Developer gives up claims to condo project stalled by bank failure

Los Angeles developer Sonny Astani has given up his legal battle to retain ownership of a never-completed $260-million condominium project in downtown Los Angeles.

Units in the 30-story tower near Staples Center will be finished by a new group of owners headed by hedge fund Starwood Capital Group, according to a U.S. Bankruptcy Court reorganization plan announced Friday.

Astani agreed to sell his interest in the Concerto project for $9.5 million, according to court documents. Terms of the accord also call for the buyers to make payments to the general contractor and subcontractors, who have filed $22.5 million worth of liens on the project at 9th and Figueroa streets

The parties agreed not to speak about their settlement during the ownership change, but Astani said he planned to press on with separate litigation against the Federal Deposit Insurance Corp., which is also now a part-owner of Concerto.

Federal regulators seized control of Astani’s lender, Corus Bank, in September 2009. That caused Astani’s construction financing to dry up, and he quickly filed for Chapter 11 bankruptcy protection with the project about 95% finished.

In October 2009 the FDIC sold control of the failed bank’s assets to the Starwood-led investment group. The FDIC retained 60% ownership of the $4.5-billion portfolio, including Astani’s $160-million construction loan, but turned its management over to the investors.

The relationship between Astani and the investor group known as Corus Construction Venture soured.

Astani sold some Concerto units that were not part of the tower to raise money to finish the high-rise. A bankruptcy judge let him keep the proceeds, but ordered him to pay millions of dollars of interest to the new owners.

Astani argued that the FDIC allowed Corus Construction to unfairly hold up his project and told The Times last September that he faced “an unholy alliance between government and Wall Street” that was bent on taking his property.

The investors countered that Astani was one of many developers who mistimed the housing market.

Astani said he would move on to his next venture, another condominium complex downtown. He hopes to start work this year on 875 units in two towers on a parking lot at 8th Street and Grand Avenue. It would also include shops.

Condominium market analyst Alan Mark predicted there would be buyers for the 271 units at Concerto because a competing project nearby named Evo is nearly sold out. A recently finished condo project at the Ritz-Carlton Hotel a few blocks away has more expensive units.

“We need more inventory downtown,” Mark said. “There are buyers out there.”

roger.vincent@latimes.com