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One Beverly Hills Project Hits Another Snag

Contractors File Claims Contending Dalian Wanda Group Behind on Payments
December 14, 2017
The anticipated but beleaguered One Beverly Hills luxury hotel and condo project has hit another obstacle in its rocky decade-long journey to be developed. The project is now faced with two claims of nonpayment to contractors totaling nearly $3.6 million, according to Los Angeles County records.

The $1.2 billion project next to the famed Beverly Hilton is approved as a 134-room hotel with 193 luxury condos, shops and restaurants. It is being developed by Beijing’s Dalian Wanda Group Co. Ltd., one of the world’s largest commercial property developers and cinema chain operators.

Two of the project’s contractors, design consultancy firm and project manager Arcadis and construction company Rudolph and Sletten, have each filed separate mechanic’s liens against the development at 9900 Wilshire Blvd. in tony Beverly Hills. The documents filed with the county Recorder's Office claim that Wanda is overdue on payments for work they completed at the site.

If not paid, bonded or settled within a relatively short period, a mechanic’s lien may lead to foreclosure or a forced sale of the property, according to real estate attorneys.

"Normally when you see liens like that it’s indicative of some trouble, some partner exiting or some material dispute but it doesn’t mean that the project won’t happen," said Samantha Ahuja, a partner at Washington DC law firm Morris, Manning & Martin LLP. "It may change size or scope. There are plenty of amazing properties today that had liens on them during development."

A source familiar with the project said that Wanda is in negotiations with Arcadis and Rudolph and Sletten to settle the claims. Arcadis declined to comment and Rudolph and Sletten did not returned requests to confirm those discussions. Dalian Wanda would not comment for this story.

In its mechanic’s lien filing against One Beverly Hills, Amsterdam-based Arcadis says it is owed $2,911,862 for work the company has done on the project since February last year. The lien was filed Dec. 1.

Redwood City-based construction company Rudolph and Sletten says it is owed $681,950 by Wanda for work it completed this fall. That lien was filed Oct. 24. That lien is now more than 50 days old and only about a month from a deadline that would allow the firm to seek foreclosure or sale proceedings.

The liens raise further questions about the future of the One Beverly Hills project, which remains a mostly vacant construction site that has sat inactive for weeks. They come on the heels of Dalian Wanda’s former development partner, the Athens Group, exiting the project in October for undisclosed reasons, and a published report that Wanda may be seeking to sell several of its properties - which Wanda publicly denied.

In a statement issued last month, Wanda said it was “undertaking a strategic review of its property projects and will consider any business opportunities which can create value for shareholders."

"A couple things could be happening," said Jay Maddox, principal in the Capital Markets Group at Avison Young. "The liens may confirm their intent to sell. They could be saying 'Hey, we are selling so we aren't putting any more money into it.' Or there could be a dispute between the owners and contractors."

Earlier this year, the Chinese government specifically restricted certain types of commercial real estate and hotel projects. Since the announcement, U.S. real estate observers have wondered whether the new regulations would in effect force large Chinese developers to abandon or sell their yet-undeveloped projects that are now on the restricted list.

The Athens Group has publicly expressed interest in acquiring the site. Other firms are beginning explore acquisition options should DWG decide to sell, according to real estate attorneys.

The recent mechanic’s liens are only the latest hurdle for the property at 9900 Wilshire, one of the most prime real estate locations in Los Angeles County that has managed to sit unused for more than a decade. Once the site of Robinsons-May department store, this parcel has been traded among developers and banks since 2005.

The first iteration of this Richard Meier-designed project was approved in 2008 for then-owners British developer brothers Nicholas and Christian Candy, who purchased the site for a jaw-dropping $500 million, as two towers with 235 condos and 16,000 square feet of retail space. The brothers lost the project in foreclosure during the Great Recession to Carlos Slim’s Banco Inbursa.

Wanda bought the property for an estimated $450 million and then modified the plans to include 134 hotel rooms with 193 luxury condos in one 15-story tower and one 13-story tower as well as public park space.

To change those original entitlements, Wanda negotiated an agreement to pay the city of Beverly Hills a city- record-breaking developer’s fee of $60 million over three years.

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