Starwood sues Joel Schreiber for $272M over troubled LA building

Starwood Capital is at its wits end with Joel Schreiber.

Barry Sternlicht’s firm is suing Schreiber, best known as WeWork’s first investor, for allegedly defaulting on its loan backing a Los Angeles office building and on a personal guarantee. Starwood says Schreiber now owes a cool $271.5 million.

Starwood’s suit follows a bizarre series of events surrounding the vacant, 1.1 million square-foot building, one of Downtown L.A.’s most troubled properties.

In May, Starwood filed a foreclosure suit alleging Schreiber and partner Jack Jangana defaulted on their $219 million loan. The owners failed to pay the loan interest in 2020, real estate taxes and even insurance premiums, leaving the property in such bad shape it became “susceptible to possible break-ins and vandalism,” according to Starwood’s lawsuit.

The court on June 30 approved an order to appoint a receiver for the property, known as the Broadway Trade Center.

The building, at 801 South Broadway, remained a key asset of his firm, Waterbridge Capital, which thought it could sell for up to $425 million, according to previous reports. To guard against losing it to foreclosure, Schreiber sought bankruptcy protection for its ownership entity in August.

But there was a problem: Jangana claimed he and his family members who had ownership stakes never signed off on the bankruptcy. Jangana thought bankruptcy would be a waste of money because they had already tried and failed to refinance, sell or find new investors for the Broadway Trade Center, according to a filing.

Starwood, too, wasn’t thrilled about the bankruptcy filing, which it said violated provision in a guarantee signed by Schreiber. According to Starwood, the bankruptcy filing triggered a requirement that Schreiber pay the full amount of the debt plus $16.9 million in default interest and close to $1 million in legal fees.

The most recent suit by Starwood does not name Jangana or his family members as defendants.

Schreiber bought the property with Jangana’s Continental Equities for $123 million in 2014. Two years later the trade center scored a $164 million loan from Jamestown, and in 2018 a $213 million refinancing from Starwood Property. A year later, the loan was upped to $219 million.

Then came the pandemic and the default, according to Starwood. Schreiber’s group negotiated for three extensions till the end of 2021.

Around this time, local media reported that a startup would buy Broadway Trade Center and revitalize it as a ”Metaverse hub.” Another report said the property was for sale, asking $425 million. No deal ever materialized.

Despite failing to make mortgage payments on 801 South Broadway, Schreiber’s firm found a way into another Downtown L.A. deal. In late July, Waterbridge made the winning bid for the Union Bank Plaza, a 40-story tower, for $155 million.

Schreiber has battled lawsuits from investors, brokers and lenders throughout his career. Goldman Sachs recently alleged he defaulted on a $20 million loan by selling WeWork stock he had pledged as collateral.

Neither Schreiber nor his attorney returned a request for comment. Starwood’s attorney also did not comment.