UPDATED, May 23, 2022, 10:00 p.m.: Joel Schreiber struck gold when he met Adam Neumann and became the first investor in WeWork.
It’s been more of a grind for Schreiber on his hopes of redeveloping a massive building in the Historic Core of Downtown Los Angeles.
Schreiber’s Waterbridge Capital set its sights on the 1.2 million-square foot, 10-story property at 801 South Broadway with partners for $123 million in 2014. The investors sought to revitalize the property, a notion that has morphed over time, most recently prompting talk of transforming the now-vacant building into a “metaverse hub.”
Documents reveal, however, that a lender has sought to auction off an equity stake in the project on numerous occasions. Since 2017, the lender, Berry Enterprises, has filed numerous public notices to sell an equity position in the project. Most recently, the lender filed a notice for an auction on May 26 with a minimum bid of $1.4 million.
Waterbridge Capital’s attorney said the auction is off, claiming the issue with its lender has been resolved. The sale does not relate to Waterbridge, but an outside partner, according to the attorney.
“We have been advised that the notice filed by Berry was filed in error and that the underlying obligation has been or will be satisfied,” said Michael Fox of the law firm Olshan Frome Wolosky. “There will not be a public sale.”
But Matthew Mannion, the auctioneer of the sale, said as recently as last week that he is not aware of the auction’s cancellation. After the story was published, the auctioneer informed The Real Deal that the sale had been canceled.
Dagan LaCorte, who claims to be a representative of the lender, said “the matter has been fully satisfied.” Meanwhile, William Brodsky of the law firm Bryan Cave Leighton, who is representing the lender in the sale, did not return multiple requests for comment.
It’s the latest in a series of troubles surrounding Schreiber, who has been dogged by lawsuits and fights with investors throughout his career.
The Real Deal discovered at least six sales notices tied to the LA property since 2017. All of the notices were offering to sell the same stake, but with varying starting bids. In one auction set for April 2017, the minimum bid started at $19 million.
Berry Enterprises’ involvement as a lender is confusing, in any case. Berry is registered to the trust of David Philip Marantz in Florida.
In 2015, Berry Enterprises was the seller of a property in the Williamsburg section of Brooklyn acquired by Schreiber for $92.5 million. (In a 2015 TRD article, LaCorte was listed as the broker for the sale). Berry Enterprises also provided a $74 million loan to Schreiber on the Williamsburg property in 2015, according to New York property records. It is unclear how Berry Enterprises later became a lender to Schreiber’s Los Angeles project.
The equity sale that had been in the works on Schreiber’s property in Los Angeles also is complicated. The sale is not a foreclosure, where the lender has the right to take control of the property. Instead, it’s akin to a public auction of an equity stake in a given enterprise. A buyer or the lender has the right to acquire a position in the project. Such sales are required to be publicly advertised and marketed to outside investors, a process that sometimes lasts months.
A public equity sale is generally taken as a sign that the loan is in distress.
Ultimately, the sale that had been in works in L.A. would have given the buyer at 10 percent in Schreiber’s building there. It would have come through a 20 percent stake in JS Western Holdco Member, which holds a 50 percent stake in a Delaware entity called Broadbridge, LA Member.
Broadbridge, LA Member has a 100 percent interest in a company that has full control of the 801 South Broadway property.
It’s unclear whether or how much of Schreiber’s stake in the building is at risk. Documents reveal that JS Western Holdco Member entity, however, has direct ties to Schreiber. A corporate ownership chart filed in a lawsuit along with a California corporate registry lists Schreiber as the manager of JS Western Holdco Member.
Schreiber’s Waterbridge Capital made a big splash when he bought the 110-year old office building with Continental Equities in 2014. The investors’ plans included a 200-room hotel, office space, upscale retail, bars and restaurants.
The building had sat mostly vacant for years, and appears to remain so, with construction barricades around its ground-floor, which was a neighborhood retail center for years.
“If this thing takes off, anywhere near the sort of plan that they’ve outlined, it would be by far the biggest game changer for downtown,” Nick Griffin of the Downtown Center Business Improvement District, told the Commercial Observer last year.
It certainly has gotten attention from various lenders. In 2016, the building scored a $164.2 million loan from Jamestown L.P. Two years later, Starwood Property Trust provided a $213 million refinancing. Waterbridge and Continental then reportedly shopped the property seeking up to $425 million, or $395 per square foot, many times more than what they initially paid for it.
News reports, including one in dot.LA, began surfacing that the investors recently lined up a New York startup called Emcee, which was said to be interested in turning the space into a “metaverse hub.” The Commercial Observer reported that Schreiber himself had a stake in Emcee. That sale has not yet closed, according to property records reviewed by The Real Deal.
Schreiber became WeWork’s first investor in 2010. His stake was valued as much as $1 billion when WeWork was valued at $47 billion in January, according to a lawsuit.
After WeWork’s first IPO imploded, the co-working firm went public again— without Neumann— in 2021 through a SPAC valued at $9 billion. If Schreiber kept his stake, it would have been worth a small fortune based on the offering.
Beyond WeWork, Schreiber developed a knack for investing early on in gentrifying parts of Brooklyn. In 2012, he partnered with RedSky Capital to buy an assemblage of properties in Williamsburg for $66 million. That same year, Schreiber and Brooklyn real estate investor David Werner bought One Court Square in Long Island City from SL Green and JPMorgan Asset Management.
Schreiber’s dealmaking has led to numerous lawsuits against him, with accusations that he has stiffed investors and refused to pay commissions. Goldman Sachs is now suing Schreiber in New York Supreme Court over a $20 million loan. Schreiber’s attorney denied the allegations in a court filing.
Update: After the story was published, the auctioneer informed The Real Deal that the equity sale set for May 26 had been canceled.