Judge OKs refinance of Honarkar properties, teeing up end to receivership

An Orange County Superior Court judge cleared the way Monday for a Laguna Beach real estate investor to potentially escape a months-long receivership for an 18-property portfolio, according to a court order.

Judge Charles Margines approved an order granting permission to Mohammad Honarkar’s companies to refinance a $195 million loan and payoff DIG PFSS Holding Company, LLC. Chris Dornin, CEO of Laguna Beach-based Dornin Investment Group, has acknowledged managing this entity.

The portfolio includes several high-profile hospitality and event properties including, the Holiday Inn at 696 S. Coast Hwy., The Hive on Laguna Canyon Road, Seven7Seven, 7 Degrees, Royal Hawaiian restaurant, and the former site of Laguna Nursery. The loan also covers several other short-term rental properties in Laguna Beach, a Corona del Mar commercial building at 2711 E. Coast Hwy., a Redlands apartment community, and a pair of vacant lots near Los Angeles’ Koreatown.

Honarkar didn’t immediately respond to a request for comment on Tuesday.

Attorneys and court-appointed receiver Douglas P. Wilson teleconferenced with Margines for a brief hearing on Monday afternoon. With no objections to approving the refinancing deal, Margines approved the order proposed by Honarkar’s attorneys.

On June 2, Dornin’s attorney Michael Farrell filed a declaration stating concerns with the terms of Honarkar companies’ proposed financing deal with Irvine-based Nano Banc, which found itself under scrutiny by federal banking regulators earlier this year.

In February, Nano Financial Holdings, Inc. and Allegiant United Holdings, LLC inked an agreement with the Federal Reserve Bank of San Francisco requiring them to submit a plan within 30 days that includes “establishment of appropriate risk tolerance guidelines and risk limits including, but not limited to [commercial real estate] lending strategy.”

This regulatory concern was not discussed in court on Monday.

Dornin’s attorney Mark Nicoletti told the Independent Tuesday that Nano Banc’s agreement with the Federal Reserve is “no longer a relevant issue” for his client. He declined to comment further.

Five months ago, Wilson was brought in by Judge Margines to take control of Honarkar’s companies in the wake of a foreclosure complaint filed by Delaware-based LCC Warehouse I LLC. Since then the receivership has tacked “a litany of issues that haven’t been attended to,” Wilson said in court Tuesday.

In May, Dornin’s company purchase the note for a $140 million line of credit remaining on the original $195 million loan.

Among the debts being handled by Wilson is $650,000 in unpaid transient occupancy taxes, penalties, and interest owed to Laguna Beach. Last month, Wilson wrote in a report that resolving this debt “remained a top priority” and disclosed ongoing talks with Retiring City Manager John Pietig, Assistant City Manager Shohreh Dupuis, and City Attorney Phil Kohn.

Margines’ latest order doesn’t immediately expunge the receivership. The unpaid taxes and other unresolved debts from vendors should be accounted for before the court dismissed the receiver, Wilson said.

Alan Reay, a Laguna Beach observer with more than 25 years of experience in hospitality property brokerage, said in a phone interview Tuesday that a successful refinance deal would give Honarkar a much friendlier lender.

“What you see here are some predatory investors [with Dornin], not for the yield but to ultimately own the commercial real estate,” Reay said. “What he’s done to bring in this lender to take out a predatory investor is huge for Mo Honarkar.”