The owners of a Beverly Hills office tower under construction filed an expected lawsuit against the city for its rejection of a request seeking to convert the building to medical office space.
The Los Angeles Business Journal reported that the owners of the building, the Kobor Family Trust, filed a lawsuit April 20 seeking $40 million in damages after their four-story building, located at 8767 Wilshire Blvd. (at Robertson Blvd.), had its original plans scuttled due to the financial meltdown. Financing for the project fell through after the lender said it would only consider financing the project if it were converted to medical office space.
“This is a costly and cautionary tale” says Andy Morrrow, head of KMFM’s Real Estate Practice Group. “Building-use requirements in finance agreements have grown more common and more restrictive as the commercial real estate credit markets continue to contract.” Morrow adds that; “property developers relying on lender funds need to ensure the restrictive use contained in their loan is not contrary to current and anticipated local use or zoning limitations during the initial feasibility study, otherwise it can be too late … as the Kobor Family Trust found out here.”
City officials in Beverly Hills at the time were considering a cap on medical office space and subsequently rejected Kobor’s bid to convert the building. Kobor appealed to the City Council but that appeal was rejected earlier this year.
Kobor filed the lawsuit on April 20 against the city in Los Angeles Superior Court and challenges the city’s assertion that converting the building to medical office space would create adverse traffic conditions and claims the city was biased against any further medical office projects within its borders. Despite the rejected proposal construction has continued on the project, financed through the Kobor family’s own resources.
