Developer scores on 2 fronts for Center West; Hekmat triumphs in financing, contract squabbles.

The developer of Westwood's elegant Center West office highrise appears to have emerged victorious from two key legal battles - and now controls a project suddenly better able to compete for tenants.

Kam Hekmat, who heads the Center West limited partnership that developed the 300,000-square-foot tower, arranged new mortgage financing for the property with a new principal amount of $54.9 million, title records show - hardly four months before its existing $90 million-balance loan matured.

Just last fall, Center West had filed a lawsuit against the property's mortgage-holder at that time - Fuji Bank  Ltd.'s Los Angeles Agency - seeking to prevent Fuji from selling the loan to other investors.

And L.A. County Superior Court Judge Leon Savitch has also tentatively ruled that Hekmat's family-led partnership is the "prevailing party" in a five-year case pertaining to Center West's construction contract and should be awarded $6.3 million.

Hekmat characterized the resolution of the two disputes as "bittersweet" for the Center West team - bitter because it's been a hassle, sweet because the results were wins.

More affordable rents

One consequence of the new financial arrangement is that Hekmat's team should be able to market the 1990-vintage tower's 100,000-some square feet of never-leased space at more affordable rental rates.

The new mortgage arrangement follows Center West's lawsuit last fall against Fuji, the former mortgage holder, Fuji officials had informed Hekmat that they intended to sell the mortgage, and a legal dispute arose over the then-pending sale and Center West's access to the identities and offer terms of other parties interested in buying the loan.

Fuji officials and attorneys noted in court documents that the often-modified mortgage - which the borrowers have always kept current - would mature this June.

The documents also stated that Fuji "believes that neither Center West nor Hekmat have the financial capacity to pay off the loan or even make a meaningful bid to buy out the loan," which carried a balance "millions of dollars" above the property's current market value.

New player

But with the help of the commercial real estate brokerage firm that handles Center West leasing, First Property Realty Corp., Hekmat was able to prove that statement wrong - and hence render the lawsuit moot.

First Property helped Center West arrange the deal through which Lehman Brothers Holdings Inc. appears to have bought the mortgage from Fuji at a substantial discount.

Title records indicate Fuji assigned its interest in the Center West loan to Lehman Bros., which now holds a mortgage with a revised outstanding principal balance of $54.9 million. That's thought to represent what Lehman paid for the note as well as loan fees the Center West partnership is paying its new lender.

Hekmat would not specify the new loan's maturity date, referring to it only as a "short-term bridge loan" that includes no equity participation in the real estate, Center West's complaint against Fuji specified that the partnership has already invested more than $40 million in the development project.

Hekmat noted with the more manageable mortgage debt in place, he expects to be "more aggressive" in leasing Center West's vacant floors. As tenants take more space, the better revenue stream should help the partnership secure new financing "well before" the Lehman Bros. mortgage matures, the developer added.

Floors 16 through 21 - combining for just under 100,000 square feet - remain unleased at the 23-story tower. Hekmat, who is seeking higher-rent tenants rather than matching the competition's latest offers amid depressed market conditions, said he'll consider offering building-top signage to the right tenant.

It's a strategy he has been reluctant to employ in the past. "We didn't design a billboard," he said.

Partnership wins damages

Meanwhile, in the construction contract dispute, Judge Savitch's ruling - technically a "tentative statement of decision" to which the litigants can respond before the judge's "final statement" judgment - states that building contractors must compensate the Hekmat partnership for damages tied to a delay in Center West's construction.

Judge Savitch found an eight-month delay cost the developers just under $6.3 million. He calculated that Peck Jones Construction Corp. was responsible for 36 percent of the damage, contractor Otis Elevator Co. 21 percent, executive architect Daniel Mann Johnson & Mendenhall 20 percent, Center West itself 20 percent, and a window contractor 3 percent.

Peck Jones attorney Mike Cathcart noted Otis had indemnified his client in the Center West contract, and hence that effectively makes the elevator contractor responsible for about 40 percent of the damages, and Peck Jones about 20 percent.

The complicated dispute - originally initiated by a subcontractor that wasn't paid and recorded a mechanics lien against the property - stemmed from disagreements over Center West's construction costs and timetable. Testimony in the case took five months after four years of legal maneuverings.