Disputed site sold at auction.

Encino Heights, the focus of a several-year entitlement battle, has been sold for $9.8 million after an auction that came down to two bidders.

EMC Development LLC, a Los Angeles-based development company, placed the winning bid in a nearly full Woodland Hills courtroom after beating out Essex Property Trust Inc., a Palo Alto-based real estate investment trust with ownership interests in 122 multifamily properties, mostly in the West.

The property, a 1.7-acre site that sits along Ventura Boulevard in Encino, is entitled for 125 apartment units and about 16,000 square feet of commercial space.

Officials at EMC declined to be interviewed following the auction and did not return subsequent phone calls. The company's website does not list any of the projects EMC has developed.

The all cash offer with no contingencies was actually $100,000 less than the competing bid from Essex, but a differential in the commission prices between the two buyers made EMC's bid the highest offer.

(A sale to Essex would have incurred a 3.2 percent commission versus a 1.25 percent commission on a sale to EMC.)

The bidding, which took about 25 minutes, began with an offer of $9,250,000 from Essex. The companies countered each other's bids about four times before Mette H. Kurth, an attorney for Sheppard Mullin Richter & Hampton LLP, who represented Essex at the auction, closed its bidding at $9.9 million.

The property was put up for sale as part of a Chap. 11 proceeding that grew out of a partners' dispute between Gold Mountain Enterprises LLC and Samson Investment Co.

Another property owned by Gold Mountain in West Hollywood was also auctioned. That parcel, which includes the site of House of Blues, and is planned for a mixed use development although not yet entitled, was sold to Combined Properties, a real estate investment and development firm based in Massachusetts, for $27,250,000 in a longer proceeding that also took place on May 27 and saw a third bidder enter at the eleventh hour.

Combined Properties opened the bidding for West Hollywood at $23 million and for most of the process competed only with EMC, which also bid on that property.

The two companies bested each other's bids about eight times until Combined put in a $27,250,000 bid and EMC went out.

Surprise turn

Then, in a surprise turn of events, Varand Gourjian, an attorney with Allen Matkins Leek Gamble & Mallory LLP, representing Morgans Hotel Group LLC, stepped up to the courtroom podium.

Morgans offered $29 million subject to a two-week due diligence period.

Then, when attorneys for Gold Mountain said that the company did not wish to consider the proposal because an all-cash, no contingency offer was on the table, Morgans upped the bid to $30 million.

Gold Mountain rejected that bid too because of the due-diligence contingency, and the property went to Combined Properties.

(That sale is subject to certain conditions and a fight of first refusal granted to House of Blues.)

"I feel pretty satisfied with the process and the end result," said Athena Novak, property manager for Calabasas-based Gold Mountain. "It exceeded our expectations, not by far, but enough."

The Encino property, which was the subject of a two-year entitlement battle between neighborhood groups and the developer, was initially listed for sale at $12.75 million. Several years later, in preparation for the auction, the property was listed at $10.9 million.

EMC, which was a stalking horse in the proceeding, offered a bid of $35 million for the two properties combined, with $9 million of that allocated to the Encino parcel and $24 million to the West Hollywood site.

The West Hollywood property was listed in preparation for the auction at $31 million.

Marianne Lowenthal, executive vice president for mixed-use development at Combined Properties, noted that the company had not yet developed a design plan for the property.

"We think it's a terrific location and a great opportunity to do a mixed-use project," Lowenthal said.