Tonkon Torp Crosses the Finish Line with a Fast Moving Real Estate Transaction
Tonkon Torp completed a sophisticated, fast-moving real estate transaction for a client that involved a time-sensitive obligation to purchase, a shaky tenant, and pending litigation. The transaction was led by partner David Petersen, who chairs the firm’s Real Estate & Land Use Practice Group.
The transaction centered on a 90-acre former drive-in movie theater in Oceanside, California, the last remaining large undeveloped piece of coastal property between Camp Pendleton and the Mexican border. The property had been purchased by two brothers in the 1960s, with each putting their half interest in a trust to benefit self and spouse. For 40 years the two brothers tried to redevelop the property, but one deal after another just could not get across the finish line. In 2004, the brothers leased the property to a Georgia developer to operate a swap meet. The developer also agreed to buy the property within 180 days after either of the brothers and his spouse passed away.
In 2014, the two brothers passed away within 11 days of each other, with their wives surviving them and leaving their respective daughters in charge of the two trusts. For four years, Tonkon Torp’s representation of one of the daughters consisted primarily of repeated efforts to pursue the tenant for unpaid rent.
In March 2018, one of the widows passed away, triggering the tenant's 180 day purchase obligation. Rather than perform, the tenant filed meritless litigation to delay or scuttle the sale. In September, with the 180-day deadline closing fast, the tenant's lender foreclosed on the tenant's lease. The tenant then tried to salvage its investment by bringing in a third party to buy the property. But the lender's patience was apparently long gone, as it gave the tenant one week to negotiate, sign, and close the deal. Given the sellers' lack of trust of the tenant and its third party buyer, documenting a deal that quickly (while at the same time resolving the pending litigation) seemed unlikely, but a mad dash got the deal to the finish line. The third party buyer paid over $25 million, which was about 97% of the tenant's original price. Tonkon Torp ended the project with a very satisfied client, who had money in the trust instead of facing further litigation with the tenant and the prospect of trying yet again to sell a challenging property in an uncertain market.
The transaction centered on a 90-acre former drive-in movie theater in Oceanside, California, the last remaining large undeveloped piece of coastal property between Camp Pendleton and the Mexican border. The property had been purchased by two brothers in the 1960s, with each putting their half interest in a trust to benefit self and spouse. For 40 years the two brothers tried to redevelop the property, but one deal after another just could not get across the finish line. In 2004, the brothers leased the property to a Georgia developer to operate a swap meet. The developer also agreed to buy the property within 180 days after either of the brothers and his spouse passed away.
In 2014, the two brothers passed away within 11 days of each other, with their wives surviving them and leaving their respective daughters in charge of the two trusts. For four years, Tonkon Torp’s representation of one of the daughters consisted primarily of repeated efforts to pursue the tenant for unpaid rent.
In March 2018, one of the widows passed away, triggering the tenant's 180 day purchase obligation. Rather than perform, the tenant filed meritless litigation to delay or scuttle the sale. In September, with the 180-day deadline closing fast, the tenant's lender foreclosed on the tenant's lease. The tenant then tried to salvage its investment by bringing in a third party to buy the property. But the lender's patience was apparently long gone, as it gave the tenant one week to negotiate, sign, and close the deal. Given the sellers' lack of trust of the tenant and its third party buyer, documenting a deal that quickly (while at the same time resolving the pending litigation) seemed unlikely, but a mad dash got the deal to the finish line. The third party buyer paid over $25 million, which was about 97% of the tenant's original price. Tonkon Torp ended the project with a very satisfied client, who had money in the trust instead of facing further litigation with the tenant and the prospect of trying yet again to sell a challenging property in an uncertain market.
