Image of Welton Becket-designed Federal Building via You Are Here
Today marks an epic day for Sonny Astani. His team of lawyers will head to the Edward R. Roybal Federal Building on Temple Street to try and convince a judge to allow the developer to go through with his bankruptcy re-organization plan for the Concerto tower. As part of his plan to pay off his creditors, he's revealed how much he proposes to sell the condos for--that information is after the jump--but his plan, which has the support of the majority of the creditors, has to be approved by the judge. Also after the jump is a handy timeline, a run-down of key events and information gathered from court documents and interviews. The timeline answers questions like: Did Astani default on his construction loan? Yes, technically. Has Starwood tried to go after Astani's $25 million guarantee? Yes. Additionally, there are thoughts from those in the business community, including some who believe Starwood is completely entitled to be trying to foreclose on the building. Meanwhile, in yet another upcoming epic decision, next Tuesday is the day the bankruptcy judge will decide whether to allow Starwood to proceed and foreclose on Concerto. UPDATE: Here's what happened. Nothing ground-breaking.
Astani submitted his bankruptcy reorganization plan earlier this year, but the judge has to approve the plan to sell the units, and slowly re-pay back his creditors. His bankruptcy plan outlines a timeline that sees sales of eight units per month.
Allowing for discounts to initially kick off sales, the prices will be as follows: average sale prices of $539,000 per unit, or $582 per square foot for floors 3-20. Average sale prices of $785,000 per unit or $719 a square foot for floors 21-25. And average sales prices of $1.662 million or $842 a square foot for floors 26-30. CCV, the Starwood entity which owns the loan, objects to the plan, in part because Astani isn't putting any more of his own money into the tower, and relying on the condo sales to pay off creditors. Those worried about the plan say there's the possibility, for instance, that Astani could get his building back, be unable to sell the units, and have to put the building back in Chapter 11 again.
A judge could allow the plan to go through today, while a decision could be delayed. Likewise, a decision in the hearing for relief of stay---scheduled for next Tuesday--could also be delayed.
And despite headlines that continue to question the FDIC-Starwood deal, it isn't hard to find people in the business community who believe that Starwood, owed more than $162 million and facing a project in Chapter 11, is completely entitled to try and foreclose on the building. “I don’t see why there is sympathy for Astani,” says one source, who says he is baffled by the developer’s PR campaign. “He was in default.” The source also thinks the FDIC-Starwood no-fee interest rate deal that Astani keeps railing against actually doesn't have any bearing in this particular case.
Supporters argue Astani should have a chance to see his project through. “Corus went upside down, not Mr. Astani,” says Richard Slawson, Executive Secretary for the L.A./O.C.. Building & Construction Trades Council. Astani, he says, has "been a good builder for this area."
HANDY TIMELINE of KEY EVENTS:
2004: Astani purchases a 100,000 square foot lot at Figueroa and 9th streets for $30 million. Concerto will be the developer’s first high-rise tower project.
April 2007: At this point, Chicago-based Corus is already making headlines for past-due condo loans as buyers back out of their condo loans. Predicting that the market will recover, Corus CEO Robert J. Glickman promises Corus will continue to make loans.
July 2007: After a deal with his Fremont Investment & Loan falls apart, Astani gets a $190 million construction loan from Corus, one the larger condominium loans the bank will issue.
Astani personally guarantees the loan for $25 million, while the third parcel, which will house the second tower, is collateral on the loan.
February 2008: CEO Glickman is growing increasingly pessimistic about Corus, already termed the poster-child for the real estate crunch by one media outlet.
April 2009: In a profile on the Concert project with the Los Angeles Times, Astani admits he will make no money on the project, and that his only is goal is to stay out of bankruptcy.
May 2009: Superior Wall Case’ Ron Hudson says this was when payment from Astani stopped. “By summer they were no longer able to pay the subcontractors their monthly draw,” says Hudson, who says he is currently owned $1.6 million.
June 2009: Corus Bank’ entire capital base had been wiped out by this point, according to the New York Times.
June 2009: Representing a number of clients, including Sonny Astani, Manatt Phelps & Phillips attorney Timi Hallem writes to Corus Bank, offering to buy seven LA-area Corus loans. Eventually she’ll get a verbal response that Corus isn’t interested in selling the loans separately, and that the FDIC intends to sell the loans packaged together. Additionally, Astani will offer to purchase his loan on his own, but be turned down.
July 2009: Alleging non-payment, Webcorp Builders files a lawsuit against the Concerto project for nearly $1 million and places a lien on the project. The lawsuit is quickly resolved.
July 2009: Astani announces plans for his auction. In an interview about the auction, he tells us the media is overplaying the bad news about Corus, and that he's not worried about the bank. He says that construction lender has been following the loan agreement and paying out on time.
Astani was in spin control, Robert Emmers, his spokesperson, says now. Astani and his sales team weren’t “going to say anything that would diminish confidence on the part of potential buyers,” says Emmers.
August 2009: Astani holds a one-day sale in which 77 units sell in one day, raising $30 million.
September 11, 2009: Corus fails and is taken over by the FDIC.
September 17, 2009: Astani puts building in Chapter 11. A bankruptcy judge allows the sales of the lofts to go through. Per the terms of the construction loan, Astani has defaulted on the loan by selling the loft units in violation of the release price provisions. He didn’t get the permission of Corus to sell the units at that price, although he’ll argue that his hand was forced given that Corus was essentially out of business at this point.
He's also defaulted on the loan by putting his building in Chapter 11 (the construction loan stipulates that bankruptcy is considered a default). In challenging Astani’s moves, lawyers for the FDIC will later charge that Astani “seeks to play fast and loose with the FDIC’s security for repayment of the loan.”
September 21, 2009: Astani files a lawsuit against Corus, alleging the bank delayed construction loan funds, among other things. He will eventually also sue CCV (the Starwood entity that bought his loan), and claim damages of at least $46 million, which Astani ultimately wants deduced from the outstanding loan amount.
October 6, 2009: Starwood Capital Group-led entity buys the group of Corus loans. The group includes 79 condominium properties, 14 multifamily complexes, eight office buildings and one land project.
October 29: 2009: CCV files court a proof of claim, claiming that he owes them $162 million plus other fees on the original $190 million Corus loan.
March 2010: Astani files his plan of bankruptcy reorganization.
May 2010: Barry Sternlicht gives an interview to the New York Times. The interview will greatly color public perception about Starwood, and gives the impression (unfairly or not) to some that the company intends to sit on projects.
June 2010: CCV files a lawsuit against Sonny Astani, his wife Joan Cho, and Marco Astanti, seeking the personal guarantee of $25 million, in a Chicago court. The case is dismissed weeks later due to jurisdiction issues. It's not clear if and where if the personal guarantee case will be filed again.
July 2010: CCV files for relief of stay, meaning they are looking to now foreclose on the site. They seek $162 million plus fees. They value the site at $122 million, saying there is no equity left. Astani’s team will despite the $122 million figure. CCV is also critical of Astani’s plan of reorganization, saying it's not viable because he is not putting in any of his own money. Another key issue is the interest rate Astani will have to pay on the debt.
Meanwhile, court papers reveal that Astani and his investors have already invested $60 million plus in the Concerto project.
August 6, 2010: A bankruptcy judge will decide on the reorganization plan.
August 10, 2010: A bankruptcy judge will rule on the relief of stay.
Some recent related Starwood-FDIC reading:
Condos come off the sidelines and into the market: [Atlanta Journal Constitution]
Broker Questions FDIC Tactics [Las Vegas Review Journal]
Moral Hazard at the FDIC [The Street]
· Concerto archives [Curbed LA]