Wilshire Robertson Plaza sits at center of legal dispute.

Developer, lender locked in battle for control of property

Beverly Hills developer Paul Amir and construction lender Security Pacific/Bank of America are locked in a battle for control of a near-empty Beverly Hills office property, according to a late-November Chapter 11 bankruptcy petition and documents filed in an earlier, related foreclosure lawsuit.

Last December, BofA filed a "judicial" foreclosure lawsuit in Los Angeles Superior Court in connection with the 118,000-square-foot Wilshire Robertson Plaza's construction loan. BofA's action sought a court-ordered sale of the property if the defaulted mortgage debt wasn't repaid by the Amir-controlled partnership that developed the three-year-old office project at 8750 Wilshire Blvd. It also included a request that a receiver be appointed to take possession of the property.

Last February, BofA also commenced "non-judicial" foreclosure proceedings by filing a Notice of Default. The notice specified that the partnership was in default on about $18.9 million in construction-related debt.

The non-judicial foreclosure process, which doesn't require a court order, allows a lender to sell a property secured by a defaulted mortgage at a public auction. Lenders frequently follow both foreclosure courses initially, real estate law sources noted.

Amir's attorneys had sought to maintain control of the property by citing, in the Superior Court case, a complex California legal doctrine pertaining to foreclosures. In October, however, Judge Diane Wayne sided with Bank of America in denying the developer's request -- based on the "one form of action" foreclosure doctrine -- to prevent the bank from foreclosing on the property by issuing a preliminary injunction.

On Oct. 26, BofA filed a Notice of Trustee's Sale, scheduling a non-judicial sale of the property under the construction loan's deed of trust. But on the date that sale was scheduled, Nov. 19, the Amir development partnership called 8750 Wilshire Associates filed for Chapter 11 bankruptcy protection.

Despite Judge Wayne's ruling, an attorney for 8750 Wilshire Associates -- which is controlled by the Paul and Herta Amir Family Trust -- still insisted that BofA violated the state's "one form of action" doctrine. Pasadena attorney Bob Garrett told the Business Journal that his conclusion stems from the bank's actions in connection with a separate line of credit -- which BofA established for the Amirs -- to provide additional funds that might be needed to complete the project's interior build-out.

He said the bank "unilaterally" increased the balance on the Amir's personal line of credit by more than $1.62 million, even though the credit account had not been pledged as security for the construction loan.

Therefore, according to Garrett's interpretation, the bank forfeited its interest in the overdue construction loan's collateral -- the property and whatever rental revenues it generates -- because it took possession of the Amir's credit-line "asset" rather than attempting to take over the property alone.

Under the Code of Civil Procedure's "one form of action" doctrine, state courts "sanction" lenders who take possession of non-collateral assets by waiving their security interests in the collateral assets, Garrett said.

But BofA attorney John Hosack argued in a memo filed in the foreclosure suit that the bank drew the $1.62 million from the Amirs' credit line and put the funds in a "collateral" account "in which Amir granted the bank a security interest." Hosack claimed in the memo that the bank had agreed to extend the construction loan's maturity date if 8750 Wilshire Associates agreed to spend another $1.62 million on "building stabilization costs" further protecting the bank's security interest in the property.

The new agreement specified that if the extended construction loan went into default -- which it has -- the bank would place $1.62 million from the credit line into an "equity funds account," Hosack's memo continued. Amir granted BofA a security interest in that account, and Amir's counsel approved the documentation of that agreement, the memo noted.

Judge Wayne's October ruling sided with the bank, stating that it was the developer's suggestion "that his line of credit be used to fund the further equity needed for the project." It also noted that as funds from the line of credit "have not been applied to reduce the outstanding balance" on the 8750 Wilshire Associates construction loan, the bank's action "does not constitute a violation of the 'one form of action' rule."

Garrett said he would continue to press his "one form of action" argument with U.S. Bankruptcy Judge Samuel Buford. He noted Judge Wayne's denial of his request for the preliminary injunction "is by no means a ruling on the merits" of the Amir position.

The saga began when Security Pacific National Bank agreed in November 1988 to loan 8750 Wilshire Associates up to $23 million to construct the building at Wilshire and Robertson boulevards. By the time the project was completed in the fall of 1990, the Beverly Hills office market had softened amid the recession and in the wake of the Drexel Burnham Lambert Inc. and Columbia Savings & Loan Association collapses.

The Amir team contracted with various commercial real estate brokerages to market the building, focusing on medical tenants as demand from "general office" tenants dwindled. However, the developer became involved in a lawsuit with the City of Beverly Hills over new, more stringent parking requirements for "medical properties." And even after a judge ruled in the Amir team's favor in that case last year, a local residents' group filed an action protesting the group's exclusion as a party to the suit between the city and the Amir trust.

The combined consequence of the shaky market environment and the uncertainty over the building's tenancy prospects is that 8750 has leased space to only one tenant -- Bank of America, which occupies just 8,800 square feet on the ground floor.

A declaration by BofA Vice President Craig Moyer filed in the foreclosure suit states that Amir told Moyer that Amir had received several "above-market" offers for the property, but accepted none. Garrett said Amir has received only one offer, "but it had so many contingencies, it couldn't be considered financially viable."

The development partnership's bankruptcy petition states that the Amirs are also party to a bankruptcy case involving the owners of the nearby 8840 Wilshire building -- the former Columbia headquarters. The petition filed in September 1992 in that case -- which is still pending before Judge Buford's court -- states that Paul and Herta Amir hold a one-third interest in the partnership that owns that 30,000-square-foot property.

The petition also indicates former Columbia Savings Chairman Thomas Spiegel and Rita Spiegel each holds a one-sixth interest in the 8840, and that Abraham and Edita Spiegal -- Thomas Spiegel's parents -- collectively hold a one-third interest.