Shorewood Chapter 11 won’t impact South Bay offices, owner says
Shorewood Realtors office at 33rd Street and Highland Avenue in Manhattan Beach. The company has filed for Chapter 11 bankruptcy protection to stay a lawsuit from former partner company ERA Franchise Systems. Photo
Shorewood Realtors, one of the South Bay’s highest performing real estate brokerage firms, filed for Chapter 11 protection last month in the U.S. Bankruptcy Court in Colorado, where Shorewood’s parent company is based.
Shorewood president and CEO Roger Herman said the filing was a strategic move to stay a claim filed by a creditor and former partner and that Shorewood is not in financial difficulty.
“The bankruptcy wasn’t for financial viability,” Herman said. “We’re very profitable this year… it’s had nothing to do with [Shorewood’s] financial issues.”
Last Friday, according to Herman, the court agreed to unfreeze Shorewood assets. Herman had stated in a declaration that Shorewood’s sales agents could “easily relocate to other brokerages” if their commissions weren’t paid.
According to a declaration filed by Herman, Shorewood Realtors’ parent company LBH, owed $516,745 to 26 Shorewood real estate sales agents and approximately $45,161 to its office staff.
Precipitating the filing, Herman said, was $6 million that ERA Franchise Systems, a national real estate company, says it is owed by LBH. A 2014 agreement gave ERA a security interest in LBH.
LBH purchased Shorewood in February 2014 from founder Arnold Goldstein and co-owner Larry Wolf. Goldstein stayed on as chairman emeritus and Wolf as a consultant. Both acknowledged that the Chapter 11 filing was not a positive development, but said the difficulties it creates have more to do with perception than finances. Shorewood operates nine offices in the South Bay, from Palos Verdes to El Segundo.
The creditor’s list reports that $3.75 million is owed by Shorewood Realtors to Goldstein and Wolf. But according to Goldstein, he and Wolf are only owed about $250,000 from the sale of their company. The $3.75 million on the creditors’ list is owed them for Brighton Escrow in Hermosa Beach. Goldstein said Herman was to have personally bought the escrow company within two years of purchasing Shorewood Realtors, but failed to fulfill the agreement. Goldstein and Wolf have retained ownership of the escrow company.
Shorewood Realtor Ed Kaminsky, who was among the agents named as being owed commissions, said he is unconcerned.
“There’s no effect on me, I’m not waiting for my checks. My business operations are fine,” he said. “It’s equivalent to an escrow that gets delayed — if you’re in real estate, you’re used to delays.”
His lack of concern was shared by other Shorewood agents who were reached for this story.
Herman recently flew out from Colorado to reassure the agents that Shorewood Realtors’ future is not in jeopardy.
“The Chapter 11 bankruptcy filing stayed the lawsuit and put us both in a position to settle, which is what we wanted all along,” Herman said in last week’s interview. ER