Crestlloyd seeks OK of sale process for Los Angeles mega-mansion

By Sarah Lizee

Olympia, Wash., Dec. 30 – Crestlloyd, LLC is seeking court approval of the bid procedures for its 105,000-square-foot mega-mansion located in Los Angeles, according to a motion filed Wednesday with the U.S. Bankruptcy Court for the Central District of California.

The property is the debtor’s primary asset. Crestlloyd said it believes the property has a current fair market value of about $325 million in its “as-is” nearly complete condition. However, the company said it understands that the market will ultimately dictate the price.

Before the property could be fully completed and sold, the company’s primary secured lender, Hankey Capital, as well as a number of other junior secured lenders and mechanic’s lien holders initiated a multitude of state court actions against the debtor seeking, among other things, to recover amounts allegedly owed and to foreclose on the property.

In connection with its action, Hankey sought and obtained the appointment of a receiver for the property. In addition, Hankey had a foreclosure sale of the property set for Oct. 27.

The company said that in order to protect its substantial equity in the property and address litigation and other claims against it, the debtor filed its bankruptcy case on Oct. 26, which stayed the foreclosure sale.

“It was imperative for the debtor regain possession and control over the property from the receiver, and to obtain the breathing spell afforded by the automatic stay, not only to stop the foreclosure and protect equity in the property, but also to provide time and a means for the debtor to sell the property,” the company said.

The company said it believes that the overall prepetition claims asserted against the debtor, plus the claim for the post-petition debtor-in-possession loan, total about $194.6 million, with about $191.2 million of those claims allegedly secured by the property and about $3.4 million in unsecured claims.

Thus, the company has about $133.8 million of equity in the property.

The company said it believes that Hankey and other large stakeholders support the sale.

Based on discussions with brokers, the company said it believes that a near-term sale of the property will generate enough funds to pay all allowed claims in full, which will allow it to exit bankruptcy, either under a plan or an alternative exit strategy, with a surplus for the debtor’s owner.

While the company said it believes that a structured dismissal option is more favorable because it offers cost and time savings, in the event dismissal isn’t possible, it will propose a simple reorganization plan with terms similar to the expected conditions for dismissal, including paying all allowed claims in full on the effective date.

The company is seeking to conduct the auction for the property between Feb. 7 and Feb. 10, and to close the sale by Feb. 28.

The Los Angeles-based home builder filed bankruptcy on Oct. 26 under Chapter 11 case number 21-18205.

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