Real-estate agent Rayni Williams stood under the hot Los Angeles sun, her Manolo Blahnik heels digging into the dirt of a vacant development site priced at $8.995 million on tony South Mapleton Drive. It was 2011, and she was waiting for a potential buyer.
A man emerged from a silver Rolls-Royce Ghost, dressed head-to-toe in light-colored linen with a deep tan and dark, slicked-back hair, Ms. Williams said. She handed him the heavy roll of architectural plans that had been drawn up for the site, which he slammed down on the hood so hard she said she feared had dented it. He declared, “I’m gonna make an offer.”
“Who is this guy?” Ms. Williams said she recalls thinking when he announced such a quick decision.
The guy was Nile Niami, then an up-and-coming developer in his early 40s with ambitious plans in the L.A. spec-home space. A few years later, he would start building his magnum opus: a Bel-Air megamansion he called “The One,” which he planned to put on the market for $500 million, making it the world’s priciest listing.
Earlier this year, the financial woes of Mr. Niami’s signature project reached a climax, ending a saga that had captivated L.A. real-estate observers for a decade. Mr. Niami’s quest to build one of the biggest and most luxurious houses in American history—a roughly 105,000-square-foot megamansion with a nightclub and five swimming pools—had gone awry amid unpaid debts and a bankruptcy proceeding. In March, The One sold at auction for just $126 million plus commissions and fees, far less than the roughly $190 million debt outstanding on the house, according to bankruptcy filings.
Mr. Niami said through a spokesperson that he and his ex-wife Yvonne Niami ended up losing $44 million on the project, “plus 10 years of my life.”
In some ways, the story of Mr. Niami, the man behind The One, is as compelling as the house itself.
“He really revolutionized Los Angeles real estate, because he took risks that nobody was willing to take,” said Ms. Williams of The Beverly Hills Estates, who later worked on the sale of The One with her husband, Branden Williams.
This account is based on interviews with lenders, business associates, personal friends, real-estate agents and construction experts who interacted with Mr. Niami while he was building The One.
He paid $8.25 million for the South Mapleton Drive site Ms. Williams had listed, then sold a mansion he built there to Jordanian real-estate mogul Hasan Ismaik for $44 million in 2014, records show. Mr. Ismaik didn’t respond to a request for comment.
Mr. Niami grew up in a working-class area of the San Fernando Valley. He worked in special effects for low-budget movies before starting his own production company in 1994. Around that time, he began buying small homes in the San Fernando Valley as a side business, fixing them up and flipping them, he told The Wall Street Journal in 2018. He started with homes priced in the low hundreds of thousands, working his way up to flipping condominiums in upscale areas. After getting married in the late 1990s, he and Ms. Niami began eyeing bigger and bigger homes.
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It was a business model that Mr. Niami would successfully replicate over and over again: He equipped his homes with over-the-top amenities, such as Champagne vaults and glass-bottomed pools, and put higher price tags on them than the market had previously supported, Ms. Williams said.
“Nile pushed the spec market into existence,” said architect Paul McClean, who was once a frequent collaborator of Mr. Niami’s. Mr. McClean said Mr. Niami had a knack for equipping his homes with flourishes that appealed to wealthy buyers: a monogrammed towel here, a spritz of perfume there.
“He was selling a lifestyle,” Mr. McClean said.
Mr. Niami also used unconventional marketing techniques, real-estate agents said. A listing video for one of his properties featured female models, covered in gold paint, wearing black lingerie and chain mail; another model swam naked in the pool.
He racked up big-ticket deals, include the 2014 sale of a Holmby Hills mansion with an underwater tunnel to P. Diddy for $39 million; the rapper’s spokesperson didn’t respond to a request for comment.
Then, around 2015, Mr. Niami began telling reporters about a house he planned to call The One, which would be priced at $500 million. Mr. Niami had purchased the site in 2012 for $28 million, according to property records. He tapped Mr. McClean to design his most ambitious house yet, with jellyfish aquariums, a casino and a nightclub, the architect said.
But Mr. Niami soon found himself facing more competition amid a glut of spec homes. “People started coming in and they started copying me,” he said in 2018.
Mr. Niami’s houses had previously traded quickly; now they were lingering unsold. By 2018, records show, Mr. Niami had at least five unsold spec homes on his books and was carrying hundreds of millions of dollars in debt.
At that point, Mr. Niami told the Journal that the stress of his business was taking a toll. “It’s like, ‘Oh my God, look at the mortgage payments,’” he said.
At the time, Mr. Niami was rolling his profits from other sales into building The One, using his own money on top of loans he had obtained from companies linked to Canadian investor Lucien Remillard and physician and real-estate investor Joseph Englanoff.
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In 2018, Mr. Niami received a $82.5 million loan from Don Hankey, a real-estate investor who runs a company that provides subprime car loans. Mr. Hankey said the loan allowed Mr. Niami to pay off some of the tens of millions of dollars in debt on the property and provided funds to help finish the project, which was about 80% complete at the time. While he viewed the $500 million price tag as a marketing stunt, Mr. Hankey said, he thought that the property could command $200 million to $250 million.
“He had cash-flow problems,” Mr. Hankey said of Mr. Niami. “We priced our loan a bit higher than the normal because there was extra risk involved.” Mr. Niami’s spokespeople said he believes the loan was priced comparably to Mr. Hankey’s other loans.
Mr. Niami was also undergoing changes in his personal life. In 2017, Ms. Niami, his wife of 18 years and the mother of his two children, had filed for divorce, records show. Ms. Niami didn’t respond to requests for comment.
After the couple split, Mr. Niami developed a reputation in the real-estate industry as a party boy, according to business associates who worked with him during that period. This perception was bolstered by Mr. Niami’s active social-media presence. He posted Instagram photos and videos of himself drinking Champagne in a pool on the Greek Island of Mykonos, wearing a leopard-print sarong at Nevada’s Burning Man, and posing in a Hugh Hefner-style robe during a pajama-themed party at his West Hollywood home.
“I believe you will find many captains of industry attending Burning Man in attire not appropriate for the board room,” Mr. Niami said through his spokespeople. As for the pajama party, he said, “It seems to me that someone wearing a robe at a pajama-themed party is exercising modesty.”
During L.A.’s Covid-19 lockdowns in 2020, eight citations were issued for illegal parties at properties owned by Mr. Niami, according to the Los Angeles Police Department. They included citations for loud or unruly gatherings and one for serving alcohol to minors. Mr. Niami said he was renting the homes to third parties at the time. ‘With perhaps one exception, these violations were not caused by me,” he said.
Lenders grew concerned about his lifestyle and partying, according to multiple people involved in the bankruptcy process.
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By the onset of the pandemic in 2020, Mr. Niami still hadn’t completed The One. And while the Williamses said they had been working for several years to find a buyer, the house had never officially been on the market. In the year leading up to the auction, the Williamses said, they brought Mr. Niami several offers from Middle Eastern buyers, but he never acknowledged them. Mr. Niami disputed that characterization through his spokespeople, saying he never received a single offer.
The One was a hard sell, according to agents who toured the property. For many buyers, it was too large, more like an office park than a private residence. Another obstacle was that Mr. Niami hadn’t obtained a certificate of occupancy, so the house couldn’t be legally lived in. That was partially due to the fact that it was larger than its permits allowed, according to a preliminary report by Vertex, a construction consulting company that was tapped to assess the property in 2021.
Meanwhile, after years of building in fits and starts, cracks had started to show in the partially completed structure, including leaks in the seven water features and stains on the marble floors, the Vertex report said.
Through his spokespeople, Mr. Niami declined to comment on the report, saying he had not seen it and didn’t have access to the house during the period in which the leaks are said to have occurred.
He said that construction on The One stopped and started over the years because funds were disbursed slowly by Mr. Hankey, and that Mr. Niami had to advance money to pay for the construction.
“If the loan proceeds had been disbursed for construction costs during the period when they were promised, the house would have been completed, all problems fixed, and [the certificate of occupancy] obtained,” he said.
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Frequent headlines about the house were also a deterrent to buyers, agents said. “A lot of people didn’t want to buy a house that’s more famous than them,” said Aaron Kirman of Compass, one of the agents who worked on marketing the property.
Around this time, Mr. Niami started saying that he didn’t want to sell The One at all, Mr. Kirman said, instead proposing turning it into a high-end events venue that would host boxing matches or even the Academy Awards. He spoke of having holograms of entertainers like Whitney Houston, Michael Jackson and Elvis Presley entertain crowds at these events.
“We did everything we could to explain to Nile that this was a long shot and he should focus on the sale, but we weren’t having much luck with that,” said Mr. Kirman.
Mr. Niami said through his spokespeople that “if I were allowed to follow that dream, all of the investors and lenders would have been paid in full, and I would have been in profit on the project.”
He also talked about launching a cryptocurrency based around The One, a bank called The One, and a television network called The One Truth Network.
Concerned about how his money was being spent, Mr. Hankey said he required Mr. Niami to work with a local development firm to help oversee construction.
“He blew through the money that we gave him,” Mr. Hankey said. “We were trying to limit our funds to make sure that they went in the right place.”
In October 2021, after issuing Mr. Niami several extensions on his loans, Mr. Hankey filed to foreclose on The One. Mr. Niami responded by putting the property into bankruptcy, which paused the foreclosure and gave him more time to find a buyer. A multiday online auction was scheduled for March of 2022.
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About the time of the bankruptcy filing, fashion mogul Richard Saghian had spent about five years looking for his L.A. dream house. The founder of the fast-fashion company Fashion Nova had a budget of $50 million to $150 million and was looking for a house with views and a Jacuzzi off the primary bedroom, according to Mr. Williams and Hilton & Hyland agent Stuart Vetterick, who said they showed Mr. Saghian around almost every major L.A. listing.
Mr. Saghian and Mr. Niami had first met a few years earlier, when Mr. Niami gave Mr. Saghian a tour of The One. Mr. Saghian hadn’t made an offer, the agents said, but as the auction loomed in early 2022, they convinced him to see it again. They spent about four hours one evening exploring the house. It seemed to intrigue Mr. Saghian, Mr. Vetterick said, but he wasn’t sold.
On the final day of the online auction, the bidding was stalled at around $60 million, and the agents were in a panic, Ms. Williams said. There was no reserve price on the property, meaning it would sell to the highest bidder, no matter what the price.
During the auction, Ms. Williams said, she was so distracted while driving through the Hollywood Hills that she asked her assistant to take the wheel of her Range Rover. Concerned about the low price, she dialed the property’s trustee from the passenger seat and begged him to stop the auction. “I’m not that sensitive of a person—I’ve been in this business a long time and I can handle myself—but I started crying.”
Suddenly, a new bidder entered the fray, placing a bid of $90 million: Mr. Saghian had changed his mind. Mr. Hankey then bid $100 million, thinking he would be able to sell it for a higher price later on, according to people familiar with the process. But Mr. Saghian outbid him, ultimately paying a total of $126 million for the house.
A judge approved the sale a few weeks later. The price was one of the highest ever obtained for an L.A. home, and Mr. Hankey said he would likely recoup all the funds he provided for the project. But the price didn’t come close to covering the property’s other outstanding debts and the money the Niamis put into The One.
“When you reinvest everything into one Camelot project, it is devastating to see that money vaporize in front of you,” Mr. Niami said through his spokespeople. He was also furious at Mr. Saghian, saying that Mr. Saghian had been a good friend and accusing him of “backstabbing.”
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“I showed Richard The One because he said he was interested in buying it,” Mr. Niami said through the spokespeople. “He had every opportunity to do so over the course of several years of our friendship, but instead waited for a fire-sale auction that he knew would leave me with nothing.”
Mr. Saghian declined to comment on that accusation.
While many in the real-estate industry now view Mr. Niami’s troubles as a cautionary tale, Mr. Williams said he would never count the developer out.
“He came from nothing. And he’s a smart guy. Some of the underbelly of Los Angeles got to him, and he lost his focus,” said Mr. Williams.
Mr. Niami disputed that characterization through his spokespeople: “I can honestly tell you I gave it 200% effort.”