Marina Executive Defaults on Loans for Six Leases
A billionaire Saudi Arabian businessman who leases the largest group of county-owned property in Marina del Rey has defaulted on bank loans for six of his 10 marina holdings, jeopardizing plans for a long-awaited make-over of the aging harbor.
A seventh property leased by the businessman, Sheik Abdul Aziz al Ibrahim, a brother-in-law of Saudi King Fahd, is also expected to go into default, county officials said.
The loan defaults on properties ranging from shopping centers to apartments to boat slip operations come less than two years after Ibrahim--with key backing from the Board of Supervisors--gained control of 20% of the marina in a bitterly contested federal court bankruptcy proceeding. To win the county’s backing in that bankruptcy case, Ibrahim promised to spend nearly $5 million to repair and remodel the properties.
Supervisors had been criticized for failing to generate adequate income from the marina, some of the most valuable real estate in the county. They were counting on Ibrahim’s investment group to refurbish long-neglected marina facilities.
“These guys came in like knights in shining armor,” said Herbert Strickstein, chairman of the county Small Craft Harbor Commission, which advises the supervisors on marina issues. “It hasn’t turned out that way.”
County officials were shocked to learn of the defaults. In the worst-case scenario, the leaseholds would revert to the bank and be sold to buyers in a process beyond the county’s control, county officials said.
The county acknowledges that it had already been having problems with Ibrahim’s management company. Last summer, the county complained to the businessmen about the glacial pace of the $4.6-million refurbishing effort they agreed to undertake.
“We tried to put their feet to the fire and they didn’t do much,” Strickstein said. “We’ve been less than happy with their performance.”
Responding to concerns raised about the progress of the repairs, Omar Benjamin, who oversees Ibrahim’s marina leases, wrote last July that $767,709 had been spent on the properties now in default. Another $365,000 was spent on the remaining properties, all hotels, for a total of $1.13 million.
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The agreement between Ibrahim and the county calls for the improvements to be made by the end of 1996.
A yearlong Times study of the marina, published in 1992, concluded that the marina leases were generating far less than market-rate income for the county, while greatly benefiting the developers.
One of those key leaseholders, Abraham M. Lurie, brought Ibrahim into the marina in 1989 by selling Ibrahim a half interest in his leases. The Board of Supervisors approved the deal, which involved a dozen shell companies stretching from Europe to the Caribbean to California, without learning of the investor’s identity.
When Lurie’s finances faltered, the properties wound up in bankruptcy court and Ibrahim eventually prevailed, with the county’s backing.
Ibrahim’s overseer, Benjamin, blamed the improvement delays on the need to address lingering issues from the bankruptcy proceedings and to analyze maintenance needs.
A progress report from Benjamin and the investment company, Newfield Enterprises International, is due at the end of March, said Department of Beaches and Harbor Director Stan Wisniewski. But Wisniewski said he has seen little evidence that the leaseholders have done major work on the properties in default.
Benjamin could not be reached for comment.
The six properties known to be in default are: Fisherman’s Village Shopping Center, Marina Beach Shopping Center, Islander Apartments & Marina, the Marina West office and retail complex and the Pier 44 and Pier 77 boat slip operations. Another apartment complex, Admiralty Apartments, is expected to enter default.
Ibrahim’s remaining marina properties, all hotels, are not affected.
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The billionaire has 90 days to bring the loans up to date or the bank will foreclose.
If that happens, and the bank has to sell the leaseholds at auction, the county has no authority over who will have long-term leases on public land, Wisniewski informed the county supervisors Thursday in a memo.
Another possibility, however, is that Ibrahim would use the defaults to renegotiate bank loans at a more favorable interest rate.
Wisniewski cautioned against jumping to a third conclusion--that Ibrahim wants to walk away from the investment he fought so hard to get. Still, he said, “any time anyone goes into default, it’s not good.”
The turn of events puts the spotlight on the Board of Supervisors, which has been called to task in the past for lax management of the marina. The supervisor who has been most intimately involved in the marina deals, Deane Dana, was not available for comment Friday.
Dana’s chief deputy, Don Knabe, who has announced his intention to run for Dana’s seat when he retires in 1996, said it is too soon to panic about the defaults.
“We think it’s a battle between (Ibrahim’s group) and their lender,” Knabe said Friday. “If they would try to use the county as a wedge between them and the lender, we wouldn’t like that.”
