Low family seeks to block sale of its stake in NY hotel in 1MDB fight

20 March 2017 1:21pm

7 February 2017. By Mark Bocchetti. 

Lawyers representing the Low family have been joined by Abu Dhabi's sovereign wealth fund in opposing a US Department of Justice request to appoint the current managing partner of a contested Manhattan hotel to initiate a sale of the family's interest as part of a broader forfeiture action linked to the 1MDB money laundering case.

Family members of Low Taek Jho, a Malaysian who is alleged to have played a key role in misappropriating more than $3.5 billion from sovereign wealth fund 1MDB, contend in court documents filed on Monday that permitting the DOJ to engage Managing Partner Steven C. Witkoff to begin exploring sale of the Low interests would not maximize the value of the property.

In addition, the Low family members — who are still seeking to win court approval of their claims — argue that the US District Court for the Central District of California lacks jurisdiction because the Park Lane Hotel is not located in the district and none of the alleged criminal acts involved in the misappropriation of Malaysian funds took place in in Los Angeles.

The Department of Justice filed a motion last week seeking court approval to prepare for a sale of the Low family's almost 55 percent interest in the hotel because they have not complied with capital calls for further funding of the joint venture since May.

Continued failure to make the required contributions would jeopardize the capacity of the joint venture to continue to cover the Park Lane's expenses, DOJ argued, and that financial duress could undermine the value of the property.

"Counsel for the Joint Venture has represented to the government that the willingness of existing lenders to forego calling their loans, as well as the prospects for continued financing of the development project, are dependent on the prompt replacement of the Jho Low Interest with a qualified investor or investors meeting appropriate credit standards," DOJ said.

Under the cooperation agreement for which DOJ and Witkoff are seeking approval, the New York real estate developer would continue to manage the property but would also make further capital contributions to be repaid from the eventual sale of the Low family interests.

Witkoff would be authorized to begin seeking a buyer for the Low family interests and negotiate an agreement that would be presented to the court for approval. Witkoff also would be required to engage a third-party broker to assist in the sale.

However, Mubadala Development Co., to which Low apparently sold some 38 percent of the Park Lane, filed a motion last week seeking sale of the entire joint venture, arguing that such a sale would bring a higher price.

And the process of seeking a buyer should be led by an independent third-party broker, Mubadala argued, rather than by Witkoff as under the plan advanced by the DOJ.

The case involving the Park Lane Hotel is just one of eight forfeiture actions in which the Low family is seeking to assert claims through a trust to which they are beneficiaries, along with Jho Low. Those claims have been pending while the Low family seeks a new trustee willing to defend their legal interests in the various properties.

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