In a complex real estate dispute, Laguna Beach mogul Mohammad Honarkar faced significant financial trouble during the pandemic. Desperate for support, he collaborated with investor Mahender Makhijani. The partnership soon unraveled, leading to the loss of many of Honarkar’s properties, including the historic Hotel Laguna.
Arbitration Victory
Three years later, Honarkar claimed vindication with a $1.34 billion arbitration award against Makhijani, who was recently arrested for alleged bank fraud. The investor is accused of defaulting on a $100 million loan. Makhijani is in custody and expected to enter a plea soon, though his defense attorneys have refrained from commenting.
Impact on the Community
The dispute unsettled the wealthy Laguna Beach community, where Honarkar owned various hotels, shops, and restaurants. His attorney described the events as a significant real estate scandal. Heidi Miller, a local shopkeeper and longtime resident, expressed shock at the need for armed security throughout the properties.
It was like a hostile takeover… really tragic and sad for Laguna Beach,said Miller.
Makhijani’s Operations
Makhijani, known in Orange County real estate circles, created a successful distressed-assets business. He maintained a lavish lifestyle, owning multimillion-dollar properties and luxury vehicles. However, federal authorities speculate his success may be attributed to threats of violence.
Prosecutors allege Makhijani used shell companies and straw men to insulate himself from litigation, evidenced by a falsified collateral claim for a $100-million loan. They also suspect connections to illegal activities, although the bank involved, Western Alliance, was not implicated in wrongdoing.
The Partnership Collapse
Honarkar’s financial struggles began during the pandemic when his business suffered alongside a contentious divorce. He sought financing from Nano Bank, leading to the partnership with Makhijani. The joint venture, formed in 2021, involved more than two dozen properties, including the Hotel Laguna.
Soon after, Honarkar uncovered financial misconduct. Many of his properties unknowingly backed venture loans. Relations deteriorated, and Honarkar encountered opposition, including defamatory mobile billboards and physical altercations at Hotel Laguna.
Arbitration Findings
Arbitrator David Thompson sided with Honarkar, declaring he was “fraudulently induced” into the venture. Thompson awarded Honarkar $9.2 million in legal fees and $1.34 billion in total damages, noting that most properties were lost after Makhijani’s team neglected financial obligations.
The arbitration also found Nano Bank accountable for concealing a $20-million loan. They settled with Honarkar separately but remain silent on the issue.
Legal Proceedings and Future Recovery
The arbitration award awaits confirmation by an Orange County judge, with Makhijani’s legal team challenging the ruling. Honarkar’s attorney, Aaron May, intends to retrieve lost properties and identify Makhijani’s remaining assets in both the U.S. and India.
Currently, Hotel Laguna is managed by a receiver. Honarkar hopes to repurchase and continue renovations on the historic site, maintaining optimism about overcoming years of legal turmoil with his family’s support.
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