Neil Shekhter (Photos by Kevin Scanlon)
8:05 a.m., Feb. 5:
immigrants and developers share at least one quality: optimism, an
unshakeable belief that there is a better life to be had in a new
country … or a new building.
Neil Shekhter, founder and CEO of Santa Monica-based NMS Properties, is relying on that buoyant
attitude to lift him and his family past the
sort of setback that might have crushed another entrepreneur.
As a successful developer with a portfolio of 2,200 residential
units and 30 buildings, NMS went in search of financing in 2010.
Shekhter ultimately found a willing partner in AEW Capital, a real
estate investment manager, and they put together a nine-building
portfolio in Santa Monica that they owned in common.
Six years ago,
Shekhter attempted to exercise what he believed was a clause in the
contract with AEW that allowed him to buy it out for $106 million.
AEW executives disagreed and litigation ensued, with AEW
ultimately winning a messy court fight rife with charges and
countercharges of fraud and forgery. The decision allowed AEW to
dispose of the entire nine-building partnership for $430
All his appeals
exhausted, Shekhter, his sons and wife have thrown themselves back
into NMS and currently have at least two Westside properties under
development — an 89-unit apartment complex at 11001 Pico
Boulevard and a 40-unit mixed-use development in Santa Monica.
According to the developer, more projects are in the
It’s quite a
comeback, but perhaps not any more remarkable than a young Jewish
refugee’s realization of the American dream in what he still
regards as “the best country in the world.”
immigrated to the United States in 1979, part of a wave of
newcomers fleeing the then-Soviet Union’s endemic anti-Semitism.
Since the Soviet authorities allowed exiting Jews to take only $200
apiece with them, the Shekhter family’s travel and resettlement in
a tiny apartment on Ogden in West Hollywood was financed by Jewish
L.A. City College and Santa Monica College to improve his English.
Later on, he acquired an auto repair facility near Pico and La Brea
and began driving a cab at a time when the occupation was so
popular among recent Russian Jewish immigrants that the taxi stand
at the Century Plaza Hotel was known as “Little Odessa.” He then
began employing other cabbies and running a maintenance facility in
became an active day trader, working the markets until 1 p.m. and
then managing his real estate business in the afternoon. After the
tech bubble burst, he moved away from stocks and cabs and into
managing a growing property portfolio, mostly on the lucrative
NMS was the
result, and despite the AEW debacle, that undiminished optimism
leads him to believe “our best years are ahead of us.”
You grew up in
Ukraine in the former Soviet Union. What prompted you to come
here? I was only 16 at the time. It was my mother’s and
grandparents’ decision. In August of 1979, we left the Soviet
Union. We received refugee status because we’re Jewish, and in the
Soviet Union they persecuted Jews. Even from the time I was in
school, the kids would try to pick fights and they would make fun
just because of your ethnicity. Being a Jew in those days in the
Soviet Union, you didn’t get many opportunities in life. Most Jews
picked up and left. Some went to Canada or Australia. But the
majority went to Israel or the United States.
When did you
decide to get into real estate? When I came here, I
used to work in a store on Fairfax Avenue. The people who owned the
store were two Holocaust survivors. They told me that they owned an
apartment building and that the building provided a nice source of
income for them. That was my first thought about being in real
estate. Fast-forward to 1982. We bought our first house in West
Hollywood on La Jolla Street. It was a duplex. Then in 1985, I
bought my first income property around Pico and La Brea.
acquiring additional properties? I always saved money
and invested it in real estate because I felt that as you get
older, you pay off your loan and retire. That was kind of the
dream. I bought my first apartment building in Beverly Hills. As I
was buying other buildings, I thought that one day I would want to
develop properties myself. I bought my first lot in Northridge next
to a building I already owned. In 2003, I had my first building
with 26 units. After that, I started developing on the Westside
What prompted you
to reach out to AEW to get the infusion of capital? In
2010, we were in a recession and I was looking for ways to grow my
portfolio. At the time, I owned several development sites. I was
looking to leverage the market. The idea was to get somebody who
would invest money with us, get a nice return and then get out.
When did you
decide to exercise the repayment clause? The deal was
they were supposed to receive 1.75 times the investment or 24
percent per year — whichever was greater. The language was in our
JV agreement. Through the years, [AEW executive] Eric Samek always
confirmed to me that that was the deal verbally. We would even joke
about it. Then in 2013, when I sent them a letter telling them that
we wanted to buy them out, that’s when things went bad.
How did they
react? At that time, I didn’t know that the attorneys I
hired did not make sure the agreement was ironclad. So when we sent
them a letter telling them we were going to buy them out, first
they didn’t respond. Then they told us, “That’s not the deal.”
After that, things started going south. They started to treat us
differently. All of a sudden, they ordered an audit. They started
to look to see if they could find anything that we did wrong. The
auditor discovered that we actually did something wrong. Somehow we
did not report 32 cents. I realized at that point that things were
not going well for me. They weren’t settling with me based on our
agreement. So after that, litigation started.
Shekhter with the family dog, Blanco
They claimed you
falsified documents? Correct. They said a lot of things about
me. That was their tactic. They also said we misappropriated funds
and all kinds of other stuff. None of it was true. They were never
able to prove anything at a trial. The mistake I made was I started
this whole litigation with a solo-practitioner attorney who was not
equipped to deal with a case like that. That was the biggest
mistake I made — plus the mistake I made myself, which was
destroying my hard drive.
Why did you
destroy the hard drive? They got an order from the
judge saying they could copy any and all records from any and all
media that we have, including my home computer. I didn’t want them
to copy certain things on my computer because it had nothing to do
with our business developing nine properties. So I deleted certain
personal files? Yes, I did it. I’m not disputing it. I
wanted to protect the privacy of my family, and to me, that was
important. I kind of regret it, of course, because that made my
whole case much worse. Because now the court saw that I did
something wrong. The litigators that AEW hired knew how to play
this game, and I didn’t.
What did you go
through personally during that period? It was very tough. You can’t conduct
business the normal way anymore, because the lenders now look at
you in a different light. The banks told me: “Until this litigation
is over, we’re not going to do business with you because you’ve
been alleged to have done all these things. We don’t know if you
did it or not, but until it’s resolved, we can’t do any business.”
So that pretty much just puts you almost out of
Were you surprised
how ugly things got in court? Listen, if I could take everything
back, I would never file a lawsuit. I would never be in litigation,
because I learned a lot from this. I learned that in court, you
never know what’s going to happen. One party can talk a judge into
certain things and make them believe certain things. Then your life
is basically in a judge’s hands. I never saw a jury in any of the
litigation. I never got a jury trial. There was some kind of bench
proceeding. That’s as far as this case went.
What prompted you
just to walk away from those properties? It was a lot of money,
more than $400 million. It was for the business and for my
family. It not only took a huge toll on my family — my children and
my wife. I just decided that we are — thank God — healthy and we
know what we’re doing. By being able to go back out and do business
the normal way, by being able to get normal loans, by dealing with
normal banks. The money that we will make every year far outweighs
what we were fighting over. If you’re going to fight over a dollar,
but you’re going to lose a dollar every year because of it, it’s
not worth it. You have to move on.
When you first
emerged from that, how many properties did you have left? How did
you start rebuilding your life and your
portfolio? As this litigation was ongoing, our lives
were not put on hold. We still continued business. The difference
was the cost of financing was a lot more expensive. We were still
able to develop; we were still able to buy. Our team has properties
today under construction in several cities. Business goes on, and
today we’re happy that now the litigation is behind us. Right now,
we have a lot of nice projects in Santa Monica and the Westside.
And you will see some of them under construction. Some are going to
start this year and next year. A lot more than we lost, let’s put
it this way.
biggest regret from that time? I will tell this to
anybody: When you go into a partnership, make sure you get the best
representation money can buy. And even then have someone else
double-check it. The biggest regret is that I did not have the best
people representing my interests. That backfired on me in a big
way. So it’s hard when you spend so many years building something,
and then you lose it all.
Did you ever get
angry? Yes. I would be lying to say that I wasn’t. It’s
very hard when people do things like what happened to me. I come
from a different world. In my world, the way I was raised, shake
hands, and to me, that’s a deal. In this country, sadly enough with
all the lawyers, people create documents 5 to 10 inches thick. And
they can bury a couple words in there that will change your whole
life. And people don’t realize until it hits them.
What advice would
you give other people facing hard times? My advice would be never to
lose faith. Always fight for what you believe. Sometimes you have
to step back and think what’s the best way to move forward.
Sometimes that means you have to give something up to move forward.
If you have to take three steps back to be able to take nine steps
forward, then that’s what you have to do. So
that’s what I did. I don’t regret it. Life goes on. We have a great
team, and we’ll be able to do great things.
Are you optimistic
about the future? Very optimistic. That’s my personality.
To be a good developer, you have to be an optimist. It is hard not
to look back. When you work so hard and lose it all, it’s not that
easy. It is what it is. It’s life. I guess that’s the way it was
meant to be. There’s nothing I can do about it. Just look to the
and condensed for clarity.