Former Regal Cinemas property in Westborough is the subject of a second lawsuit

WESTBOROUGH — Plans to redevelop the former Regal Cinema site on Route 9 have hit another legal challenge, as the company from which the property was seized claims it was not properly notified by the town of its intention to foreclose.

Lolonyon Akouete, representing Westborough SPE, LLC, says that company is the true owner of the former cinema site, at 231 Turnpike Road. Akouete said Westborough SPE, LLC, was never notified that the cinema property was being foreclosed upon, and is currently in Land Court with the town to determine whether the town has a right to sell the property.

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"During the foreclosure process, the town failed to give proper notice, which resulted in Westborough SPE, LLC's due process being violated," Akouete told the Daily News.

Westborough Town Manager Kristi Williams could not be reached for comment. She was assistant town manager, to Jim Malloy, at the time of the town's decision to foreclose on the property.

Regal Cinema closed in the fall of 2017; its lease expired in November. Per the lease agreement, Regal Cinema had been paying the property taxes on the property. But once Regal stopped leasing, tax payments were no longer made on the 29-acre parcel.

Town, attorney were unable to contact Westborough SPE, LLC

The town made an effort find the property owner, but was unable to locate them. Westborough SPE, LLC, was listed as the landlord in the tenant agreement with Regal Cinemas, but according to a letter written in 2017 from a Regal Cinemas lawyer to the town, Westborough SPE had administratively dissolved and was no longer authorized to do business in Massachusetts. The letter also stated that Regal Cinemas was unable to get in touch with anyone from Westborough SPE, LLC, or gather any contact information related to the company.

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With the town unable to get in touch with Westborough SPE, LLC, and no other claimants coming forward, the town foreclosed on the property.

Town officials then put out a request for proposal to investigate the sale and future use of the site, with the winning bid awarded last year to LAX Media MA, LLC, a Walpole-based group that operates the Apple Cinemas chain. LAX Media's proposal was to refurbish the former Regal Cinema into a new cinema.

Westborough SPE emerges as 'rightful' owner

However, Westborough SPE would emerge following the sale, claiming it was never properly contacted about the foreclosure.

According to Akouete, Westborough SPE is essentially a shell company, created only to manage the 231 Turnpike Road parcel. The company was owned by a private entity organized in the British Virgin Islands, which was done to protect the identity of the investor. The lack of information about the true owner of Westborough SPE, compounded by several changes in its management during the 2000s, led to the town being unable to identify and contact the owner about its intent to foreclose.

"What I think ended up happening was that the company (Westborough SPE) ended up changing management so many times, they lost some paperwork and the train of management," said Akouete.

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Akouete said a complex series of management changes regarding who was administrating the Westborough SPE property led to the Massachusetts branch being dissolved. That meant there was no longer a trail of ownership of Westborough SPE, and a significant asset was undocumented to the larger company.

"There was an issue where there was a manager in California who wasn't getting any money back from paying annual fees," Akouete said. "I believe that there was a withdrawal of Massachusetts so they don't have to file an annual report every year, and by doing that and leaving the company, they left assets in the state hanging."

Akouete, who is based in New York, said he was hired as an asset recovery specialist. He began investigating the assets of the company, which is what led him to discovering the Westborough SPE location. Akouete was then named manager of Westborough SPE, in order to work to recover value from the asset. And that led to Westborough SPE filing a motion in Suffolk County Superior Land Court to vacate the foreclosure of the property.

Akouete did not say who hired him.

What does Westborough SPE want to do with the site?

Akoute said Westborough SPE has declared bankruptcy, and is going through bankruptcy court. The goal is to liquidate the Westborough cinema site by selling it to the highest bidder through the bankruptcy court. Meanwhile, the Town of Westborough would be entitled only to the unpaid property taxes on the site — currently about $940,000, but increasing until a resolution is determined.

Notably, LAX Media's $2.5 million bid was not the highest submitted during the town's RFP process. There was a $9.24 million bid from a real estate developer to convert the property into 108 condominiums, and there was a $2.8 million bid from Southborough-based Ferris Development Group, LLC, which sought to redevelop the plot into a business center.

Ferris Development sued the town following the decision to declare LAX Media the winning bidder, saying Westborough officials did not follow their own RFP criteria. That case remains unresolved, as a decision on who actually owns the property remains in question given the motion made by Westborough SPE to retract the foreclosure.

David Ferris, CEO of Ferris Development, said he could not comment on the case at this time.

Attempts to reach LAX Media for comment were unsuccessful.

This article originally appeared on MetroWest Daily News: Westborough snarled in second legal issue with former cinema spot