Treetop Development, LLC

THE DEBTOR WAS TRYING TO BUILD ANOTHER MEGA-MANSION

Marketed as even better than “The One” mansion, the complex that is planned for 9650 Cedarbrook Drive, Beverly Hills, CA 90210, boasts a private road, three-level 26,000 square foot guest house, and four-level 52,000 square foot main house on 38 acres, including a private vineyard. The planned complex is the largest property ever permitted in the City of Los Angeles, but is currently in the very early stages of build. The property was being marketed as for sale for $92 million once the foundations are in place or $250 million if purchased after construction has been completed.

The developer of the property is Mohamed Hadid, a prominent real estate developer and investor and the father of models Bella Hadid and Gigi Hadid. The lender, Skylark Capital Management, LLC, contends the Debtor breached the loan agreements with lender by failing to meet construction schedule deadlines, failing to pay contractors resulting in the attachment of mechanics liens, failing to pay real property taxes, failing to make payments due under the loan and failing to fulfill other contractual obligations.

THREAT OF LENDER CAUSED THE DEBTOR TO FILE CH 11

The bankruptcy case was filed on an emergency basis. Debtor contends that the lender has engaged in an fraudulent “loan to own” scheme. Debtor contends that lender did not have the funds it committed to lend to Debtor or, if it once had the funds, it loaned the funds on other projects and subsequently failed to timely release the funds in accordance with the Debtor’s draw requests or even denied some of the Debtor’s draw requests. This caused the Debtor to fall behind in its construction schedule and to the inability of the Debtor to pay its contractors and subcontractors and even property taxes.

In its first filing, the Debtor stated that it had “been notified that a purportedly secured creditor shall attempt to foreclose on all the assets of Treetop on August 2, 2022.” The lender was trying to seize the Debtor’s assets, including the 38 acres at 9650 Cedarbrook Drive. The creditor who had not been paid would likely have sold the property at a substantial discount in order to recover what it was owed. The lender filed a Motion to Appoint a Chapter 11 Trustee, but the Debtor and the Lender have agreed to the appointment of an Independent Manager.

The deadline for unsecured creditors to file their claims with the Bankruptcy Court is Friday November 28, 2022.

WHAT WILL HAPPEN TO UNSECURED CREDITORS AND SUB-CONTRACTORS?

At PRLT, we have seen multiple cases like the Treetop Development bankruptcy recently, including the Crestlloyd or “The One” mansion bankruptcy. We have also unfortunately seen an uptick in bankruptcy filings by contractors and subcontractors themselves. The COVID-19 pandemic, supply chain issues, and skyrocketing prices of building materials have besieged the residential and commercial construction industries. Real estate prices, which have begun falling after historic demand, are now compounding the issues.

Unsecured creditors, vendors, contractors, and subcontractors do not have to be left holding the bag. The bankruptcy laws and rules allow unsecured creditors to have a voice in bankruptcy proceedings. For example, creditors may work together in a committee of unsecured creditors. If you have any questions about the bankruptcy process, unsecured creditors’ committees, or the Treetop Development bankruptcy specifically, please feel free to contact PRLT.