Fashion Nova founder Richard Saghian’s $141 million bid for the Bel-Air mega-mansion known as “The One” was approved by a U.S. bankruptcy court judge on Monday.
Judge Deborah Saltzman’s decision follows a two-day hearing in which creditors opposed to the sale alleged that Saghian’s offer should be deemed inadequate because the three-day auction for the sprawling estate took place less than a week after Russia invaded Ukraine, scaring off bidders.
Lawyers for Saghian, the bankrupt estate and other creditors – who acknowledged the offer was disappointing – countered that there were other crucial reasons why the offer came in at half the price asked for $295 million from the house. They further argued that there was no guarantee that the global geopolitical situation would improve if another auction took place within months.
Saltzman said that although the “proposed sale does not appear to be a success to anyone except perhaps the proposed buyer”, she deemed it met all legal criteria for approval. She also said she would not insert her own judgment into whether a second auction would have yielded a better result.
“There have been credible arguments that markets might have adjusted and things might be different now, but there are also arguments to suggest things might be worse now,” she said. declared.
The 105,000 square foot marble and glass home on a hilltop in Bel-Air remains unfinished and carries more than $250 million in claimed debt. Saghian’s $126 million bid, which totaled $141 million after auction fees, means many creditors face substantial, if not total, losses for the home, which has been under construction for nearly of a decade.
The winning bid for the trophy house was a huge disappointment, failing to break the California record set in October by venture capitalist Marc Andreessen, who bought an estate in Malibu for $177 million. It was also well below the $238 million a hedge fund mogul spent in 2019 on a penthouse overlooking New York’s Central Park, the mark of America’s high waters.
Saghian was one of only five participants in an online auction which started on February 28 and ended on March 3. Home developer Nile Niami – who says he owes some $44m in loans to the project – had hoped to put together a last-minute offer of $250m, but that didn’t happen, ne leaving that fashion mogul’s offer on the table.
Saltzman told creditors Friday that she would assess the decision based on case law that would allow her to rescind Saghian’s offer if it was found to be “manifestly inadequate.” In making her decision, she said she considered the sale price to be “fair and reasonable”.
Creditors who wanted the offer overturned noted that Crestlloyd, the bankrupt limited liability company that owns The One, had said in court papers that the property was worth $325 million. They also pointed to an appraisal completed in 2019 while construction was underway that valued the property at $228 million.
They also noted that the online sale conducted by luxury real estate auction house Concierge Auctions had attracted few bidders.
“It is impossible that the fear of this war and with the potential for a Third World War…did not have an impact [the] bidding process,” Niami’s lawyer, Hamid Rafatjoo, told the judge on Friday.
A lawyer for creditor Inferno Investments, which has filed claims of about $31 million against the estate, argued that even if the war continues in a few months, bidders will be adjusted to it by then.
Proponents of the sale said Crestlloyd’s estimate of the property’s value and 2019 valuation were unrealistic and holding another auction could result in a lower bid. And they said all five bidders were consistent with what Concierge expected. Saghian’s lawyer had told the judge that his client might not participate in a second round.
The backers also pointed out that no other bona fide bids were made in the weeks after the auction, even though Crestlloyd said it would entertain them – something the judge noted in her ruling. . Two of the lawyers also asked in their arguments on Monday why critics of the sale had not made their own emergency motions to delay the auction.
“It’s just speculation about what will happen tomorrow, next week. World War III is two months away and we’re in it for God knows how long,” Hankey Capital attorney Thomas Geher said Friday.
Hankey Capital, the home lending arm of Los Angeles billionaire Don Hankey, has provided more than $100 million in loans to the project and is first in line among lenders to repay, although it may not be repaid.
Proponents of the bid have argued that what has really dampened enthusiasm for what is by far the largest home in Los Angeles and potentially the largest new home in the country is that it is unfinished and n has no occupancy certificate.
Moreover, obtaining the certificate, which would allow the new owner to move in, could well be an arduous process, they said.
Before The One filed for bankruptcy last year, Niami failed to repay some $106 million in construction loans from Hankey, which foreclosed on the property and put it into receivership. In state court, allegations were made that the house had construction defects and violated various zoning codes.
At Friday’s hearing, house brokers and Concierge Auctions president Chad Roffers said some ultra-wealthy potential buyers were scared off by the challenges.
Roffers said the concerns of neighbors – including the Bel-Air Assn. – were particularly disturbing. This group of owners, who called The One a “growing scandal”, were involved in the destruction of a Bel-Air mansion illegally built by developer Mohamed Hadid.
Roffers’ testimony also appeared to support claims of construction faults when he said the mansion suffered extensive damage during record rainfall in December which left Crestlloyd scrambling to carry out repairs so it could be shown to potential bidders. This also caused the auction to be delayed.
It emerged during the hearing that the Los Angeles Department of Building and Safety carried out a recent inspection and alleged that the mansion exceeded its approved height, which would require any owner to reduce it or request a waiver. .
Saghian’s lawyer, Sam Newman, said on Friday his client had realized since the auction that the situation was more complex than he thought and it was unclear how much money would have to be spent to allow the fashion mogul to move in.
“I am grateful that Judge Saltzman approved my offer and I look forward to working with the City of Los Angeles, the Bel-Air Association, my new neighbors and my design team to complete and perfect this iconic property,” said Saghian said in a written statement after the ruling.
Recently considered a billionaire by Forbes, Saghian, 40, already owns two neighborhood homes, one in the Hollywood Hills that he bought for $17.5 million in 2018 and another on a Malibu beach that it bought for $14.7 million last year. The hillside home was designed by Paul McClean, the architect who designed The One.
The fashion mogul is 100% owner of his business, which sells trendy and inexpensive fast fashion and has seen annual sales top $1 billion, according to a source close to Saghian. Fashion Nova has benefited from clothing deals with popular stars such as Cardi B and Lil Nas X, as well as support from a legion of social media influencers.
Niami is a former film producer who developed many award-winning houses but has seen his sales dry up in recent years. He considered The One the culmination of his construction career and had once hoped to sell the mansion for $500 million, although many saw the price tag as a marketing ploy.
Prior to his efforts last week to mount a last-minute offer, Niami made other unsuccessful attempts to retain ownership. A year ago, he proposed turning the house into an event space with boxing matches and concerts. Then he made a public call in December for a partner to establish a property-backed cryptocurrency that would pay off all his debts.
There is no doubt that the property with 21 bedrooms and 42 full bathrooms is extraordinary. It includes a 4,000 square foot guest house, servants quarters, moat and several swimming pools, wellness spa, beauty salon, four-lane bowling alley and multiplex movie theater, for n to name a few of its luxury Amenities.
The bid price of $141 million will leave $138 million in proceeds in the bankrupt’s hands once he receives negotiated auction fee rebates of 12%. The next step will be to distribute all profits, although Saltzman has made some initial decisions, including that real estate commissions should be paid. She said it was clear the brokers had done their job to sell the property.