A last-minute bankruptcy filing aims to block auction of 'The One' mega-mansion

The developer of "The One" mega-mansion filed for bankruptcy protection Tuesday in a last-minute bid to stop a scheduled auction of the sprawling estate.

Nile Niami's limited liability company, Crestlloyd, filed for Chapter 11 protection shortly after noon in U.S. Bankruptcy Court in Los Angeles.

Lawrence Perkins, newly appointed manager of the development company, said the action comes with an automatic stay of the trustee's sale, scheduled for Wednesday, and other collection activities against Crestlloyd.

"Our goal is to maximize the value of the house through a thoughtful sales process where we can bring in brokers and show the house to all the right people that need to see it," said Perkins, of Sierra Constellation Partners, a turnaround firm.

The 105,000-square-foot Bel-Air property is the largest modern home in the United States and the most extravagant property yet by Niami, known as the king of the L.A. mega-mansion.

The trustee's sale of the home once marketed for $500 million was scheduled after Crestlloyd defaulted on $106 million due to Hankey Capital, the real estate lending arm of L.A. billionaire Don Hankey.

The auction in Pomona Civic Center Plaza has already been delayed twice, most recently Oct. 13 after another lender — Joseph Englanoff's Yogi Securities Holdings — alleged that Hankey pulled out of a deal to have the house completed and listed by real estate brokers for $225 million.

C. Kerry Fields, a professor of clinical finance and business economics at USC's Marshall School of Business, said the bankruptcy filing was the only legal maneuver Niami had to stop the auction.

"The Bankruptcy Court [can] make a decision as to whose position will prevail by allowing the trustee sale to either proceed or to be stayed pending the resolution of some issues that the developer may want to present to the court," he said.

He also said the judge could have the house sold through the Bankruptcy Court in a way that would be superior to a trustee's sale. Such auctions typically leave little to nothing for junior lienholders such as Yogi, experts say.

Englanoff, a Los Angeles-area physician and longtime investor in Niami's developments, accused Hankey of trying to take ownership of the mansion at a rock-bottom price or take all the proceeds if it was sold.

Yogi lent Crestlloyd $30.2 million in 2018 and is still owed $22 million, according to an earlier declaration Englanhoff filed in support of a temporary restraining order to halt the auction. Hankey lent Crestlloyd $82.5 million in 2018 and $23.5 million in two additional loans. Englanloff says his debt should be paid prior to Hankey's later loans.

Los Angeles County Superior Court Judge Mitchell Beckloff did not issue the temporary restraining order but delayed the auction until Oct. 27 to give the two sides time to work out a deal.

Hankey told The Times he had tried but failed to come to an agreement with Englanoff. Attorneys for Hankey Capital said the company’s actions were legal and noted there is nothing preventing Yogi from bidding for the house itself.

The other major secured debt holder is an entity called Inferno Investment, associated with Julien Remillard, a longtime friend of Niami, which lent Crestlloyd more than $10 million in 2015 but worked out a deal with Hankey to be paid second out of the sale proceeds.

There is smaller unsecured debt attached to the property, including several million dollars owed to contractors and others, according to the filing. The total debt attached to The One has been estimated at $165 million.

In the spring, after Niami defaulted on his debt to Hankey, he proposed living in The One and turning it into an event space featuring entertainment such as boxing matches and concerts. Hankey was not interested in the plan.

The mansion at 944 Airole Way features luxurious amenities such as infinity pools, a spa and beauty salon, a billiard room and bowling alley, a multiplex-size movie theater and a 50-car garage with carousels to display exotic cars.

Hankey did not immediately respond to an email seeking comment on the bankruptcy filing. An attorney representing Yogi also did not respond to a call for comment.

The filing comes as a court-appointed receiver works to finish the house, which was not completed at the time Crestlloyd lost control of the property.

This story originally appeared in Los Angeles Times.