Hotel Laguna developer sued by prospective buyers

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Coast Highway traffic rushes past Hotel Laguna. Photo by Allison Jarrell.

Despite repeated public statements that Hotel Laguna is on track to reopen, court records show Mohammad Honarkar attempted to sell his stake in the historic building in April.

A group of real estate investors filed a complaint in Orange County Superior Court on Nov. 23, claiming Honarkar misrepresented his ability to sell Hotel Laguna’s ground lease. The Laguna Beach Co. CEO agreed to a $10 million purchase price for leases of the hotel, an adjacent single-family home, and Laguna Village Arts & Flowers, according to a letter of intent.

The deal allegedly fell apart, the complaint states, because Honarkar is restricted from transferring real estate owned by him and or corporations he controls without the approval of a judge overseeing his divorce.

“Plaintiffs justifiably and reasonably relied to their detriment on Honarkar’s false and misleading representation in incurring significant costs on due diligence and negotiations with Honarkar,” Attorney Julie Gerchik wrote.

Honarkar declined to comment for this story on Wednesday.

The land under Hotel Laguna is owned by E.W. Merritt Farms in conjunction with the Merritt Family Trust.

The hotel has long been an economic engine for the Downtown Laguna bringing patrons to restaurants, art galleries, and retail stores. Before the hotel’s closure in 2018, Laguna Beach has counted on transient occupancy tax from overnight guests to help fund essential city services.

It’s unclear how the underlying legal battles will impact stated plans to pursue approval of a historic restoration of the building by the Laguna Beach City Council and the California Coastal Commission.

During a public Zoom meeting in November, Hasty Honarkar, vice president of the Laguna Beach Co., said Hotel Laguna was not for sale and a reopening of its restaurant and bar was planned for early 2021.

The plaintiffs in the lawsuit include holding companies managed by Andrew Masi, founder of Las Vegas-based Clique Hospitality, and Ron Burkle, managing partner of the Yucaipa Companies.

In and around June, Honarkar’s wife sought court receivership of his business assets, according to court records.

A July 9 order signed by Superior Court Judge Lon Hurwitz restricts Honarkar from transferring or attempting to transfer any interest, ownership, or control of assets stewarded by a court-appointed receiver without prior court approval.

In October, the Yucaipa Companies reached a $15 million deal for the leases with the court-appointed receiver, according to court records.

“Honarkar immediately opposed the Receiver’s Request for Sale Approval in a wrongful effort to delay the sale order with frivolous attacks,” Gerchik wrote.

In his opposition brief, Honarkar claimed the court didn’t have the authority to approve the sale because the ground leases were not marital property even though they acquired with community funds, Gerchik added.

The plaintiffs are seeking unspecific general damages, special damages, and punitive damages—as well as their attorneys’ fees and costs. They’re also seeking a judge’s declaration that the purchase and sale agreement is enforceable and the transaction may be completed, pending court approval of the Honarkars’ marriage dissolution.

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Daniel is currently managing editor for the Laguna Beach Independent. He first started reporting on Laguna Beach in 2018. Daniel moved to Orange County from his hometown of Santa Barbara in 2008 to attend Chapman University. He wrote for the college newspaper, The Panther, for nearly four years before obtaining a Bachelor’s degree in Political Science and English with an emphasis in journalism. While attending Chapman, he started interning at the Orange County Register as a community blogger in Orange. In 2012, he was hired as a staff writer covering Orange and Villa Park. He went on to cover the Nixon Presidential Library & Museum as well as housing, development, education, water, and local politics in other Orange County cities. Since leaving the Register in 2015, he has written for Law360, the Foothills Sentry, the Newport Beach Independent, the Laguna Beach Independent, Los Angeles Times Community News, BehindtheBadge.com, and the California Business Journal. When Daniel isn't busy covering Laguna Beach, he serves as ​engagement editor for a nonprofit newsroom, The War Horse. He lives in Irvine with his wife and son.

3 COMMENTS

  1. I use to work here before it closed back when it was fun here in California. Now everyone is concerned about their money here in California and edging everyone out if they can afford to be here even people born here. Good by commifornia you suck!

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