Secretive Foreign Investors May Buy 49.9% of Marina del Rey Leasehold
A secretive group of foreign investors, using a major Paris bank, a Luxembourg holding company, a Cayman Islands tax shelter and a series of California corporations, is buying into Marina del Rey.
Unlike many of the highly publicized foreign purchases of private Southern California real estate, this transaction involves investment in public land. The marina is owned by Los Angeles County, and businesses there operate on long-term leases obtained from the county.
Although county officials who manage the marina do not know the identity, or even the nationality, of the investors, they have already given preliminary approval to the $21.8-million deal after an examination of its details that did not extend beyond California.
Supervisors to Decide
Early next month, the County Board of Supervisors will be asked to ratify the complex deal, which would give the overseas investors a major stake in leases on three hotels, two apartment complexes, restaurants, tourist facilities, a shopping center, an office building and hundreds of boat slips at the marina.
The supervisors must approve any substantial change in the leases, including the partnerships that control them.
County officials say there has been foreign investment in Marina del Rey before, but never on this scale.
The marina’s largest leaseholder, Abraham M. Lurie, is selling a 49.9% interest in leases on 10 marina properties for $21.8 million to foreign investors.
Lurie, president and owner of Real Property Management, Inc. is a major real estate investor and political contributor. He and his companies donated $27,350 to the campaigns of four of the five county supervisors from 1985 through 1988.
Lurie said he does not know the identity and nationality of the foreign investors who are becoming general partners in his marina ventures.
“I have no way of knowing who the investors are now and if there is any change in investors I have no way of knowing that either,” he said in an interview. “I assume the identity is not one particular nationality. It could be a number of them. They are not U.S. residents.”
The deal spans four countries--the United States; the Cayman Islands, a cluster of Caribbean islands with tax laws favorable to overseas investors; Luxembourg, a small duchy in Europe with incorporation laws that require minimal disclosure, and France. It involves a group of new corporations, a holding company, a multinational bank, Banque Indo Suez and investors who value their privacy.
“They could be Saudi Arabians. They could be French. They could be Swiss,” Lurie said. “They could be anyone who is a customer who is checked by Banque Indo Suez. What they could not be is a U.S. resident.”
The 10 leases cover the Marina del Rey Hotel, the Marina Beach Hotel, the Marina International Hotel, the Islander Marina and Admiralty Apartments, the Marina Beach Shopping Center, Real Property Management’s offices, Fisherman’s Village and Pier 44. A total of 841 boat slips are included.
Lurie said he intends to use the proceeds from the deal to pay off loans, make capital improvements and begin redeveloping some of the parcels involved in the transaction. He also is taking on new partners to build a nine-story, 300-room hotel, to be known as the Marina Plaza, on a long-vacant 3.7-acre site in the marina.
Taken together, the Marina Plaza site and the 10 properties involved in the transactions represent 16% of Marina del Rey’s land area and provided the county with $3.35 million in rental income last year. That was 20% of the marina’s overall rental revenue.
After a lengthy hearing, the county’s Small Craft Harbor Commission, an advisory group, voted 3-1 earlier this month to recommend that the supervisors approve at their Aug. 8 meeting the changes in the lease partners.
The lone dissenter, Century City attorney Herbert J. Strickstein, objected on grounds that the staff of the county’s Department of Beaches and Harbors has not supplied enough information on whether Lurie will have to pay a transfer fee to the county.
Strickstein said in an interview that he has been concerned about “foreign investors coming in and eventually owning the marina.”
The terms of the lease require the county to approve changes in the ownership of a leasehold if, in Strickstein’s words, “a person is financially responsible and their credit is good.”
Strickstein acknowledged, however, that county officials do not know who the new investors are. “Under terms of the lease there is not a lot we can know,” Strickstein said. “I don’t know what country or where they come from.”
No Need to Know
“We just don’t feel a need to know that,” said Eric Bourdon, assistant director of the Beaches and Harbors Department.
County lease specialist Dennis Heitmann, who works for Bourdon, said he had limited his inquiries to the 10 new California corporations that were set up for the transaction. The new companies are all headed by the same person, Charles E. Wallace, and all share the same Century City office.
In his report to the Small Craft Harbor Commission, Heitmann described Wallace as a certified public accountant “with a strong background in corporate finance and management.”
Wallace said in an interview, however, that he is not a CPA. He said he has no investment of his own in any of the corporations and that he, too, does not know the identity or nationality of the foreign investors.
“The $22 million is coming from the Banque Indo Suez and their clients,” he said. “I honestly don’t know the scope of the group.”
Nine of the new companies are acquiring varying percentage interests in Marina International Properties Ltd., the company headed by Lurie, which holds the marina leases. The 10th company is involved with the Marina Plaza hotel project. All 10 are owned by Marina Enterprises International Ltd., which is based in the Cayman Islands.
The Cayman Islands corporation, in turn, is owned entirely by North American Real Estate Holding, which is based in Luxembourg.
And the money for the investments is being raised from customers of Banque Indo Suez, a large Paris-based multinational bank, whose name stems from its role in the financing construction of the Suez Canal, which opened in 1869.
An attorney for the state Franchise Tax Board in Sacramento, who asked not to be identified, said the complex corporate structure will reduce taxes and protect the anonymity of the investors.
Chicago attorney Cornelius J. Sullivan explained the complex corporate structure to the Small Craft Harbor Commission at its July 12 meeting. He said it would allow profits from sale of parts of the investment to be sent to the Cayman Islands without paying a 30% U.S. withholding tax. “That is perfectly legitimate, legal tax planning under our U.S. laws,” he said.
Lurie said he has never met the actual investors and has negotiated only with Sullivan. He said the identity of the investors will be known by the Banque Indo Suez.
County officials said they did not ask for information on the identity of the investors, although lease specialist Heitmann said Sullivan offered to give the county a letter stating that “the money involved was not derived from illegal sources.”
“We think we have gone far enough,” said Bourdon of the Beaches and Harbors Department. “We are assured that the county is protected.”
MARINA LEASING PLAN Background--All land at Marina del Rey is owned by Los Angeles County, but businesses there are operated on longterm leases that can be bought and sold much like real estate.
Seller--Abraham M. Lurie, the largest leaseholder in the Marina, is seeking county approval to sell a 49.9% share of 10 leases, including those of three marina hotels, two apartment complexes, a shopping center, Fisherman’s Village and 841 boat slips.
Buyers--Foreign investors, through a complex network of companies based in California, the Cayman Islands and Luxembourg, with financing from a large French bank. The deal is structured to minimize taxes and protect the anonymity of the investors.