The Sterling Family Trust could default on $480 million in loans if the sale of the Clippers doesn’t proceed, attorneys for Shelly Sterling argued in court Monday.
Darren Schield, the longtime chief financial officer and controller for Beverly Hills Properties, which runs the Sterlings’ real estate empire, testified that Donald Sterling’s revocation of the trust last month could lead to “severe consequences.”
If the Clippers' sale isn’t completed, Schield said, the Sterlings would have to sell off almost $500 million of their properties to satisfy loans held by three banks.
“I don’t think we could sell that many properties that quickly,” Schield said.
Schield was the lone witness in an abbreviated day of testimony in Los Angeles Superior Court for the case that could determine the fate of Steve Ballmer’s $2-billion bid to purchase the franchise.
Attorneys for Donald Sterling repeatedly objected to the line of questioning, insisting that Shelly Sterling’s plans to use sale proceeds to pay off the loans isn’t relevant.
“That has absolutely nothing to do with the sale of the Clippers,” said Maxwell Blecher, who added after the proceedings that he believed that the loans will never be in default.
Under cross-examination, Schield said the Sterlings haven’t received any notice of default for the three loans. He added that the problem would disappear if Donald Sterling rescinded the trust’s revocation.
But Schield laid out a dire scenario if the trust defaulted on the loans. That includes damaging the Los Angeles real estate market where the Sterlings own the bulk of their estimated 15o apartment buildings and difficulty in obtaining future loans at similar interest rates.
“I don’t think we could find a bank that big that would give us much money,” Schield said. “There’s huge reputational issues there. … I don’t know if anyone would want to go into partnership with us right now.”
Interim Clippers chief executive Richard Parsons and Shelly Sterling are scheduled to testify Tuesday.
Testimony in the trial will continue through Wednesday, with closing arguments next week.