Former WeWork investor enters Chapter 11 for DTLA “metaverse hub”

Joel Schreiber, WeWork’s first investor, has filed for bankruptcy on the vacant site of a planned “metaverse hub” redevelopment in Downtown Los Angeles, The Real Deal has learned.

Schreiber, who recently won a bidding war for the Union Bank Plaza, filed a Chapter 11 petition in a New York bankruptcy court ahead of a planned foreclosure sale by lender Starwood. In the filing, Schreiber said that the petition was filed on an “emergency basis” due to Starwood’s refusal to give an extension on the nearly $214 million of debt on the property. The foreclosure sale was scheduled for Aug. 9.

“The ramifications of the COVID-19 pandemic over the last few years have taken a great toll on the intended development, Schreiber wrote in the petition. “Despite obvious challenges, the debtor still believes strongly in the property and has elected to commence this Chapter 11 case to prevent an immediate foreclosure and gain one last opportunity to salvage the project. The debtor intends to proceed with a comprehensive new marketing approach to reignite interest in the project promptly after the Chapter 11 filing.”

The property at 801 South Broadway is a 10-story, 1.2 million-square-foot building. A joint venture led by Waterbridge Capital acquired the asset for $123 million in 2014. Since 2017, Berry Enterpises, a lender in the project, has made several attempts to sell a minority stake in the property. The latest notice from Berry advertised a May 26 auction that was later called off.

Starwood filed a foreclosure petition on the property last July. In its filing, the firm alleged that Schreiber and his partner Jack Jangana were “financially incapable” of curing its defaults on $221 million of debt.

Over the years, several plans have emerged for the property. After acquiring the site, Schreiber and partner Continental Equities announced plans for a mixed-use development with a 200-room hotel, offices, luxury retail and restaurants. The property was later put on the market with an asking price of $425 million. In February, an obscure New York-based startup called Emcee reportedly signed a contract to buy the property with plans to convert the space into a “metaverse hub.” Schreiber, according to a report from the Commercial Observer, has a stake in Emcee. The transaction was not mentioned in the bankruptcy filing.

Schreiber is currently in contract to buy KBS’ Union Bank Plaza office tower in Downtown Los Angeles for $155 million. If that deal fails to close, Schreiber may have to pay up to $7.5 million in penalties.