Ali Choudhri Poised To Lose Galleria-Area Office Building After Lengthy Court Battle
More than four years after Ali Choudhri's firm last made a payment on its $51.7M loan, the bankruptcy sale of a 1980s Galleria-area office building is moving forward.
The sale of 2425 W. Loop S. is under contract and is moving toward closing, Stephen Madura, senior vice president for Hilco Real Estate, told Bisnow by email. Hilco is handling the bankruptcy sale by order of the U.S. Bankruptcy Court for the Southern District of Texas.
QB Loop Property LP has agreed to buy the 285K SF building for $27.25M, which includes $1M earmarked for Chapter 11 administrative claims, according to court documents filed this week. Closing is slated for Aug. 8 or before, the sale agreement says.
QB Loop Property LP is registered to the address of a Houston attorney who didn’t respond to Bisnow’s request for comment. Choudhri didn't respond to Bisnow's request for comment.
The sale could be the end of a lengthy legal battle between the lender, National Bank of Kuwait, and the borrower, an LLC controlled by Choudhri, the CEO of Jetall Capital.
National Bank of Kuwait first moved to foreclose on the building in September 2021 after an April 2021 default, according to court documents. That foreclosure attempt was withdrawn after the parties reached an agreement, but it set off a yearslong chain of legal maneuvering as Choudhri tried to keep ownership of the building.
Choudhri's entity stopped making payments on the $51.7M loan in mid-2020, according to court documents. He later defaulted on a settlement agreement that required a $400K bond and $80K monthly payments, according to the filings, and that settlement agreement had a provision that Choudhri and his LLCs acknowledge and agree that National Bank of Kuwait was owed $60.2M.
After defaulting on the settlement payments, Choudhri filed temporary restraining orders and his LLC filed for bankruptcy to block foreclosure attempts, court records show. Despite ongoing lawsuits, objections and maneuvers, the Chapter 11 bankruptcy case filed Dec. 5 moved forward and resulted in this week’s sale agreement.
Bankruptcy Judge Jeffrey Norman signed a memorandum opinion for the case on June 22 saying the debtor and its principal, Choudhri, raised disputes that were “dubious and of limited value.” The disputes were “primarily nuisance litigation to avoid foreclosure,” the document says.
The court confirmed the National Bank of Kuwait’s Chapter 11 plan in the June 22 filing. The building sale agreement filed Monday authorizes a trustee to use proceeds from the sale to pay creditors, including the National Bank of Kuwait, the city of Houston, Houston Independent School District and Harris County taxing authorities.
Choudhri and any entity controlled directly or indirectly by Choudhri are barred from pursuing any lawsuit or other action against the buyer, the trustee or any professionals involved in the sale without first obtaining leave of the bankruptcy court, the sale agreement says.
“The Debtor and its principal have attempted and to this point been successful in delaying NBK from exercising its rights. … The Debtor and its principal Choudhri have been involved in a long running scheme to postpone a real estate foreclosure,” the memorandum opinion says.
Choudhri gave Bisnow a tour of the building last summer, during which he received acupuncture in his top-floor office and detailed what renowned architect I.M. Pei had in mind when he designed it in the early 1980s. The building’s occupancy took a significant hit when Stage Stores, which had occupied almost 200K SF in the building, declared bankruptcy and sold its assets in 2020.
Choudhri during the interview explained what he was doing to transform and lease up the building. Although the National Bank of Kuwait had moved twice that year to foreclose on the building, a foreclosure hadn't happened at the time. The bankruptcy was meant as a reorganization, Choudhri said, not a liquidation.
The National Bank of Kuwait isn't Choudhri’s only legal opponent. He has also faced a $15M fraud and racketeering suit stemming from a condominium development project in the Houston Heights and traded lawsuits with Sonder over a lease agreement at 2425 W. Loop S.
A federal judge last month ruled that Veritex Community Bank could proceed with foreclosure on 50 Briar Hollow, overturning a temporary restraining order Choudhri had filed. Choudhri is also in a legal battle with a tenant at 1001 W. Loop S., another office building he is fighting to keep out of foreclosure, The Real Deal reported.
