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AEG and Moinian Group Spar Over $80-Million Parcel Next to Staples Center

By Eric Richardson
Published: Monday, September 14, 2009, at 02:57PM
L.A. Central Eric Richardson [Flickr]

A temporary injunction forbids developer The Moinian Group from running parking operations on the site of the proposed L.A. Central development.

In the summer of 2006, New York-based developer Joseph Moinian bought a prime piece of land across the street from Staples Center for $80 million, intending to build a $1-billion hotel and residential project known as L.A. Central.

Three years later the site is gathering weeds, with even its use as a parking lot suspended while a dispute between Moinian and AEG works its way through the courts.

The fate of the project, and of the important site, is anything but clear.

The agreement for the $80-million land purchase was signed on May 12, 2006, by Ted Tanner of AEG and Joseph Moinian of the Moinian Group. The sale closed in August of that year. Planned for the four acre site was "L.A. Central," a project including two towers of 53 and 37 stories, 860 market-rate units, a 222 room hotel and 250,000 square feet of retail.

The project appeared ready to break ground in July of 2007, when construction fencing was erected and parking operations on the site were stopped.

Then, nothing.

After three months, pieces of the fence were pulled down and cars were again allowed to park on the site.

A Dispute Over Parking

While those parking on the site may not have noticed any difference, those 2007 events form the core of a lawsuit AEG's Arena Land Company filed on April 27.

Section 15.2.5 of the sale contract included a parking agreement that gave AEG, the seller, "a license to for either short-term parking by Seller's patrons in connection with Staples Center events or as a 'staging' area in connection with any of Seller's construction activities ... until Buyer commences any construction of or relating to Buyer's development of the Property." This license was provided "at no cost," save that AEG would be responsible to pay property taxes on the site.

When parking returned to the site in October 2007, it was run by an entity under the control of the Moinian Group, not AEG.

The complaint filed in Superior Court by AEG says that the company "made repeated requests to [Moinian Group] to return possession of the Property based on [Moinian's] wrongful termination of the License Agreement, all of which were ignored."

In a declaration filed on June 5, Moinian Director of Development Oskar Brecher disputed AEG's interpretation of the license agreement. "At no point during [purchase] negotiations did [AEG] ever insist that the Purchase and Sale Agreement or the Parking License Agreement could only be terminated when [Moinian] had reached certain benchmarks, such as obtaining construction financing or all building permits, and we never would have agreed to such a condition."

Judge David P. Yaffe didn't seem to buy that argument, issuing a preliminary injunction on June 24 that forbids Moinian from operating any parking operations on the site.

That could spell trouble for Moinian. In the same declaration, Brecher said that his firm is responsible for debt service of "approximately $495,000 per month." He also said that "should we lose the right to fund our debt through the use of revenue obtained from interim parking operations ... there is the possibility that we will go into default on our loan."

Moinian filed a counter-claim against AEG alleging that the deal was breached by AEG's failure to pay some property taxes on the site, but that claim was denied on August 26.

Other Legal Trouble

Complicating the situation is another lawsuit against Moinian filed by architecture firm RTKL. The company was contracted to provide design services for the L.A. Central project. It claims that it is still owed $3.6 million of that $14 million contract and is attempting to foreclose a lien on the property.

A hearing is scheduled for October 8 on RTKL's motion to compel the deposition of Moinian Group head Joseph Moinian.

The Future

Should Moinian be unable to make its debt payments or the RTKL suit lead to a foreclosure sale, it's unlikely that the property would sell for anywhere near what it did in 2006. The $80 million purchase price represented roughly $460 per square foot. While land sales have been sparse since the collapse of the real estate market, the City recently purchased a plot of land on Spring Street for roughly $170 per square foot.

The inability to get construction financing has doomed several high-profile Downtown projects. The $2-billion Grand Avenue Project has been delayed several times, and Houk Development's proposed $1.3-billion Park Fifth project is currently for sale.

AEG declined to comment on the lawsuit directly, but said that it still hopes to see the project developed. "We continue to support their plan for increased development of the site," said spokesman Michael Roth. "Their successful development of the project would be of tremendous long-term value to the community."

The company did say that parking for NBA games would be unaffected should the dispute drag into the upcoming season.

Calls to Brecher and to Moinian Group's law firm, Allen Matkins Leck Gamble & Mallory LLP, were not returned by the time this story was published.

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