hollywood hotel went home with them.
First, some of the backstory on how CIM came into the picture: In what was an obvious strategic move to buy a distressed property, CIM purchased the construction note on the nearly-finished hotel from Pasadena-based East West Bank late last year, according to a source. CIM execs didn't respond to a request earlier this week for information about their purchase of the note.
Since East West Bank had already started the foreclosure proceedings on the hotel, all CIM had to do was ride out the foreclosure process and wait for the eventual auction. Additionally, the foreclosure process can wipe out the junior liens (if a subcontractor wasn't paid by Palisades, for instance) on the property, so it may have been in CIM's interest to simply foreclose.
And to ensure that no one else bid on the project, a handful of CIM staffers attended this morning’s auction of the hotel, which had a starting bid of $16.8 million. "I don't anticipate anyone buying [your hotel]," TD Services auctioneer Garth Russell told the CIM group, shortly before the auction started. Indeed. Most of the crowd at today's auction was likely there for the cheap foreclosed homes.
And when Pailhouse's name was called by Russell, no bids were received, so CIM got the hotel and Brosh is officially out. The whole process took about 10 seconds. A source says that CIM expects to complete the construction of the project.
Meanwhile, this Norwalk courthouse, site of four auctions today (during each auction, dozens, and perhaps hundreds of home are up for sale), is an utterly wacky scene. It's the place that O. J. Simpson's foreclosed home sold back in 1997, while the Los Angeles Times also profiled the homebuying process that goes on here back in 2007, noting that amateurs "face competition from professional real estate investors as well as the lenders themselves, who come to the auctions ready to bid for homes they issued loans for if it appears that the properties can be resold at higher prices." It's an altogether depressing and fascinating process to witness.
Waiting for the auction to start. At each auction, the auctioneer reads dozens and dozens of addresses of foreclosed properties.
TD Services auctioneer Garth Russell, reading addresses. The Palihouse project came up about 20 minutes into the list of homes.
Dozens of home buyers and investors crowded under the building to avoid the rain as they bid on homes.
· Palihouse Vine coverage [Curbed LA]
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