A Los Angeles megamansion once expected to list for $500 million has sold at a bankruptcy auction for $141 million. While Milwaukee’s real estate market isn’t as hot as LA’s, the entire saga provides an interesting look at the bankruptcy process. Hanson & Payne has been involved with several similar but smaller bankruptcy cases like this in our area.
One Of A Kind
When he started building The One more than a decade ago, developer Nile Niami planned for it to be one-of-a-kind. He bragged that it would be the most expensive home in the world.
The compound sits on 3.8 acres, and has 360-degree views of the Pacific Ocean, downtown Los Angeles and the San Gabriel Mountains. According to the listing, there is 105,000 square feet of living space, which includes 21 bedrooms, 42 bathrooms, and 7 half-baths. There is also a nightclub, a juice bar, a full-service beauty salon, a wellness spa, a tennis court, a home theater that seats 40, a bowling alley, a 10,000-bottle wine cellar, 30-car garage, and a 400-foot private outdoor running track. The property features seven water features, including a massive moat that runs around the property.
It truly is one of a kind. And there will never be another home like it built near LA, which has changed its property laws to prevent similar developments from cropping up.
One Major Headache
Delays and disputes dramatically increased the cost of building The One.
The developer originally wanted to list it for $500 million. However, his debt on the property ballooned to more than $190 million. The property was placed into receivership and then went into bankruptcy. As part of a bankruptcy agreement, it was listed for $295 million and, when no buyer emerged, it was put up for auction.
It sold for $141 million. This makes it the third most expensive home ever sold in Los Angeles. It’s behind the Jack Warner Estate (as in Warner Brothers) bought by Amazon’s Jeff Bezos for $165 million, and a Malibu compound that sold for $177 million last year.
The selling price is also “about $60 million less than the total debt on the house, meaning several lenders may still end up losing money on the home. The biggest lender was Los Angeles subprime lending magnate Don Hankey, who loaned more than $125 million to the project. People familiar with the sale said Hankey, who could have used his loan to “credit bid,” was not the final buyer.”
This is not an unusual situation. Properties that sell at bankruptcy often go for less than they would on the open market.
One For The Road
Though the house has been sold, there are still a number of issues that the new owner will need to spend money addressing. CNBC says, “According to the receiver’s report and an engineering study, the house has cracks in and around many of the pools and stonework, as well as signs of mold. It has several outstanding building and occupancy permits, and a local homeowner’s association is challenging its construction.”
Hanson & Payne LLC is a full-service bankruptcy law firm in Milwaukee. We have worked with developers, lenders, and property buyers in the Milwaukee area when their properties are put into receivership or someone involved in a project files for bankruptcy. Our experienced team of attorneys are “the ones” you should reach out to if you have questions about real estate transactions and bankruptcy.