The court-appointed receiver in charge of liquidating the assets of Advanced Development Inc. — the affordable housing developer that allegedly bilked Glendale and Los Angeles out of millions of dollars — has started slashing prices to attract buyers for everything from land to a used Bentley.
While that might be good for someone in the market for a $60,000 British luxury car, it’s vexing ADI creditors who fear the bargain sell-offs will leave less money for collection.
On top of the markdowns, the receiver, David Pasternak, plans to file years of delinquent tax returns, which Glendale attorneys opposed because it could reduce the amount of money left for the city and others to collect.
Pasternak has about $31 million in assets and property owned by ADI and its construction arm, Pacific Housing Diversified. That’s down from about $37 million in August, mostly due to a roughly $5-million court-mandated payout to former ADI business partners.
How much in the end will be available to the cities of Glendale and Los Angeles, as well as other creditors — including subcontractors — is still unknown, Pasternak said in an interview.
“I don’t know what else is going to come into the receivership,” he said, adding that in addition to fraud victims, some of the money he currently holds will go to ADI business partners.
What is known, though, is that Pasternak has struggled to sell because developers don’t want to pay top dollar for some Los Angeles properties due to difficulties getting projects approved by the Los Angeles Housing Department, according to Los Angeles County Superior Court records.
So far he’s dropped the listing price of the developer’s former Los Angeles office by 37%, to $749,000, which requires maintenance and is vulnerable to vandalism.
The price for a parcel in L.A. was also cut by 40% to roughly $2.39 million. Other price cuts have also been made, according to a report filed with Superior Court Judge Elihu Berle last month.
Pasternak said some of the property up for sale is undeveloped land in remote areas.
“They typically don’t sell very well in this market,” he said.
Pasternak has a buyer for the Bentley, which he hopes will be approved by the judge later this month. Los Angeles officials contend the car should be sold for $150,000, but Pasternak disagrees, according to court records. He originally priced it at $85,000.
While some property prices are being slashed, Pasternak is also going after the mother-in-law of ADI’s former president for hundreds of thousands of dollars.
The mother-in-law sold a Hacienda Heights home that belonged to the receivership for about $618,000, but she says she’s already spent the money, Pasternak said.
As for previous tax returns, the judge approved submitting those last month, even as Glendale and others objected.
“There are significant and costly consequence to all parties if the receiver is permitted to make disclosures to the tax authorities,” according to court records filed by attorneys handling a 2011 lawsuit Glendale filed in Los Angeles County Superior Court against ADI for allegedly overcharging for construction work, falsifying invoices and other fraud.
But Pasternak wrote in court documents that transparency with federal and state tax officials is the best route, even though paying off tax debts reduces the amount of money left over to compensate fraud victims. He added that tax officials may broker deals when fraud victims are involved.
Since 2005, Glendale issued loans to ADI totaling $34 million for four affordable housing projects and had another development in the works before they sued.
That development is now slated to become an affordable housing complex for veterans.
Glendale’s lawsuit has been folded in with dozens of others that have been making their way through the court system for more than a year. The cases have been held up as Pasternak and his team of accountants, lawyers and Realtors gets the ADI estate in order.