Leo Pustilnikov, a developer who has clashed repeatedly with Santa Monica city officials over downtown governance and housing projects, has defaulted on a $37.5 million loan connected to retail property on Third Street Promenade, according to Los Angeles County records.
Entities connected to Pustilnikov and partners Ely Dromy and Eli Taban are past due on approximately $39 million as of early November for the five-story, 30,000-square-foot property at 1315 3rd Street Promenade, which houses Holey Moley, a mini golf and cocktail bar. The Real Deal was the first to report on the default.
The default comes as downtown faces mounting challenges. The Santa Monica City Council unanimously approved a comprehensive realignment plan recently aimed at restoring public safety, revitalizing the downtown core and achieving fiscal stability by 2028, marking what officials. At the time, officials said it was a pivotal moment for the city's recovery from years of pandemic-era decline.
The multi-year framework responds to concerns including rising homelessness, deteriorating public spaces, declining tourism revenues and a projected $29.6 million structural deficit by fiscal year 2026-27. The plan will deploy $60 million in previously allocated reserves to fund immediate investments in public safety, capital improvements and organizational capacity while pursuing new revenue streams to balance the city's operating budget.
However, it is still in the nascent stages of implementation and hasn’t prevented some sour economic news this month.
In a separate default, the Pacific Investment Management Company and the Witkoff Group fell behind on a loan topping $400 million tied to The Park Santa Monica, a 249-unit luxury apartment complex at 500 Broadway, according to The Real Deal.
County records show the project was financed with a $324 million loan in 2021, with the balance later increased to $405 million in November 2024. The note matured in July and had climbed to approximately $439.5 million as of last month when accrued interest and late charges were included.
Pustilnikov has been a controversial figure in Santa Monica real estate and civic affairs. In September, he and Jon Farzam filed a lawsuit against the city and its council challenging the removal of six directors from Downtown Santa Monica Inc., the nonprofit that manages the downtown business improvement district.
Pustilnikov and Farzam, both former DTSM board members, argued in their Los Angeles Superior Court filing that the City Council violated the organization's bylaws and California nonprofit law when it removed board members and installed interim appointees.
The July removals followed a memo by Councilman Barry Snell and Councilmembers Dan Hall and Caroline Torosis citing "growing concerns regarding the lack of transparency and accountability." Mayor Lana Negrete was the sole opponent, questioning the emergency justification.
Pustilnikov claimed the removals were retaliatory, stating directors had raised concerns about the city meeting baseline service responsibilities. "DTSM directors were raising concerns about the City meeting its baseline service responsibilities — obligations the City now admits it cannot afford," he said. "Instead of addressing the problem transparently, the City chose to remove directors and destabilize DTSM at a critical moment."
Pustilnikov has also been at the center of controversies involving housing projects on Ocean Avenue. Over Thanksgiving, city officials scrambled to respond after approximately 30 people were moved into 413 Ocean Avenue, a building Pustilnikov previously earmarked for mental health housing.
When city staff investigated, they discovered an unpermitted residential facility operating without proper permits, a certificate of occupancy or a business license. The building had undergone modifications including room divisions that raised concerns about electrical work and fire safety.
City officials said Pustilnikov, who has a lease for the building, told them he was pursuing a new transitional housing use but did not disclose that operations had already begun. The city issued a notice to vacate and an administrative citation to the property owner.
The building was one of two properties Pustilnikov had previously targeted for a controversial mental health housing program. Los Angeles County Supervisor Lindsey Horvath eventually terminated that proposal, citing broken community trust.
DTSM manages the downtown business improvement district with a $10 million annual budget funded primarily by special assessments. The organization is governed by a 13-member board with six members appointed by the City Council, six elected by downtown property owners, and one seat reserved for the city manager.