Santa Monica’s largest apartment owner fired another shot in the battle over ownership of nine luxury properties in Santa Monica and Los Angeles, accusing Boston-based hedge fund AEW Capital Management of a “sophisticated conspiracy” to steal the properties.

In new documents filed with the Los Angeles Superior Court, NMS Properties’ CEO Neil Shekhter accuses AEW of conspiring with real estate investors to eventually “flip” the buildings to make more than $100 million in profit. The buildings were developed as part of a joint venture between Shekhter and AEW in 2010 and remain at the center of a complicated web of lawsuits, contracts and judgements.

“This is not Wall Street, it’s Santa Monica,” Shekhter’s attorney Skip Miller of Miller Barondness said over the phone. “They’re not going to get away with this.”

In December, Superior Court Judge Suzanne Bruguera transferred ownership of the properties to AEW, finding that Shekhter fabricated and forged documents submitted to the court. Judge Bruguera retired shorty after the ruling. By the time Shekhter’s attorney could file an appeal and request a stay on the ruling, AEW had already sold the properties to a team of real estate investors in San Francisco and Sacramento.

Shekhter estimates the properties are worth about $550 million, but alleges they were sold for $406.8 million, far below market value, to slash any amount of money NMS may receive from the sale. The sellers provided more than half of the financing for the deal, $237 million. If the properties are eventually resold at market value, AEW and the new owners could stand to make hundreds of millions in profit, according to the complaint. NMS continues to manage the properties.

In a written response to the Daily Press, James Fogelman, an attorney for AEW calls allegations “frivolous, just as they are in every other case that NMS has filed to date.”

Fogelman, at attorney for Gibson, Dunn & Crutcher LLP in Los Angeles, went on to blame NMS for the very problems they list in the complaint, saying Shekhter’s “tortious conduct caused the very loss of title insurance, requirement of seller financing and lower sales price it now purports to complain about.  The properties were sold pursuant a competitive bidding process by a reputable broker and the highest bidder purchased the properties.”

AEW has no further ownership interest in the properties and would not benefit from any subsequent sale, according to Fogelman.

But where AEW attorneys see a fair-and-square sell off, Shekhter sees a conspiracy. In order to pull it off, Shekhter believes AEW entered into a secret agreement with real estate investors Dennis Wong, Mark Friedman and David Waks to not only take the buildings, but to expel NMS as property managers through a “hostile takeover” in November, where a team of locksmiths and computer technicians stormed the nine apartment management offices and attempted to kick out NMS staff.

The exact terms of the joint venture agreement between NMS and AEW are the point of contention in several lawsuits. In December, Judge Bruguera found a version of the agreement provided by Shekhter was a “fabrication and a forgery.” The judge also found Shekhter mishandled and misappropriated funds from the agreement.

Shekhter admitted to deleting files from his personal computer and replacing the hard drive, after the court ordered him to freeze all electronic documents. During the lawsuit, the director of the Office of Investigative and Forensic Sciences at the National Institute of Justice, examined ink samples and anti-counterfeiting codes created by some office printers to conclude Shekhter’s copy of the agreement was a forgery he and his son created.

After the judge’s order, the Santa Monica City Council vowed stricter scrutiny of contracts concerning NMS in the City.

The properties include seven buildings in Santa Monica: the Lido at 1440 5th Street, Quonset at 829 Broadway, Lincoln Walk at 1447 Lincoln Blvd, San Marco at 1420 5th Street, Rapallo at 1430 5th Street, Luxe Broadway at 1502 Broadway and 1511 15th Street. One other property is in Los Angeles: 9901 Washington Blvd, and another is in West Hollywood: Luxe La Cienega at 375 N. La Cienega Boulevard.

kate@smdp.com

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