One mid-November evening last year, USC trustee Glorya Kaufman says, a “close friend” of hers dropped in for a visit. The friend, developer Michael Rosenfeld, had come to get her to sign some documents.
In a new lawsuit, Kaufman alleges that she signed the papers without having a chance to read them and without being provided with copies afterwards. She was “shocked to learn” afterwards that she had signed a $75 million guaranty on construction loans for the Century Plaza condo development in Century City.
In the lawsuit’s telling, the guarantee was just the latest in a series of big real estate deals Kaufman had been brought into over the past decade at the behest of Rosenfeld, the founder of real estate investment and development firm Woodridge Capital Partners and an accountant, Harvey Bookstein of Armanino LLP. Rosenfeld and Bookstein held themselves out as “close friends and trusted financial, business, and investment advisors” to Kaufman, the complaint filed last week in Los Angeles Superior Court states. Despite assuring her that their investments were conservative and safe, the duo allegedly “created and/or structured very risky self-dealing transactions where they used Mrs. Kaufman’s assets to make big gambles to promote their own financial gain.”
Rosenfeld vigorously denies this characterization of their relationship. “The complaint is replete with misrepresentations,” he said in an interview with The Real Deal Thursday. “It is unconscionable that her lawyers and new advisors would make such assertions against the very people who have provided her with years of successful investments.”
The document Kaufman signed that November evening, for example, was simply a quarterly certificate that she had signed every quarter since 2016, and not a new guarantee, according to Rosenfeld.
“We empathize with the fact that Mrs. Kaufman contends that she has no recollection of entering into these agreements, however there’s no question that she did in fact knowingly enter into them,” he said. “It is my understanding that her advisors reviewed every investment with her thoroughly, that she insisted on having a complete understanding of each prospective investment, and that the entirety of the documentation was presented to her.”
Kaufman, the widow of KB Home co-founder Donald Bruce Kaufman and founder of the Glorya Kaufman School of Dance at USC, is asking for the deal agreements to be voided, and is seeking damages on charges including fraud, elder abuse, and breach of fiduciary duty.
“With great reluctance, we have filed a breach of contract action based on this non-performance,” Rosenfeld said. “We encourage Mrs. Kaufman to honor her obligations under the numerous agreements that she entered into.”
An attorney for Kaufman declined to comment. Bookstein did not respond to requests for comment.
Full scope unknown?
The investments listed in the suit total out to nearly $60 million, as well as two guarantees on loans totaling $115 million. But according to the suit, because Rosenfeld and Bookstein haven’t provided details on the investments, “the full scope of Defendants’ breaches of fiduciary obligations, and fraud, may not yet be fully known.”
The earliest investment documented in the complaint occurred in 2011, when Kaufman invested $5 million in an entity controlled by Rosenfeld known as Unification Partners, LLC.
“Mrs. Kaufman has never received any income or distribution from this investment, and she does not know how Defendants used her funds,” the suit alleges.
In 2013, the Glorya Kaufman Trust provided a $3.3 million loan for the development of 150 homes near Lake Castaic north of Santa Clarita. The homes were never built and the defendants have allegedly continued to collect management and accounting fees on the investment, according to the suit. Woodridge received county approval to build a much larger 3,150-unit complex in the area in 2018.
Another “high stakes financial deal” Kaufman was allegedly cajoled into was a $27.7 million investment in the Hotel Californian in Santa Barbara, which opened in 2017. Kaufman “has not received any distributions of any kind on this large investment,” and the hotel has been losing money for years, the suit alleges.
One of Kaufman’s largest financial entanglements popped up in the news in 2016, when real estate investor and attorney Leonard Ross put the Hearst Estate in Beverly Hills on the market for $195 million.
An analysis by TRD at the time uncovered “an elaborate web of LLCs and a series of intricate refinancings” at the property, the former home of William Randolph Hearst. This included a $40 million loan provided by Fortress Investment Group and a $19 million loan provided by Kaufman. Curiously, Kaufman was also a guarantor for the Fortress loan.
The new lawsuit claims that this arrangement was also Rosenfeld and Bookstein’s doing.
Ross was a “business associate, and/or client” of Bookstein’s, and the defendants allegedly induced Kaufman to sign a $40 million guaranty for him despite knowing that Ross had declared bankruptcy in 2010 and “had a history of taking loans and not repaying them.”
The Hearst estate’s financial troubles have dragged on. Ross defaulted on the loan in 2018, and Kaufman was allegedly only informed a year later that she was now on the hook for more than $50 million because of her guarantee.
Ross has filed a lawsuit against his creditors, also claiming elder abuse, while Fortress has sued the Kaufman Trust asserting that it reneged on its role as guarantor. The LLC that owns the estate, TBH19 LLC, filed for Chapter 11 bankruptcy in November.
Amid the megamansion frenzy that swept L.A. shortly before the coronavirus crisis, Ross had held out hope that the property could be sold for as much as $125 million to pay off his debts — and claimed that “a Saudi Arabian prince” had expressed interest in buying it.
Heist of the Century
Rosenfeld’s Woodridge Capital Partners is currently developing the two-tower, 268-unit Century Plaza condo development on Avenue of the Stars. It’s a project widely viewed as a litmus test for the strength of the residential market in Century City, a neighborhood better known for law firm offices than luxury towers.
The nature of the $75 million construction financing Kaufman purportedly provided a guarantee for is unclear. The developer had secured about $1 billion in construction loans for the $2.5 billion project in 2016, including a $446 million senior loan from JPMorgan Chase, $120 million in mezzanine financing from Colony Capital, and $450 million of EB-5 financing.
And the guarantee wasn’t the only way in which Kaufman ended up supporting the project, she alleges. The octogenarian was also induced into buying “an entire floor in the North Tower condominium,” after Rosenfeld allegedly offered her a great $24.2 million “deal” on two units and a maid’s room — only to provide an agreement at a “substantially higher purchase price” afterwards.
“Mrs. Kaufman completely trusted Defendant Rosenfeld, and as was her practice, did not read the documents and simply signed them relying on Defendant Rosenfeld,” the lawsuit states.
In October, Woodridge announced that the Century Plaza development had already closed on more than $200 million in luxury condo pre-sales. The unit purchases by Kaufman, as described in the complaint, would account for about one-eighth of that sum.